Raytheon Technologies(RTX) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Unaudited Financial Statements This section presents the company's unaudited condensed consolidated financial statements and accompanying notes for the recent quarter and six-month period Condensed Consolidated Statement of Operations Quarter Ended June 30, 2025 vs. 2024 (dollars in millions): | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $21,581 | $19,721 | $1,860 | 9.4% | | Operating Profit | $2,146 | $529 | $1,617 | 305.7% | | Net Income | $1,725 | $175 | $1,550 | 885.7% | | Net Income Attributable to Common Shareowners | $1,657 | $111 | $1,546 | 1392.8% | | Diluted EPS | $1.22 | $0.08 | $1.14 | 1425.0% | Six Months Ended June 30, 2025 vs. 2024 (dollars in millions): | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $41,887 | $39,026 | $2,861 | 7.3% | | Operating Profit | $4,181 | $2,399 | $1,782 | 74.3% | | Net Income | $3,350 | $1,918 | $1,432 | 74.7% | | Net Income Attributable to Common Shareowners | $3,192 | $1,820 | $1,372 | 75.4% | | Diluted EPS | $2.36 | $1.36 | $1.00 | 73.5% | Condensed Consolidated Statement of Comprehensive Income Quarter Ended June 30, 2025 vs. 2024 (dollars in millions): | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $1,725 | $175 | $1,550 | | Other Comprehensive Income (Loss), net of tax | $816 | $(83) | $899 | | Comprehensive Income | $2,541 | $92 | $2,449 | | Comprehensive Income Attributable to Common Shareowners | $2,473 | $28 | $2,445 | Six Months Ended June 30, 2025 vs. 2024 (dollars in millions): | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $3,350 | $1,918 | $1,432 | | Other Comprehensive Income (Loss), net of tax | $1,364 | $(299) | $1,663 | | Comprehensive Income | $4,714 | $1,619 | $3,095 | | Comprehensive Income Attributable to Common Shareowners | $4,556 | $1,521 | $3,035 | Condensed Consolidated Balance Sheet As of June 30, 2025 vs. December 31, 2024 (dollars in millions): | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $167,139 | $162,861 | $4,278 | | Total Liabilities | $102,892 | $100,903 | $1,989 | | Total Equity | $64,206 | $61,923 | $2,283 | | Cash and Cash Equivalents | $4,782 | $5,578 | $(796) | | Accounts Receivable, net | $12,385 | $10,976 | $1,409 | | Inventory, net | $14,012 | $12,768 | $1,244 | | Short-term borrowings | $1,635 | $183 | $1,452 | | Long-term debt | $38,259 | $38,726 | $(467) | Condensed Consolidated Statement of Cash Flows Six Months Ended June 30, 2025 vs. 2024 (dollars in millions): | Activity | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net Cash Flows Provided by Operating Activities | $1,763 | $3,075 | $(1,312) | | Net Cash Flows Used in Investing Activities | $(1,187) | $(40) | $(1,147) | | Net Cash Flows Used in Financing Activities | $(1,409) | $(3,591) | $2,182 | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(779) | $(568) | $(211) | Condensed Consolidated Statement of Changes in Equity Six Months Ended June 30, 2025 vs. 2024 (dollars in millions): | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Equity Beginning Balance | $61,923 | $61,410 | $513 | | Net Income Attributable to Common Shareholders | $3,192 | $1,820 | $1,372 | | Dividends on Common Stock | $(2,543) | $(2,415) | $(128) | | Other Comprehensive Income (Loss), net of tax | $1,364 | $(299) | $1,663 | | Equity at June 30 | $64,206 | $60,650 | $3,556 | Notes to Condensed Consolidated Financial Statements Note 1: Basis of Presentation This note clarifies the unaudited basis of the financial statements, reclassifications, and varying fiscal calendars for its segments - The Condensed Consolidated Financial Statements are unaudited and include normal recurring adjustments[22][24] - Raytheon follows a 4-4-5 fiscal calendar, while Collins Aerospace and Pratt & Whitney use a calendar quarter end[25] Note 2: Acquisitions and Dispositions This note details agreements to sell the Simmonds Precision Products and actuation businesses and the completed sale of the CIS business - On June 30, 2025, RTX entered into a definitive agreement to sell the Simmonds Precision Products business for approximately $0.8 billion in cash[27] - On March 29, 2024, RTX completed the sale of its Cybersecurity, Intelligence and Services (CIS) business for approximately $1.3 billion in cash, resulting in a pre-tax gain of $0.4 billion[28] - RTX completed the sale of the actuation and flight control business for gross proceeds of $1.8 billion on July 21, 2025[29] Note 3: Goodwill and Intangible Assets Goodwill balances increased slightly to $53.3 billion, while amortization of intangible assets for the first half of 2025 was $1,009 million Goodwill Balance (dollars in millions): | Segment | Dec 31, 2024 | Acquisitions and Divestitures | Foreign Currency Translation and Other | June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | | Collins Aerospace | $32,223 | $(256) | $793 | $32,760 | | Pratt & Whitney | $1,563 | — | — | $1,563 | | Raytheon | $18,986 | — | $1 | $18,987 | | Total | $52,789 | $(256) | $794 | $53,327 | Intangible Assets (dollars in millions): | Type | June 30, 2025 Gross Amount | June 30, 2025 Accumulated Amortization | Dec 31, 2024 Gross Amount | Dec 31, 2024 Accumulated Amortization | | :--- | :--- | :--- | :--- | :--- | | Amortized Total | $40,597 | $(16,329) | $40,436 | $(15,456) | | Indefinite-lived Total | $8,480 | — | $8,463 | — | | Total | $49,077 | $(16,329) | $48,899 | $(15,456) | Amortization Expense (dollars in millions): | Period | 2025 | 2024 | | :--- | :--- | :--- | | Quarter Ended June 30 | $508 | $534 | | Six Months