RAYTHEON TECHNOLOGIES CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) is intended to provide information to the reader in
understanding our consolidated financial statements and notes thereto included
in Item 8. Financial Statements and Supplementary Data of this Form 10-K, the
changes in certain key items in those financial statements between select
periods and the primary factors that accounted for those changes. In addition,
we discuss certain accounting principles, policies and critical estimates that
affect our financial statements. Our discussion also contains some additional
context regarding our business, including industry considerations and the
business environment, as well as certain forward-looking statements related to
future events and expectations. This MD&A should be read in conjunction with the
other sections of this Form 10-K, including Item 1A. "Risk Factors."

                               BUSINESS OVERVIEW

We are a global premier systems provider of high technology products and
services to the aerospace and defense industries. We operate in four principal
business segments: Collins Aerospace (Collins), Pratt & Whitney, Raytheon
Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD). The Company
recently announced its intention to streamline the structure of its core
businesses into three principal business segments: Collins Aerospace, Pratt &
Whitney and Raytheon. The Company plans to determine the exact composition of
each segment and implement the reorganization in the second half of 2023. All
segment information included in this Form 10-K is reflective of the existing
four segments of Collins, Pratt & Whitney, RIS and RMD in accordance with the
management structure in place as of December 31, 2022. Unless the context
otherwise requires, the terms "we," "our," "us," "the Company," "Raytheon
Technologies," and "RTC" mean Raytheon Technologies Corporation and its
subsidiaries.

Industry Considerations

Our worldwide operations can be affected by industrial, economic and political
factors on both a regional and global level. Our operations include original
equipment manufacturer (OEM) and extensive related aftermarket parts and
services related to our aerospace operations. Our defense business serves both
domestic and international customers primarily as a prime contractor or
subcontractor on a broad portfolio of defense and related programs for
government customers. Our business mix also reflects the combination of shorter
cycles in our commercial aerospace spares contracts and certain service
contracts in our defense business primarily at RIS, and longer cycles in our
aerospace OEM and aftermarket maintenance contracts and on our defense contracts
to design, develop, manufacture or modify complex equipment. Our customers are
in the public and private sectors, and our businesses reflect an extensive
geographic diversification that has evolved with continued globalization.

Collins and Pratt & Whitney serve both commercial and government aerospace
customers. Revenue passenger miles (RPMs), available seat miles and the general
economic health of airline carriers are key barometers for our commercial
aerospace operations. Performance in the general aviation sector is closely tied
to the overall health of the economy and is positively correlated to corporate
profits. Many of our aerospace customers are covered under long-term aftermarket
service agreements at both Collins and Pratt & Whitney, which are inclusive of
both spare parts and services.

RIS, RMD, and the defense operations of Collins and Pratt & Whitney are affected
by U.S. Department of Defense (DoD) budget and spending levels, changes in
demand, changes in policy positions or priorities, the domestic and global
political environment and the evolving nature of the global and national
security threat environment. In addition, our defense businesses engage in both
direct commercial sales, which generally require U.S. government licenses and
approvals, as well as foreign military sales, which are government-to-government
transactions initiated by, and carried out at the direction of, the U.S.
government. Changes in these budget and spending levels, policies, or
priorities, which are subject to U.S. domestic and foreign geopolitical risks
and threats, may impact our defense businesses, including the timing of and
delays in U.S. government licenses and approvals for sales, the risk of
sanctions or other restrictions.

Government legislation, policies and regulations can impact our business and
operations. Changes in environmental and climate change laws or regulations,
including regulations on greenhouse gas emissions, carbon pricing, and energy
taxes, could lead to new or additional investment in product designs and
facility upgrades and could increase our operational and environmental
compliance expenditures, including increased energy and raw materials costs and
costs associated with manufacturing changes. In addition, government and
industry-driven safety and performance regulations, restrictions on aircraft
engine noise and emissions, government-imposed travel restrictions and
limitations, and government procurement practices can impact our businesses.

Business Environment

Global economic and political conditions, changes in raw material and commodity
prices and supply, labor availability and costs, inflation, interest rates,
international and domestic tax law changes, foreign currency exchange rates,
energy costs and
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supply, levels of air travel, the financial condition of commercial airlines, and the impact from natural disasters and weather conditions create uncertainties that could impact our businesses.

Global Supply Chain and Labor Markets. Global supply chain and labor markets are
continuing to experience high levels of disruption, causing significant
materials and parts shortages, including raw material, microelectronics and
commodity shortages, as well as delivery delays, labor shortages, distribution
problems and price increases. Current geopolitical conditions, including
sanctions and other trade restrictive activities and strained intercountry
relations, are contributing to these issues. We have had difficulties procuring
necessary materials, including raw materials, components and other supplies, and
services on a timely basis or at all. We have also had difficulties hiring
qualified personnel, particularly personnel with specialized engineering
experience and security clearances. Our suppliers and subcontractors have been
impacted by the same issues, as well as ongoing pandemic-related issues,
compounding the shortages for us because we rely on them, sometimes as
sole-source providers. In addition, as the ongoing recovery in commercial air
travel continues, the anticipated increase in new aircraft deliveries and
increased demand for our products and services will add to these supply chain
and labor market challenges.

We work continuously to mitigate the effects of these supply chain and labor
constraints through targeted activities and ongoing programs. We work with our
suppliers and subcontractors to assist in mitigation, arrange supply source
alternatives, increase our inventory of available materials and parts, and
regularly pursue cost reductions through a number of mechanisms. We also
continuously monitor labor market conditions and trends and work to mitigate
constraints through talent acquisition, partnership, sourcing and recruiting
arrangements, workforce succession planning, and initiatives to attract, retain
and rehire former employees.

Coronavirus Disease 2019 (COVID-19) Pandemic. The COVID-19 pandemic continues to
negatively affect the global economy, our business and operations, the labor
market, supply chains, inflation, and the industries in which we operate,
although we continue to see signs of ongoing recovery in commercial air travel.
While we believe that the long-term outlook for the aerospace industry remains
positive due to the fundamental drivers of air travel demand, uncertainty
continues with respect to when commercial air traffic capacity will fully return
to and/or exceed pre-COVID-19 levels. The pace of the commercial aerospace
recovery is tied to general economic conditions and may be impacted by
inflation, an economic downturn, or government budget deficits, among other
factors, and may also be impacted by a resurgence of the pandemic and
corresponding travel restrictions and protocols. Our expectations regarding the
COVID-19 pandemic and ongoing recovery and their potential financial impact are
based on available information and assumptions that we believe are reasonable at
this time; however, the actual financial impact is highly uncertain and subject
to a wide range of factors and future developments.

Geopolitical Matters. In response to the Russian military's invasion of Ukraine
on February 24, 2022, the U.S. government and the governments of various
jurisdictions in which we operate, including Canada, the United Kingdom, the
European Union, and others, have imposed broad economic sanctions and export
controls targeting specific industries, entities and individuals in Russia. The
Russian government has implemented similar counter-sanctions and export controls
targeting specific industries, entities and individuals in the U.S. and other
jurisdictions in which we operate, including certain members of the Company's
management team and Board of Directors. These government measures, among other
limitations, restrict transactions involving various Russian banks and financial
institutions and impose enhanced export controls limiting transfers of various
goods, software and technologies to and from Russia, including broadened export
controls specifically targeting the aerospace sector. These measures have
adversely affected, and could continue to adversely affect, the Company and/or
our supply chain, business partners or customers. In the quarter ended March 31,
2022, we reversed $1.3 billion of backlog, which would have been recognized over
a span of approximately 10 years, and recorded certain impairment charges and
increases to reserves related to operations at our Pratt & Whitney and Collins
businesses, as discussed further in "Note 1: Basis of Presentation and Summary
of Accounting Principles" within Item 8 of this Form 10-K. These adverse impacts
have been mitigated in part by the identification of alternative suppliers and
an increase in the global demand for our products as a result of the current
geopolitical environment. Based on information available to date, we do not
currently expect these issues will have a material adverse effect on our
financial results.

China previously announced that it may take measures against RTC in connection
with certain foreign military sales to Taiwan. In addition, China has indicated
that it decided to sanction our Chairman and Chief Executive Officer Gregory
Hayes, in connection with another potential foreign military sale to Taiwan
involving RTC products and services. RTC is not aware of any specific sanctions
against Mr. Hayes or RTC, or the nature or timing of any future potential
sanctions or countermeasures. If China were to impose sanctions or take other
regulatory action against RTC, our suppliers, affiliates or partners, it could
potentially disrupt our business operations. The impact of potential sanctions
or other actions by China cannot be determined at this time.

We have direct commercial sales contracts for products and services to certain
foreign customers, for which U.S. government review and approval have been
pending. The U.S. government's approval of these sales is subject to a range of
factors, including its foreign policies related to these customers, which are
subject to continuing review and potential changes.
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Likewise, regulatory approvals previously granted for prior sales can be paused
or revoked if the products and services have not yet been delivered to the
customer. If we ultimately do not receive all of the regulatory approvals, or
those approvals are revoked, it could have a material effect on our financial
results. In particular, as of December 31, 2022, our Contract liabilities
include approximately $385 million of advance payments received from a Middle
East customer on contracts for which we no longer believe we will be able to
execute or obtain required regulatory approvals. These advance payments may
become refundable to the customer if the contracts are ultimately terminated.

See Item 1A. "Risk Factors" within Part I of this Form 10-K for further discussion.