Ended June 30 | $1,009 | $1,060 | Expected Amortization (dollars in millions): | Year | 2025 (Remaining) | 2026 | 2027 | 2028 | 2029 | 2030 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Expense | $1,069 | $2,000 | $1,890 | $1,819 | $1,679 | $1,642 | Note 4: Earnings Per Share Diluted EPS for Q2 2025 was $1.22, a significant increase from $0.08 in the prior year, reflecting higher net income Earnings Per Share Attributable to Common Shareowners (dollars and shares in millions, except per share amounts): | Metric | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to common shareowners | $1,657 | $111 | $3,192 | $1,820 | | Basic weighted average number of shares outstanding | 1,340.6 | 1,331.8 | 1,338.8 | 1,330.5 | | Diluted weighted average number of shares outstanding | 1,354.0 | 1,342.1 | 1,352.9 | 1,339.7 | | Basic EPS | $1.24 | $0.08 | $2.38 | $1.37 | | Diluted EPS | $1.22 | $0.08 | $2.36 | $1.36 | - The computation of diluted EPS excluded 1.8 million and 2.5 million stock awards for the quarter and six months ended June 30, 2025, respectively, due to their anti-dilutive effect[33] Note 5: Changes in Contract Estimates at Completion Net EAC adjustments unfavorably impacted Q2 2025 operating profit by $117 million, with a significant $0.6 billion charge recognized in Q2 2024 - Changes in estimates on contracts are recognized on a cumulative catch-up basis[35] - During Q2 2024, Raytheon recognized a $0.6 billion charge related to the termination of a fixed-price development contract[37] Impact of Net EAC Adjustments (dollars in millions, except per share amounts): | Metric | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net sales | $(99) | $3 | $(145) | $(15) | | Operating profit | $(117) | $(62) | $(275) | $(224) | | Income attributable to common shareowners | $(92) | $(49) | $(217) | $(177) | | Diluted EPS attributable to common shareowners | $(0.07) | $(0.04) | $(0.16) | $(0.13) | Note 6: Accounts Receivable, Net Net accounts receivable increased to $12.385 billion as of June 30, 2025, from $10.976 billion at year-end 2024 Accounts Receivable, Net (dollars in millions): | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Accounts receivable | $12,722 | $11,265 | | Allowance for expected credit losses | $(337) | $(289) | | Total accounts receivable, net | $12,385 | $10,976 | Note 7: Contract Assets and Liabilities Net contract liabilities decreased to $3.5 billion, with changes primarily driven by activity at Pratt & Whitney Contract Assets and Liabilities (dollars in millions): | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Contract assets, net | $15,686 | $14,570 | | Contract liabilities | $(19,186) | $(18,616) | | Net contract liabilities | $(3,500) | $(4,046) | - Contract assets increased $1.1 billion primarily due to sales in excess of billings at Pratt & Whitney[39] - Contract liabilities increased $0.6 billion primarily due to advances received and billings in excess of sales at Pratt & Whitney[39] - The allowance for expected credit losses on contract assets increased to $0.7 billion from $0.5 billion, mainly due to a customer bankruptcy at Pratt & Whitney[40] Note 8: Inventory, net Net inventory increased to $14.012 billion as of June 30, 2025, from $12.768 billion at year-end 2024 Inventory, Net (dollars in millions): | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Raw materials | $4,559 | $4,164 | | Work-in-process | $4,822 | $4,493 | | Finished goods | $4,631 | $4,111 | | Total inventory, net | $14,012 | $12,768 | Note 9: Borrowings and Lines of Credit RTX maintained access to a $5.0 billion credit facility and had $1.4 billion in commercial paper outstanding as of June 30, 2025 - As of June 30, 2025, RTX had a $5.0 billion revolving credit agreement with no outstanding borrowings[42] - RTX had $1.4 billion of commercial paper borrowings outstanding at June 30, 2025, with a weighted-average interest rate of 4.7%[43] - The average maturity of RTX's long-term debt as of June 30, 2025, is approximately 12 years[46] Long-Term Debt Repayments (dollars in millions): | Date | Description of Notes | Aggregate Principal Balance | | :--- | :--- | :--- | | May 7, 2025 | 3 Month SOFR plus 1.225% term loan due 2025 | $750 | Note 10: Employee Benefit Plans Contributions to defined contribution plans were $741 million for the first half of 2025, with changes in pension assets and liabilities noted Contributions to Plans (dollars in millions): | Plan Type | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | U.S. qualified defined benefit plans | — | — | — | — | | International defined benefit plans | $11 | $10 | $14 | $12 | | PRB plans | $1 | $4 | $11 | $13 | | Defined contribution plans | $340 | $339 | $741 | $734 | Balance Sheet Recognition (dollars in millions): | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Non-current pension assets | $2,358 | $1,819 | | Current pension and PRB liabilities | $257 | $256 | | Future pension and postretirement benefit obligations | $2,038 | $2,104 | Net Periodic Pension Income (dollars in millions): | Component | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net periodic pension income | $(310) | $(327) | $(636) | $(666) | Note 11: Income Taxes The Q2 2025 effective tax rate was 15.4%, a significant decrease from 59.1% in the prior year due to a tax benefit and absence of a prior-year charge Effective Income Tax Rate: | Period | 2025 | 2024 | | :--- | :--- | :--- | | Quarter Ended June 30 | 15.4% | 59.1% | | Six Months Ended June 30 | 16.2% | 15.8% | - The Q2 2025 effective tax rate includes a $33 million tax benefit from the conclusion of an IRS examination for RTX's 2020 tax year[50] - The Q2 2024 effective tax rate included the impact of a $918 million charge for which no related tax benefit was recorded[50] - RTX is disputing certain IRS proposed adjustments for tax years 2017-2019 at the Appeals Division of the IRS[53] Note 12: Financial Instruments RTX uses derivative instruments for risk management, with the notional principal of foreign currency hedges increasing to $21 billion - RTX uses derivative instruments to manage foreign currency, interest rate, and commodity price exposures[55] - The aggregate notional principal of outstanding foreign currency hedges was $21 billion at June 30, 2025, up from $17 billion at year-end 2024[56] - During Q2 2025, the Company entered into forward exchange contracts to partially hedge its net investment in certain foreign subsidiaries[57] Note 13: Fair Value Measurements RTX measures certain assets and liabilities at fair value, with derivative instruments primarily valued using Level 2 inputs Recurring Fair Value Measurements (dollars in millions) - June 30, 2025: | Metric | Total | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Marketable securities held in trusts | $679 | $609 | $70 | — | | Derivative assets | $490 | — | $490 | — | | Derivative liabilities | $307 | — | $307 | — | Recurring Fair Value Measurements (dollars in millions) - December 31, 2024: | Metric | Total | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Marketable securities held in trusts | $786 | $721 | $65 | — | | Derivative assets | $187 | — | $187 | — | | Derivative liabilities | $451 | — | $451 | — | Fair Value of Long-Term Debt (excluding finance leases) (dollars in millions): | Date | Carrying Amount | Fair Value | | :--- | :--- | :--- | | June 30, 2025 | $40,262 | $37,877 | | December 31, 2024 | $40,991 | $37,956 | - The fair value of long-term debt is primarily classified as Level 2 ($35,845 million at June 30, 2025) within the fair value hierarchy[63] Note 14: Variable Interest Entities Pratt & Whitney consolidates IAE and IAE LLC as variable interest entities, with total assets of $12.739 billion as of June 30, 2025 - Pratt & Whitney consolidates International Aero Engines AG (IAE) and International Aero Engines, LLC (IAE LLC) as variable interest entities[64] Consolidated Variable Interest Entities (dollars in millions): | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Current assets | $11,611 | $10,315 | | Non-current assets | $1,128 | $1,060 | | Total assets | $12,739 | $11,375 | | Current liabilities | $14,130 | $13,595 | | Non-current liabilities | $123 | $140 | | Total liabilities | $14,253 | $13,735 | Note 15: Guarantees RTX provides various financial and performance guarantees, with the carrying amount of warranties increasing to $1.044 billion - The carrying amount of liabilities related to obligations from sales of certain businesses was $0.1 billion at June 30, 2025[67] Outstanding Financial Guarantees (dollars in millions): | Type | June 30, 2025 Maximum Potential Payment | June 30, 2025 Carrying Amount of Liability | Dec 31, 2024 Maximum Potential Payment | Dec 31, 2024 Carrying Amount of Liability | | :--- | :--- | :--- | :--- | :--- | | Commercial aerospace financing arrangements | $211 | — | $274 | — | | Third party guarantees | $44 | — | $79 | $1 | Changes in Service and Product Warranties and Performance Guarantees (dollars in millions): | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Balance as of January 1 | $993 | $1,091 | | Warranties and performance guarantees issued | $152 | $134 | | Settlements | $(108) | $(152) | | Other | $7 | $(5) | | Balance as of June 30 | $1,044 | $1,068 | Note 16: Commitments and Contingencies RTX faces various commitments and contingencies, including environmental remediation, legal matters, and impacts from the Powder Metal issue - RTX has $0.8 billion reserved for environmental remediation as of June 30, 2025[71] - Commercial aerospace financing and other contractual commitments totaled approximately $13.6 billion as of June 30, 2025[72] - Standby letters of credit and surety bonds totaled $3.9 billion as of June 30, 2025[74] - Aggregate outstanding notional value of industrial cooperation agreements was approximately $11.5 billion at June 30, 2025[75] - Pratt & Whitney faces three Cost Accounting Standards (CAS) claims totaling approximately $2.0 billion plus interest, which the company believes are without merit[86][87] - In 2024, RTX resolved several legal matters with penalties and settlements totaling $1.004 billion[88][89] - RTX entered into a Consent Agreement with the Department of State to resolve export control violations, including a $200 million civil penalty[90] - The Pratt & Whitney Powder Metal Matter requires accelerated fleet inspection, with accrued liabilities for customer compensation at $1.1 billion as of June 30, 2025[80][82][83] - The UTC Equity Conversion Litigation was concluded in the Company's favor in May 2025[92] - The class action lawsuit regarding employee hiring practices was concluded in May 2025 after all defendants reached a settlement[93] - RTX is cooperating with an SEC investigation related to the Powder Metal Matter[96] Note 17: Equity Accumulated Other Comprehensive Loss decreased to $(2,391) million, driven by foreign currency translation and hedging gains Changes in Accumulated Other Comprehensive Loss (AOCL), net of tax (dollars in millions) - Six Months Ended June 30, 2025: | Component | Foreign Currency Translation | Defined Benefit Pension and Postretirement