New Legislation. In August 2022, the Creating Helpful Incentives to Produce
Semiconductors (CHIPS) and Sciences Act and the Inflation Reduction Act were
signed into law, each effective as of January 1, 2023. These new pieces of
legislation include the implementation of a new corporate alternative minimum
tax, an excise tax on stock buybacks, and tax incentives for energy and climate
initiatives, among other provisions. We are evaluating the legislation and
currently do not expect the legislation to have a material impact on our
operations, financial condition or liquidity.

                               FINANCIAL SUMMARY

We use the following key financial performance measures to manage our business
on a consolidated basis and by business segment, and to monitor and assess our
results of operations:
•Net Sales: a growth metric that measures our revenue for the current year;
•Operating Profit (Loss): a measure of our profit (loss) for the year, before
non-operating expenses, net and income taxes; and
•Operating Profit (Loss) Margin: a measure of our Operating profit (loss) as a
percentage of Total Net Sales.
(dollars in millions)                                2022           2021           2020
Total net sales                                   $ 67,074       $ 64,388       $ 56,587
Operating profit (loss)                              5,414          4,958         (1,889)
Operating profit (loss) margins                        8.1  %         7.7  %        (3.3) %
Operating cash flow from continuing operations    $  7,168       $  7,142

$ 4,334

In order to better assess the underlying performance of our business, we also
focus on the change in organic net sales on both a consolidated basis and
business segment basis, and the change in organic operating profit (loss) on a
business segment basis, which allows for better year-over-year comparability.
See Results of Operations below for our definition of the organic change in Net
sales and Operating profit (loss), which are not defined measures under U.S.
Generally Accepted Accounting Principles (GAAP) and may be calculated
differently by other companies.

We also focus on backlog as a key financial performance measure of our
forward-looking sales growth. Total backlog was $175 billion and $156 billion as
of December 31, 2022 and 2021, respectively. Backlog, which is equivalent to our
remaining performance obligations (RPO) for our sales contracts, represents the
aggregate dollar value of firm orders for which products have not been provided
or service has not been performed and excludes unexercised contract options and
potential orders under ordering-type contracts (e.g., indefinite-delivery,
indefinite-quantity (IDIQ) type contracts). Backlog generally increases with
bookings and/or orders and generally decreases as sales are recognized on these
bookings and is affected by changes in foreign exchange rates, as well as
contract cancellations and terminations, and cost underruns on cost-type
contracts.

In addition, we maintain a strong focus on program execution and the prudent
management of capital and investments in order to maximize operating income and
cash. We focus on adjusted earnings per share (EPS) and measures to assess our
cash generation and the efficiency and effectiveness of our use of capital, such
as free cash flow, both of which are not defined measures under U.S. GAAP and
may be calculated differently by other companies.

Considered together, we believe these metrics are strong indicators of our overall performance and our ability to create shareowner value. We also use these and other performance metrics for executive compensation purposes.

A discussion of our results of operations and financial condition follows below in Results of Operations, Segment Review, and Liquidity and Financial Condition.

                             RESULTS OF OPERATIONS

As described in our "Cautionary Note Concerning Factors That May Affect Future
Results" of this Form 10-K, our period-to-period comparisons of our results,
particularly at a segment level, may not be indicative of our future operating
results. The following discussions of comparative results among periods,
including the discussion of segment results, should be viewed in this context.
The results of RIS and RMD reflect the period subsequent to the completion of
the Raytheon merger on April 3, 2020. As such, the results of RIS and RMD for
the second quarter of 2020 exclude results prior to the date of completion of
the
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Raytheon merger, the estimated impact of which is approximately $400 million of
sales and approximately $45 million of operating profit. These amounts, in
addition to the first quarter of 2021 results, have been excluded from the
organic changes for the year ended December 31, 2021 disclosed throughout our
Results of Operations discussion. In addition, as a result of the separation of
United Technologies Corporation's (UTC's) business into three independent,
publicly traded companies - UTC, Carrier Global Corporation (Carrier) and Otis
Worldwide Corporation (Otis) (the Separation Transactions) and the
Distributions, the historical results of Carrier and Otis are presented as
discontinued operations and, as such, have been excluded from both continuing
operations and segment results for all periods presented.

We provide the organic change in Net sales and Cost of sales for our
consolidated results of operations as well as the organic change in Net sales
and Operating profit (loss) for our segments. We believe that these
non-Generally Accepted Accounting Principles (non-GAAP) measures are useful to
investors because they provide transparency to the underlying performance of our
business, which allows for better year-over-year comparability. The organic
change in Net sales, Cost of sales and Operating profit (loss) excludes
Acquisitions and divestitures, net, and the effect of foreign currency exchange
rate translation fluctuations and other significant non-operational items and/or
significant operational items that may occur at irregular intervals (Other).
Additionally, the organic change in Cost of sales and Operating profit (loss)
excludes restructuring costs, the FAS/CAS operating adjustment and costs related
to certain acquisition accounting adjustments. Restructuring costs generally
arise from severance related to workforce reductions and facility exit costs. We
are continuously evaluating our cost structure and have implemented
restructuring actions in an effort to keep our cost structure competitive.
Acquisition accounting adjustments include the amortization of acquired
intangible assets related to acquisitions, the amortization of the property,
plant and equipment fair value adjustment acquired through acquisitions, the
amortization of customer contractual obligations related to loss making or below
market contracts acquired, and goodwill impairment.

                                   Net Sales
                 (dollars in millions)      2022          2021          2020
                 Total net sales         $ 67,074      $ 64,388      $ 56,587


The factors contributing to the total change year-over-year in Total Net Sales
are as follows:

(dollars in millions)                    2022         2021
Organic (1)                            $ 3,660      $   724

Acquisitions and divestitures, net (676) 6,961 Other

                                     (298)         116
Total change                           $ 2,686      $ 7,801

(1) See "Results of Operations" for definition of organic. A reconciliation of this measure to reported U.S. GAAP amounts is provided in the table above.

Net sales increased $3.7 billion organically in 2022 compared to 2021 primarily
due to higher organic sales of $2.5 billion at Pratt & Whitney and $2.4 billion
at Collins, partially offset by lower organic sales of $0.6 billion at RMD. The
$0.7 billion decrease in net sales related to Acquisitions and divestitures, net
in 2022 compared to 2021, was primarily driven by the sale of our global
training and services business within our RIS segment in the fourth quarter of
2021. The decrease in other net sales of $0.3 billion in 2022 compared to 2021
represents the impact of foreign exchange.

Net sales increased $0.7 billion organically in 2021 compared to 2020 primarily
due to higher organic sales of $1.3 billion at Pratt & Whitney, partially offset
by lower organic sales of $0.6 billion at Collins. The $7.0 billion sales
increase in Acquisitions and divestitures, net in 2021 compared to 2020, was
primarily driven by the Raytheon merger on April 3, 2020, partially offset by
the sale of the Collins military Global Positioning System (GPS) and space-based
precision optics businesses in the third quarter of 2020 and the sale of our
Forcepoint business in the first quarter of 2021.

See "Segment Review" below for further information by segment.

                                                                             % of Total Net Sales
(dollars in millions)      2022          2021          2020               2022             2021       2020
Net sales
Products sales          $ 50,773      $ 49,270      $ 43,319                     76  %      77  %      77  %
Services sales            16,301        15,118        13,268                     24  %      23  %      23  %
Total net sales         $ 67,074      $ 64,388      $ 56,587                    100  %     100  %     100  %

Refer to "Note 21: Segment Financial Data" within Item 8 of this Form 10-K for the composition of external net sales by products and services by segment.

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Net products sales increased $1.5 billion in 2022 compared to 2021 primarily due
to increases in external products sales of $1.5 billion at Collins and
$1.2 billion at Pratt & Whitney, partially offset by decreases in external
products sales of $0.7 billion at RMD and $0.5 billion at RIS. Net services
sales increased $1.2 billion in 2022 compared to 2021 primarily due to increases
in external services sales of $1.2 billion at Pratt & Whitney and $0.5 billion
at Collins, partially offset by a decrease in external services sales of
$0.5 billion at RIS primarily driven by the sale of the global training and
services business in the fourth quarter of 2021.

Net products sales increased $6.0 billion in 2021 compared to 2020 primarily due
to an increase in external products sales of $3.7 billion at RMD and $3.0
billion at RIS, both primarily due to the Raytheon merger on April 3, 2020, and
an increase in external products sales of $1.0 billion at Pratt & Whitney,
partially offset by a decrease in external products sales of $1.3 billion at
Collins. Net services sales grew $1.9 billion in 2021 compared to 2020 primarily
due to an increase in external services sales of $0.8 billion at RIS and $0.4
billion at RMD, both primarily due to the Raytheon merger on April 3, 2020, and
an increase in external services sales of $0.4 billion at Pratt & Whitney and
$0.3 billion at Collins.

Our sales to major customers were as follows:

                                                                                                         % of Total Net Sales
(dollars in millions)                  2022              2021              2020               2022               2021               2020

Sales to the U.S. government (1) $ 30,317 $ 31,177 $ 25,962

                 45  %              48  %              46  %
Foreign military sales through the
U.S. government                        5,042             5,546             4,585                  8  %               9  %               8  %
Foreign government direct
commercial sales                       4,327             4,993             3,974                  6  %               8  %               7  %
Commercial aerospace and other
commercial sales                      27,388            22,672            22,066                 41  %              35  %              39  %
Total net sales                     $ 67,074          $ 64,388          $ 56,587                100  %             100  %             100  %

(1) Excludes foreign military sales through the U.S. government.