Plans | Unrealized Hedging Gains (Losses) | Accumulated Other Comprehensive Loss | | :--- | :--- | :--- | :--- | :--- | | Balance at December 31, 2024 | $(949) | $(2,679) | $(127) | $(3,755) | | Other comprehensive income (loss) before reclassifications, net | $1,362 | $(179) | $259 | $1,442 | | Amounts reclassified, pre-tax | — | $(77) | $23 | $(54) | | Tax benefit (expense) | $1 | $39 | $(64) | $(24) | | Balance at June 30, 2025 | $414 | $(2,896) | $91 | $(2,391) | Changes in Accumulated Other Comprehensive Loss (AOCL), net of tax (dollars in millions) - Six Months Ended June 30, 2024: | Component | Foreign Currency Translation | Defined Benefit Pension and Postretirement Plans | Unrealized Hedging Gains (Losses) | Accumulated Other Comprehensive Loss | | :--- | :--- | :--- | :--- | :--- | | Balance at December 31, 2023 | $(440) | $(2,026) | $47 | $(2,419) | | Other comprehensive income (loss) before reclassifications, net | $(189) | $(10) | $(61) | $(260) | | Amounts reclassified, pre-tax | — | $(87) | $9 | $(78) | | Tax benefit (expense) | $(3) | $21 | $21 | $39 | | Balance at June 30, 2024 | $(632) | $(2,102) | $16 | $(2,718) | Note 18: Segment Financial Data Total segment net sales and operating profit increased for the first half of 2025, driven by strong performance across all segments - RTX's operations are classified into three principal segments: Collins Aerospace, Pratt & Whitney, and Raytheon[103][104] Total Segment Net Sales (dollars in millions): | Segment | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Collins Aerospace | $7,622 | $6,999 | $14,839 | $13,672 | | Pratt & Whitney | $7,631 | $6,802 | $14,997 | $13,258 | | Raytheon | $7,001 | $6,511 | $13,341 | $13,170 | | Total segment | $22,254 | $20,312 | $43,177 | $40,100 | Total Segment Operating Profit (dollars in millions): | Segment | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Collins Aerospace | $1,173 | $1,118 | $2,261 | $1,967 | | Pratt & Whitney | $492 | $542 | $1,072 | $954 | | Raytheon | $805 | $127 | $1,483 | $1,123 | | Total segment | $2,470 | $1,787 | $4,816 | $4,044 | Segment Sales Disaggregated by Geographic Region (Six Months Ended June 30, 2025, dollars in millions): | Region | Collins Aerospace | Pratt & Whitney | Raytheon | Other | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | United States | $6,862 | $6,678 | $9,356 | $107 | $23,003 | | Europe | $3,480 | $3,378 | $1,759 | $1 | $8,618 | | Asia Pacific | $1,760 | $3,111 | $1,131 | — | $6,002 | | Middle East and North Africa | $510 | $325 | $917 | — | $1,752 | | Other regions | $904 | $1,504 | $104 | — | $2,512 | | Consolidated net sales | $13,516 | $14,996 | $13,267 | $108 | $41,887 | Segment Sales Disaggregated by Type of Customer (Six Months Ended June 30, 2025, dollars in millions): | Customer Type | Collins Aerospace | Pratt & Whitney | Raytheon | Other | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales to the U.S. government | $3,511 | $3,055 | $9,335 | $104 | $16,005 | | Foreign military sales through the U.S. government | $220 | $783 | $2,103 | — | $3,106 | | Foreign government direct commercial sales | $648 | $328 | $1,808 | $1 | $2,785 | | Commercial aerospace and other commercial sales | $9,137 | $10,830 | $21 | $3 | $19,991 | | Consolidated net sales | $13,516 | $14,996 | $13,267 | $108 | $41,887 | Segment Sales Disaggregated by Sales Type (Six Months Ended June 30, 2025, dollars in millions): | Sales Type | Collins Aerospace | Pratt & Whitney | Raytheon | Other | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Products | $10,518 | $8,155 | $11,381 | $88 | $30,142 | | Services | $2,998 | $6,841 | $1,886 | $20 | $11,745 | | Consolidated net sales | $13,516 | $14,996 | $13,267 | $108 | $41,887 | Note 19: Remaining Performance Obligations (RPO) Total RPO was approximately $236 billion as of June 30, 2025, with 25% expected to be recognized as revenue in the next 12 months - Total RPO was approximately $236 billion as of June 30, 2025[123] - Approximately 25% of the total RPO is expected to be recognized as revenue over the next 12 months[123] - Approximately 45% of RPO relates to long-term commercial aerospace maintenance contracts at Pratt & Whitney[123] Note 20: Accounting Pronouncements RTX is evaluating the impact of two new FASB Accounting Standards Updates related to income statement and income tax disclosures - ASU 2024-03, Disaggregation of Income Statement Expenses, requires tabular disclosure of natural expense categories and is effective after December 15, 2026[124] - ASU 2023-09, Improvements to Income Tax Disclosures, enhances income tax reporting and is effective for fiscal years beginning after December 15, 2024[125] - RTX is currently evaluating the impact of these new pronouncements on its disclosures[124][125] Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP (PwC) reviewed the interim financial information and is not aware of any material modifications needed for conformity with U.S. GAAP[129] - PwC's review is substantially less in scope than an audit, and thus, no opinion is expressed on the interim financial information[131] - PwC previously audited the consolidated financial statements as of December 31, 2024, and expressed an unqualified opinion[130] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on RTX's financial condition, results of operations, and key business developments BUSINESS OVERVIEW RTX's 2025 business environment is influenced by supply chain disruptions, inflation, geopolitical conflicts, and government policies - RTX is a global premier systems provider of high technology products and services to the aerospace and defense industries[134] - Significant factors affecting the business in 2025 include global supply chain disruptions, inflation, geopolitical conflicts, and U.S. government policy changes[142][147][149][151][152][155][156][157][159][160][161] - In 2024, RTX resolved several legal matters, including government investigations and export control violations[143][144] - The Pratt & Whitney Powder Metal Matter continues to require accelerated inspection of the PW1100G-JM GTF fleet through 2026[146] - The IAM work stoppage at Pratt & Whitney ended on May 27, 2025, with full production resuming in June 2025[148] CRITICAL ACCOUNTING ESTIMATES There have been no significant changes in critical accounting estimates during the six months ended June 30, 2025 - Preparation of financial statements requires management to make estimates and assumptions, with the most complex judgments arising from inherently uncertain matters[164] - There have been no significant changes in critical accounting estimates during the six months ended June 30, 2025[164] RESULTS OF OPERATIONS RTX reported strong financial performance, with significant increases in net sales and operating profit driven by organic growth and absence of prior-year charges - RTX provides organic change in Net sales and Operating profit (non-GAAP measures) to offer transparency into underlying business performance[167][168] Net Sales Total net sales increased by 9.4% for the quarter and 7.3% for the six months, driven by organic growth across all segments Total Net Sales (dollars in millions): | Period | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Quarter Ended June 30 | $21,581 | $19,721 | $1,860 | 9.4% | | Six Months Ended June 30 | $41,887 | $39,026 | $2,861 | 7.3% | Factors Contributing to Change in Total Net Sales (dollars in millions): | Factor | Quarter Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Organic | $1,783 | $3,304 | | Acquisitions and divestitures, net | $(30) | $(522) | | Other | $107 | $79 | | Total change | $1,860 | $2,861 | - Organic net sales increased by $1.8 billion for the quarter and $3.3 billion for the six months, primarily due to higher sales at all segments[171][172] Net Sales by Type (dollars in millions): | Type | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Products | $15,551 | $14,562 | $30,142 | $28,865 | | Services | $6,030 | $5,159 | $11,745 | $10,161 | Sales to Major Customers (dollars in millions): | Customer Type | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales to the U.S. government | $8,273 | $8,052 | $16,005 | $16,179 | | Foreign military sales through the U.S. government | $1,635 | $1,269 | $3,106 | $2,518 | | Foreign government direct commercial sales | $1,433 | $1,171 | $2,785 | $2,379 | | Commercial aerospace and other commercial sales | $10,240 | $9,229 | $19,991 | $17,950 | Cost of Sales Total cost of sales increased due to higher sales volumes, partially offset by the absence of significant prior-year charges Total Cost of Sales (dollars in millions): | Period | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Quarter Ended June 30 | $17,205 | $16,141 | $1,064 | 6.6% | | Six Months Ended June 30 | $33,395 | $31,885 | $1,510 | 4.7% | | Percentage of net sales (Qtr) | 79.7% | 81.8% | | | | Percentage of net sales (6M) | 79.7% | 81.7% | | | Factors Contributing to Change in Total Cost of Sales (dollars in millions): | Factor | Quarter Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Organic | $1,510 | $2,579 | | Acquisitions and divestitures, net | $(23) | $(471) | | Restructuring | $13 | $57 | | FAS/CAS operating adjustment | $28 | $58 | | Acquisition accounting adjustments | $(18) | $(46) | | Other | $(446) | $(667) | | Total change | $1,064 | $1,510 | - Organic increase in total cost of sales was $1.5 billion for the quarter and $2.6 billion for the six months, driven by higher sales volumes[182][184] - Other cost of sales decreased primarily due to the absence of a $0.5 billion charge for the Raytheon Contract Termination and $0.2 billion in charges at Collins in 2024[183][185] Cost of Sales by Type (dollars in millions): | Type | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Products | $12,989 | $12,625 | $25,272 | $24,841 | | Services | $4,216 | $3,516 | $8,123 | $7,044 | Research and Development Company-funded R&D remained consistent, while customer-funded R&D increased due to military and commercial programs Research and Development (dollars in millions): | Type | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Company-funded | $697 | $706 | $1,334 | $1,375 | | Customer-funded | $1,247 | $1,186 | $2,447 | $2,422 | - Company-funded R&D expenses were relatively consistent year-over-year[193] - Customer-funded R&D expenses increased by $0.1 billion for the quarter, driven by higher expenses at Collins and Pratt & Whitney[194] Selling, General, and Administrative SG&A expenses increased primarily due to a charge at Pratt & Whitney related to a customer bankruptcy and higher restructuring costs Selling, General, and Administrative (dollars in millions): | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Quarter Ended June 30 | $1,573 | $1,449 | $124 | | Six Months Ended June 30 | $3,021 | $2,843 | $178 | | Percentage of net sales (Qtr) | 7.3% | 7.3% | | | Percentage of net sales (6M) | 7.2% | 7.3% | | - The increase in SG&A for the quarter was primarily driven by a $0.1 billion charge at Pratt & Whitney related to a customer bankruptcy[196] - The six-month increase was due to the customer bankruptcy