                                 Cost of Sales
               (dollars in millions)        2022           2021           2020
               Total cost of sales       $ 53,406       $ 51,897       $ 48,056
               Percentage of net sales         80  %          81  %          85  %


The factors contributing to the change year-over-year in total Cost of sales are
as follows:

(dollars in millions)                    2022          2021
Organic (1)                            $ 2,368      $ (1,293)

Acquisitions and divestitures, net (552) 5,829 Restructuring

                                3          (363)
FAS/CAS operating adjustment               234          (643)

Acquisition accounting adjustments (348) 345 Other

                                     (196)          (34)
Total change                           $ 1,509      $  3,841

(1) See "Results of Operations" for definition of organic. A reconciliation of this measure to reported U.S. GAAP amounts is provided in the table above.

The organic increase in total Cost of sales in 2022 compared to 2021 of
$2.4 billion was primarily due to the organic sales increases at Collins and
Pratt & Whitney noted above. The decrease related to Acquisitions and
divestitures, net of $0.6 billion in 2022 compared to 2021 was primarily driven
by the sale of our global training and services business within our RIS segment
in the fourth quarter of 2021. The decrease in other cost of sales of $0.2
billion in 2022 compared to 2021 was primarily driven by the impact of foreign
exchange, partially offset by charges recorded during the first quarter of 2022
at Pratt & Whitney and Collins related to impairment of customer financing
assets for products under lease, inventory reserves, purchase order obligations,
and the impairment of contract fulfillment costs that are no longer recoverable,
all due to global sanctions on and export controls with respect to Russia. See
"Note 1: Basis of Presentation and Summary of Accounting Principles" within Item
8 of this Form 10-K for additional information.

The organic decrease in total Cost of sales in 2021 compared to 2020 of
$1.3 billion was primarily due to an organic Cost of sales decrease at Collins
and RMD. The Collins decrease was primarily due to the sales decrease noted
above, the benefit of cost reduction initiatives, and the absence of prior year
significant unfavorable adjustments. The RMD decrease was primarily due to the
absence of an unfavorable profit impact of $516 million related to inventory
reserves, contract asset impairments and
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recognition of supplier related obligations for certain international contracts
as further described in "Segment Review" below. These decreases in Cost of sales
were partially offset by an increase in organic Cost of sales at Pratt & Whitney
due to the organic sales increases noted above. The increase related to
Acquisitions and divestitures, net of $5.8 billion in 2021 compared to 2020 was
primarily driven by the Raytheon merger on April 3, 2020, partially offset by
the sale of the Collins military GPS and space-based precision optics businesses
in the third quarter of 2020, and the sale of our Forcepoint business in the
first quarter of 2021 as further discussed in "Note 2: Business Acquisitions,
Dispositions, Goodwill and Intangible Assets" within Item 8 of this Form 10-K.
The $0.4 billion decrease in Restructuring is primarily due to the absence of
2020 severance and restructuring actions at Pratt & Whitney and Collins related
to the economic environment primarily caused by the COVID-19 pandemic, and
ongoing cost reduction efforts.

For further discussion on FAS/CAS operating adjustment see the "FAS/CAS
operating adjustment" subsection under the "Segment Review" section below. For
further discussion on Acquisition accounting adjustments, see the "Acquisition
accounting adjustments" subsection under the "Segment Review" section below.

                                                                            % of Total Net Sales
(dollars in millions)      2022          2021          2020               2022             2021      2020
Cost of sales
Products                $ 41,927      $ 41,095      $ 38,137                     63  %     64  %     67  %
Services                  11,479        10,802         9,919                     17  %     17  %     18  %
Total cost of sales     $ 53,406      $ 51,897      $ 48,056                     80  %     81  %     85  %


Net products cost of sales increased $0.8 billion in 2022 compared to 2021
primarily due to increases at Collins and Pratt & Whitney, partially offset by
decreases in Acquisition Accounting Adjustments and RIS. The changes at Collins,
Pratt & Whitney and RIS were related to the changes in products sales noted
above. Net services cost of sales increased $0.7 billion in 2022 compared to
2021 primarily due to increases in external services cost of sales at Pratt &
Whitney and Collins, partially offset by a decrease in external services sales
at RIS, all driven by the services sales changes noted above.

Net products cost of sales increased $3.0 billion in 2021 compared to 2020
primarily due to increases in external products cost of sales at RIS and RMD
principally due to the Raytheon merger on April 3, 2020, and an increase in
external products cost of sales at Pratt & Whitney, principally driven by the
products sales increase noted above, partially offset by a decrease in external
products cost of sales at Collins, principally driven by the products sales
decrease noted above, the benefit of cost reduction initiatives and the absence
of prior year significant unfavorable adjustments. Net services cost of sales
grew $0.9 billion in 2021 compared to 2020 primarily due to an increase in
external services cost of sales at RIS and RMD principally due to the Raytheon
merger on April 3, 2020.

                            Research and Development
                (dollars in millions)        2022          2021          2020
                Company-funded            $ 2,711       $ 2,732       $ 2,582
                Percentage of net sales       4.0  %        4.2  %        4.6  %
                Customer-funded (1)       $ 4,376       $ 4,485       $ 4,111
                Percentage of net sales       6.5  %        7.0  %        7.3  %


(1)  Included in Cost of sales in our Consolidated Statement of Operations.

Research and development spending is subject to the variable nature of program
development schedules and, therefore, year-over-year fluctuations in spending
levels are expected.

Company-funded research and development in 2022 was relatively consistent with
2021. The increase in company-funded research and development of $0.2 billion in
2021 compared to 2020, was primarily driven by $0.2 billion related to the
Raytheon merger on April 3, 2020.

The decrease in customer-funded research and development of $0.1 billion in 2022
compared to 2021, was primarily driven by lower expenses on various programs at
RMD, partially offset by an increase in expenses on the Next Generation
Interceptor (NGI) program at RMD. The increase in customer-funded research and
development of $0.4 billion in 2021 compared to 2020, was primarily driven by
$0.6 billion related to the Raytheon merger on April 3, 2020, partially offset
by lower expenses of $0.2 billion on various military and commercial programs at
Pratt & Whitney and lower expenses of $0.1 billion at Collins primarily related
to the sale of the military GPS and space-based precision optics businesses in
the third quarter of 2020.
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                      Selling, General and Administrative
          (dollars in millions)                     2022          2021      

2020

Selling, general and administrative $ 5,663 $ 5,224

$ 5,540

          Percentage of net sales                    8.4  %        8.1  %   

9.8 %

Selling, general and administrative expenses increased $0.4 billion in 2022
compared to 2021, primarily driven by higher information technology-related
costs at Corporate, Collins and Pratt & Whitney, and higher combined expenses at
Collins and Pratt & Whitney principally driven by higher employee-related costs
and $0.1 billion of charges related to increased estimates for credit losses due
to global sanctions on and export controls with respect to Russia. See "Note 1:
Basis of Presentation and Summary of Accounting Principles" within Item 8 of
this Form 10-K for additional information on Russia sanctions.

Selling, general and administrative expenses decreased $0.3 billion in 2021
compared to 2020, primarily driven by the absence of $0.4 billion of prior year
charges related to increased estimates of expected credit losses due to customer
bankruptcies and additional allowances for credit losses at our Pratt & Whitney
and Collins segments, lower costs of $0.3 billion due to the sale of our
Forcepoint business in the first quarter of 2021, and lower general and
administrative restructuring costs of $0.3 billion primarily related to 2020
severance and restructuring actions at Collins and Corporate related to the
economic environment primarily caused by the COVID-19 pandemic, the Raytheon
merger and ongoing cost reduction efforts, partially offset by an increase in
expenses of $0.4 billion related to the Raytheon merger, and higher
employee-related costs.

                               Other Income, Net
                      (dollars in millions)    2022       2021       2020
                      Other income, net       $ 120      $ 423      $ 885


Other income, net includes equity earnings in unconsolidated entities, royalty
income, foreign exchange gains and losses, and other ongoing and nonrecurring
items.

The decrease in Other income, net of $0.3 billion in 2022 compared to 2021 was
primarily due to the absence of a gain of $269 million on the sale of RIS's
global training and services business in the fourth quarter of 2021, as further
discussed in "Note 2: Business Acquisitions, Dispositions, Goodwill and
Intangible Assets" within Item 8 of this Form 10-K, $69 million of charges
associated with the disposition of two non-core businesses at Collins in the
second quarter of 2022, a $42 million charge in the fourth quarter of 2022
associated with a divestiture of a small non-core Naval Power business at RMD,
and the absence of prior year foreign government wage subsidies related to
COVID-19 at Pratt & Whitney of $41 million, partially offset by the absence of
an accrual of $147 million in the fourth quarter of 2021 related to the ongoing
Department of Justice (DOJ) investigation into contract pricing matters at RMD.

The decrease in Other income, net of $0.5 billion in 2021 compared to 2020, was
primarily due to the absence of $595 million of gains on the sales of the
Collins businesses, in the third quarter of 2020, a decrease of $178 million of
foreign government wage subsidies related to COVID-19 at Pratt & Whitney and
Collins and an accrual of $147 million in the fourth quarter of 2021 related to
the ongoing DOJ investigation into contract pricing matters at RMD, partially
offset by a gain of $269 million on the sale of RIS's global training and
services business in the fourth quarter of 2021. The remaining change was spread
across multiple items with no common or significant driver.