charge and $0.1 billion of higher restructuring costs at Collins[197] Other Income (Expense), Net Other income increased significantly due to the absence of a $0.9 billion charge for legal matters recorded in Q2 2024 Other Income (Expense), Net (dollars in millions): | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Quarter Ended June 30 | $40 | $(896) | $936 | | Six Months Ended June 30 | $44 | $(524) | $568 | - The quarterly increase was primarily due to the absence of a $0.9 billion charge recorded in Q2 2024 related to legal matters[200] - The six-month increase was partially offset by the absence of a $0.4 billion gain on the sale of the CIS business in Q1 2024[201] Operating Profit Operating profit surged by 305.7% for the quarter, driven by improved segment performance and the absence of major prior-year charges Operating Profit (dollars in millions): | Period | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Quarter Ended June 30 | $2,146 | $529 | $1,617 | 305.7% | | Six Months Ended June 30 | $4,181 | $2,399 | $1,782 | 74.3% | | Operating profit margin (Qtr) | 9.9% | 2.7% | | | | Operating profit margin (6M) | 10.0% | 6.1% | | | - The quarterly increase was driven by segment performance and the absence of a $0.9 billion legal charge and a $0.6 billion contract termination charge from Q2 2024[202] - The six-month increase was driven by a $0.7 billion increase in segment operating performance and the absence of prior year charges[203] Non-service Pension Income Non-service pension income remained relatively consistent compared to the prior year Non-service Pension Income (dollars in millions): | Period | 2025 | 2024 | | :--- | :--- | :--- | | Quarter Ended June 30 | $(351) | $(374) | | Six Months Ended June 30 | $(717) | $(760) | Interest Expense, Net Net interest expense remained relatively consistent year-over-year Interest Expense, Net (dollars in millions): | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Quarter Ended June 30 | $457 | $475 | $(18) | | Six Months Ended June 30 | $900 | $880 | $20 | | Average interest expense rate (Qtr) | 4.5% | 4.6% | | | Average interest expense rate (6M) | 4.5% | 4.6% | | - Interest expense, net, for the quarter and six months was relatively consistent with the prior year[206] - The six-month increase was primarily due to the reversal of interest accruals from tax audit conclusions in H1 2024[207] Income Taxes The Q2 2025 effective tax rate was 15.4%, a significant decrease from 59.1% in the prior year due to a tax benefit and absence of a prior-year charge Effective Income Tax Rate: | Period | 2025 | 2024 | | :--- | :--- | :--- | | Quarter Ended June 30 | 15.4% | 59.1% | | Six Months Ended June 30 | 16.2% | 15.8% | - The Q2 2025 effective tax rate includes a $33 million tax benefit from the conclusion of an IRS examination[209] - The Q2 2024 effective tax rate included the impact of a $918 million charge for which no related tax benefit was recorded[209] Net Income Attributable to Common Shareowners Net income and diluted EPS increased significantly, reflecting improved operating performance and the absence of substantial prior-year charges Net Income Attributable to Common Shareowners (dollars in millions, except per share amounts): | Metric | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to common shareowners | $1,657 | $111 | $3,192 | $1,820 | | Diluted earnings per share | $1.22 | $0.08 | $2.36 | $1.36 | - Net income for Q2 2025 included unfavorable impacts from acquisition accounting adjustments of $0.4 billion (diluted EPS of $0.28)[212] - Net income for H1 2024 included unfavorable impacts from a $0.9 billion legal charge and a $0.4 billion contract termination charge[213][219] SEGMENT REVIEW All segments reported organic sales growth, driving a significant increase in total segment operating profit, with strong defense bookings - Total backlog was $236 billion as of June 30, 2025, up from $218 billion at year-end 2024[226] - Defense bookings were approximately $12 billion for the quarter and $21 billion for the six months ended June 30, 2025[227] - The change in net EAC adjustments was primarily due to unfavorable changes across businesses, with no single significant driver[224] Net EAC Adjustments (dollars in millions): | Period | 2025 | 2024 | | :--- | :--- | :--- | | Quarter Ended June 30 | $(117) | $(62) | | Six Months Ended June 30 | $(275) | $(224) | Collins Aerospace Collins Aerospace reported a 9% increase in net sales, driven by higher commercial aftermarket and defense sales Collins Aerospace Financial Performance (dollars in millions): | Metric | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $7,622 | $6,999 | 9% | $14,839 | $13,672 | 9% | | Operating profit | $1,173 | $1,118 | 5% | $2,261 | $1,967 | 15% | | Operating profit margins | 15.4% | 16.0% | | 15.2% | 14.4% | | - Organic net sales increased by $0.6 billion for the quarter, driven by higher commercial aftermarket and defense sales[232] - Organic operating profit increased by $0.1 billion for the quarter, primarily due to higher defense volume and favorable mix[233] - Organic net sales increased by $1.2 billion for the six months, driven by higher commercial aftermarket and defense sales[236] - Organic operating profit increased by $0.3 billion for the six months, driven by higher commercial aftermarket and defense volume[237] - Other operating profit for the six months increased due to the absence of $0.2 billion in Q1 2024 charges related to alternative titanium sources[238] - Collins booked $358 million for the U.S. Navy's Very Low Frequency