                            Operating Profit (Loss)
            (dollars in millions)                2022         2021           2020
            Operating profit (loss)            $   5,414    $   4,958    $    (1,889)
            Operating profit (loss) margin        8.1  %       7.7  %       (3.3)   %


The increase in Operating profit (loss) of $0.5 billion in 2022 compared to 2021
was primarily driven by a decrease in Acquisition accounting adjustments, the
operating performance at our operating segments and a decrease in Corporate and
Eliminations and other, partially offset by the change in our FAS/CAS operating
adjustment, all of which are described below in "Segment Review."

The change in Operating profit (loss) of $6.8 billion in 2021 compared to 2020
was primarily driven by the operating performance at our operating segments,
including the impact of the Raytheon merger, the absence of the $3.2 billion
goodwill impairment in the second quarter of 2020 related to two Collins
reporting units, and an increase in our FAS/CAS operating adjustment of
$690 million primarily as a result of the Raytheon merger. Included in the
increase in Operating profit was a decrease in restructuring costs of
$625 million primarily related to 2020 restructuring actions taken at our
Collins and Pratt & Whitney segments and the absence of 2020 unfavorable profit
impact of $516 million related to inventory reserves, contract
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asset impairments and recognition of supplier related obligations for certain
international contracts at RMD as further described in "Segment Review" below.

                           Non-service Pension Income
              (dollars in millions)               2022          2021         2020
              Non-service pension (income)     $ (1,889)     $ (1,944)     $ (902)


The change in Non-service pension income of $0.1 billion in 2022 compared to
2021 was primarily driven by the impact of an increase in discount rates,
partially offset by prior years' pension asset returns exceeding our expected
return on plan assets (EROA) assumption.

The change in Non-service pension income of $1.0 billion in 2021 compared to
2020 was primarily driven by the decrease in the discount rates at December 31,
2020 compared to the prior period, the Raytheon Company domestic defined benefit
pension plan amendment described below and prior years' pension asset returns
exceeding our EROA assumption.

In December 2020, we approved a change to the Raytheon Company domestic defined
benefit pension plans for non-union participants to cease future benefit
accruals based on an employee's years of service and compensation under the
historical formula effective December 31, 2022. The plan change does not impact
participants' historical benefit accruals. Benefits for service after December
31, 2022 will be based on a cash balance formula.

                             Interest Expense, Net

(dollars in millions)                                           2022             2021             2020
Interest expense                                             $ 1,300          $ 1,330          $ 1,430
Interest income                                                  (70)             (36)             (42)
Other non-operating expense (income)(1)                           46               28              (22)
Interest expense, net                                        $ 1,276

$ 1,322 $ 1,366 Total average interest expense rate - average outstanding borrowings during the year:

                                      4.0  %           4.1  %           4.0  %

Total average interest expense rate - outstanding borrowings as of December 31:

                                               4.0  %           4.0  %           4.2  %


(1)  Primarily consists of the gains or losses on assets associated with certain
of our nonqualified deferred compensation and employee benefit plans, as well as
the gains or losses on liabilities associated with certain of our nonqualified
deferred compensation plans.

Interest expense, net in 2022 was relatively consistent with 2021.

Interest expense, net in 2021 was relatively consistent with 2020. Included in
Interest expense, net was a decrease in interest expense primarily due to the
repayment of long-term debt.

                                  Income Taxes
                                                 2022        2021        2020
                 Effective income tax rate      11.6  %     15.9  %     (24.4) %


The 2022 effective tax rate includes a benefit of $214 million related to the
Foreign Derived Intangible Income (FDII) benefit, $207 million associated with
legal entity and operational reorganizations implemented in 2022, and
$164 million associated with U.S. research and development credits. The increase
in the FDII benefit from 2021 is primarily attributable to the capitalization of
research or experimental expenditures for tax-purposes, enacted as part of the
Tax Cuts and Jobs Act of 2017 effective beginning January 1, 2022.