communication subsystem in the first half of 2025[240] Pratt & Whitney Pratt & Whitney's net sales increased by 12% for the quarter, driven by higher commercial aftermarket and OEM sales Pratt & Whitney Financial Performance (dollars in millions): | Metric | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $7,631 | $6,802 | 12% | $14,997 | $13,258 | 13% | | Operating profit | $492 | $542 | (9)% | $1,072 | $954 | 12% | | Operating profit margins | 6.4% | 8.0% | | 7.1% | 7.2% | | - Organic net sales increased by $0.8 billion for the quarter, reflecting higher commercial aftermarket and OEM sales[244] - Organic operating profit increased by $0.1 billion for the quarter, driven by higher commercial aftermarket volume and favorable OEM mix[245] - Other operating profit decreased by $0.1 billion for the quarter, primarily due to a charge related to a customer bankruptcy[246] - Organic net sales increased by $1.7 billion for the six months, reflecting higher commercial aftermarket and OEM sales[250] - Organic operating profit increased by $0.2 billion for the six months, driven by higher commercial aftermarket volume and lower R&D expenses[251] - Pratt & Whitney booked $541 million for F135 sustainment in the first half of 2025[252] Raytheon Raytheon's net sales increased by 8% for the quarter, with operating profit surging 534% due to higher volume and absence of a prior-year charge Raytheon Financial Performance (dollars in millions): | Metric | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $7,001 | $6,511 | 8% | $13,341 | $13,170 | 1% | | Operating profit | $805 | $127 | 534% | $1,483 | $1,123 | 32% | | Operating profit margins | 11.5% | 2.0% | | 11.1% | 8.5% | | Raytheon Defense Bookings (dollars in millions): | Period | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Quarter Ended June 30 | $9,399 | $5,028 | $4,371 | 87% | | Six Months Ended June 30 | $13,795 | $13,150 | $645 | 5% | - Organic net sales increased by $0.4 billion for the quarter, primarily due to higher sales from international Patriot and NASAMS programs[256] - Organic operating profit increased by $0.1 billion for the quarter, driven by a favorable change in mix and higher volume[257] - Other operating profit increased due to the absence of a $0.6 billion charge related to the Raytheon Contract Termination in Q2 2024[258] - Organic net sales increased by $0.6 billion for the six months, primarily due to higher sales from international Patriot, NASAMS, and LTAMDS programs[261] - Organic operating profit increased by $0.2 billion for the six months, primarily due to a favorable change in mix and higher volume[262] - Raytheon's backlog was $64 billion as of June 30, 2025, with key quarterly bookings including $1.1 billion for AIM-9X and $1.8 billion on classified contracts[265] Corporate and Eliminations and other Corporate expenses decreased significantly due to the absence of a $0.9 billion charge for legal matters from the prior year Eliminations and other & Corporate expenses (dollars in millions): | Metric | Quarter Ended June 30, 2025 Net Sales | Quarter Ended June 30, 2024 Net Sales | Quarter Ended June 30, 2025 Operating Profit | Quarter Ended June 30, 2024 Operating Profit | | :--- | :--- | :--- | :--- | :--- | | Eliminations and other | $(673) | $(591) | $24 | $(36) | | Corporate expenses and other unallocated items | — | — | $(47) | $(930) | | Metric | Six Months Ended June 30, 2025 Net Sales | Six Months Ended June 30, 2024 Net Sales | Six Months Ended June 30, 2025 Operating Profit | Six Months Ended June 30, 2024 Operating Profit | | :--- | :--- | :--- | :--- | :--- | | Eliminations and other | $(1,290) | $(1,074) | $36 | $(41) | | Corporate expenses and other unallocated items | — | — | $(85) | $(1,026) | - The change in eliminations and other operating profit was primarily due to a gain on an investment recognized in Q2 2025[268][271] - The change in corporate expenses was primarily due to the absence of a $0.9 billion charge recorded in Q2 2024 related to legal matters[269][272] FAS/CAS operating adjustment The FAS/CAS operating adjustment, representing the difference between GAAP and government accounting standards, remained relatively consistent - The FAS/CAS operating adjustment represents the difference between pension and PRB expense under U.S. GAAP (FAS) and U.S. government Cost Accounting Standards (CAS)[273] FAS/CAS Operating Adjustment (dollars in millions): | Component | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | FAS service cost (expense) | $(30) | $(34) | $(60) | $(69) | | CAS expense | $216 | $246 | $431 | $495 | | FAS/CAS operating adjustment | $186 | $212 | $371 | $426 | Acquisition accounting adjustments Acquisition accounting adjustments, primarily amortization of acquired intangibles, remained relatively consistent year-over-year - Acquisition accounting adjustments include amortization of acquired intangible assets and are not part of management's segment evaluation[275] - Acquisition accounting adjustments for the quarter and six months were relatively consistent with the prior year[276] Acquisition Accounting Adjustments (dollars in millions): | Component | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Amortization of acquired intangibles | $(498) | $(516) | $(978) | $(1,022) | | Amortization of property, plant, and equipment fair value adjustment | $(8) | $(11) | $(17) | $(23) | | Amortization of customer contractual obligations related to acquired loss making and below-market contracts | $19 | $23 | $38 | $41 | | Acquisition accounting adjustments | $(487) | $(504) | $(957) | $(1,004) | LIQUIDITY AND FINANCIAL CONDITION RTX maintains strong liquidity with $4.8 billion in cash, though operating cash flows decreased due to higher accounts receivable and tax payments Key Financial Metrics (dollars in millions): | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $4,782 | $5,578 | | Total debt | $41,978 | $41,261 | | Total equity | $64,206 | $61,923 | | Total capitalization | $106,184 | $103,184 | | Total debt to total capitalization | 40% | 40% | - As of June 30, 2025, approximately 48% of RTX's $4.8 billion cash was held by foreign subsidiaries[280] - RTX's Moody's outlook improved to Baa1/stable in March 2025, and S&P rating was affirmed at BBB+/stable in June 2025[281] - RTX has a $5.0 billion revolving credit agreement with no outstanding borrowings and $1.4 billion in commercial paper borrowings outstanding[282][283] - RTX believes its cash on hand and access to credit markets will be sufficient to meet future operating cash needs[285] Cash Flow - Operating Activities Operating cash flows decreased by $1.3 billion, primarily due to an increase in accounts receivable and higher tax payments Net Cash Flows Provided by Operating Activities (dollars in millions): | Period | 2025 | 2024 | | :--- | :--- | :--- | | Six Months Ended June 30 | $1,763 | $3,075 | - The $1.3 billion decrease in operating cash flows was driven by an increase in accounts receivable and higher tax payments[288][290] - Factoring activity resulted in a $0.2 billion decrease in cash provided by operating activities[289] - For the Powder Metal Matter, RTX estimates a full year 2025 cash impact of approximately $1.1 billion to $1.3 billion[291] Cash Flow - Investing Activities Net cash used in investing activities increased by $1.1 billion, primarily due to the absence of proceeds from the CIS business sale in the prior year Net Cash Flows Used in Investing Activities (dollars in millions): | Period | 2025 | 2024 | | :--- | :--- | :--- | | Six Months Ended June 30 | $(1,187) | $(40) | - The $1.1 billion change was primarily related to the sale of the CIS business in Q1 2024, which generated approximately $1.3 billion in cash proceeds[294] - Investments in other intangible assets increased, primarily due to collaboration and exclusivity payments[295] Cash Flow - Financing Activities Net cash used in financing activities decreased by $2.2 billion, driven by higher commercial paper issuance and lower debt repayments Net Cash Flows Used in Financing Activities (dollars in millions): | Period | 2025 | 2024 | | :--- | :--- | :--- | | Six Months Ended June 30 | $(1,409) | $(3,591) | - The $2.2 billion change was primarily driven by a $1.4 billion increase in commercial paper issuance and $0.9 billion lower long-term debt repayments[298] - RTX had remaining authority to repurchase approximately $0.6 billion of common stock under its share repurchase program[299] - The Board of Directors declared a dividend of $0.68 per share payable September 4, 2025[301] Common Stock Repurchases (dollars in millions; shares in thousands): | Period | 2025 $ | 2025 Shares | 2024 $ | 2024 Shares | | :--- | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $50 | 396 | $100 | 1,045 | Item 3. Quantitative and Qualitative Disclosures About Market Risk There has been no significant change in the company's exposure to market risk during the first half of 2025 - There has been no significant change in RTX's exposure to market risk during the six months ended June 30, 2025[302] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - As of June 30, 2025, management concluded that the company's disclosure controls and procedures were effective[303] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[304] PART II – OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 16 for a discussion of material legal proceedings, with no other material developments - For a discussion regarding material legal proceedings, refer to "Note 16: Commitments and Contingencies"[310] - Except as noted, there have been no material developments in legal proceedings[310] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report - There have been no material changes from the risk factors disclosed in the 2024 Annual Report on Form 10-K[311] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds RTX did not repurchase any equity securities during the quarter ended June 30, 2025 - On October 21, 2023, the Board of Directors authorized a share repurchase program for up to $11 billion of common stock[314] - During the quarter ended June 30, 2025, RTX did not repurchase shares outside of the program[315] Issuer Purchases of Equity Securities (Quarter Ended June 30, 2025): | Period | Total Number of Shares Purchased (000's) | Average Price Paid per Share (dollars) | Total Number of Shares Purchased as Part of a Publicly Announced Program (000's) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (dollars in millions) | | :--- | :--- | :--- | :--- | :--- | | April 1 - April 30 | — | — | — | $615 | | May 1 - May 31 | — | — | — | $615 | | June 1 - June 30 | — | — | — | $615 | | Total | — | — | — | | Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[316] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including certifications and XBRL documents - The exhibits include certifications, Inline XBRL documents, and a letter regarding unaudited interim financial information[317] SIGNATURES - The report was signed on July 22, 2025, by the Executive Vice President and Chief Financial Officer, and the Corporate Vice President and Controller[320]