The 2021 effective tax rate includes tax benefits of $244 million associated
with legal entity and operational reorganizations implemented in 2021,
$172 million associated with U.S. research and development credits and
$121 million associated with FDII, and tax charges of $73 million associated
with the revaluation of deferred taxes resulting from the increase in the United
Kingdom (U.K.) corporate tax rate to 25% enacted in 2021. In the first quarter
of 2021, we recorded $148 million of tax charges associated with the sale of the
Forcepoint business, and subsequently recognized a $104 million tax benefit due
to the revaluation of that tax benefit as a result of completing the divestiture
of RIS's global training and services business for a gain in the fourth quarter
of 2021.
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The 2020 negative effective tax rate is a result of having tax expense of
$575 million on a loss from continuing operations before income taxes of $2.4
billion. The loss from continuing operations before income taxes in 2020
includes the $3.2 billion goodwill impairment, most of which was non-deductible
for tax purposes. Tax expense includes net deferred tax charges of $416 million
resulting from the Separation Transactions and the Raytheon merger primarily
related to the impairment of deferred tax assets and the revaluation of certain
international tax incentives, and incremental tax expense of $177 million
related to the disposal of businesses, including the sales of businesses at
Collins, the airborne tactical radios business at RIS and the entry into a
definitive agreement to sell Forcepoint. Also included in the 2020 effective tax
rate are tax benefits of $142 million associated with U.S. research and
development credits and $83 million associated with FDII.

For additional discussion of income taxes and the effective income tax rate, see
"Income Taxes" within Critical Accounting Estimates, below, and "Note 13: Income
Taxes" within Item 8 of this Form 10-K.

Net Income (Loss) from Continuing Operations Attributable to Common Shareowners (dollars in millions, except per share amounts)

                 2022             2021             2020

Net income (loss) from continuing operations attributable to common shareowners

$ 5,216          $ 3,897          $ (3,109)
Diluted earnings (loss) per share from continuing operations $  3.51

$ 2.58 $ (2.29)

Net income from continuing operations attributable to common shareowners for
2022 includes the following:
•acquisition accounting adjustments of $1.5 billion, net of tax, which had an
unfavorable impact on diluted EPS from continuing operations of $0.99;
•impairment charges and reserve adjustments related to the global sanctions on
and export controls with respect to Russia of $210 million, net of tax, which
had an unfavorable impact on diluted EPS from continuing operations of $0.14;
•combined charges associated with disposition of businesses at Collins and RMD
of $102 million, net of tax, which had an unfavorable impact on diluted EPS from
continuing operations of $0.07; and
•restructuring charges of $91 million, net of tax, which had an unfavorable
impact on diluted EPS from continuing operations of $0.06.

Net income from continuing operations attributable to common shareowners for
2021 includes the following:
•acquisition accounting adjustments primarily related to the Raytheon merger of
$1.7 billion, net of tax, which had an unfavorable impact on diluted EPS from
continuing operations of $1.13;
•net debt extinguishment costs of $524 million, net of tax, in connection with
the early repayment of outstanding principal, which had an unfavorable impact on
diluted EPS from continuing operations of $0.35;
•tax benefits of $244 million associated with legal entity and operational
reorganizations implemented in the third quarter 2021, which had a favorable
impact on diluted EPS from continuing operations of $0.16;
•tax expense of $148 million related to the sale of our Forcepoint business in
the first quarter of 2021, which had an unfavorable impact on diluted EPS from
continuing operations of $0.10, and the subsequent revaluation of that tax
benefit of $104 million in the fourth quarter of 2021, due to the completion of
the divestiture of RIS's global training and services business for a gain, which
had an favorable impact on diluted EPS from continuing operations of $0.07;
•accrual of $147 million related to the ongoing DOJ investigation into contract
pricing matters at RMD, which had an unfavorable impact on diluted EPS from
continuing operations of $0.10;
•restructuring charges of $121 million, net of tax, which had an unfavorable
impact on diluted EPS from continuing operations of $0.08; and
•gain on the sale of our global training and services business within our RIS
segment of $126 million, net of tax, which had a favorable impact on diluted EPS
from continuing operations of $0.08.

Net loss from continuing operations attributable to common shareowners for 2020
includes the following:
•$3.2 billion of primarily non-deductible goodwill and intangibles impairment
charges related to our Collins segment, which had an unfavorable impact on
diluted EPS from continuing operations of $2.37;
•acquisition accounting adjustments primarily related to the Raytheon merger of
$1.4 billion, net of tax, which had an unfavorable impact on diluted EPS from
continuing operations of $1.06;
•significant unfavorable contract adjustments at Pratt & Whitney and Collins of
$667 million, net of tax, which had an unfavorable impact on diluted EPS from
continuing operations of $0.49;
•restructuring charges of $598 million, net of tax, which had an unfavorable
impact on diluted EPS from continuing operations of $0.44;
•$415 million of tax charges in connection with the Separation Transactions,
including the impairment of deferred tax assets not expected to be utilized,
which had an unfavorable impact on diluted EPS from continuing operations of
$0.31;
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•unfavorable profit impact at RMD of $412 million, net of tax, related to
certain direct commercial sales contracts for precision guided munitions with a
certain Middle East customer, which had an unfavorable impact on diluted EPS
from continuing operations of $0.30;
•increased estimates of expected credit losses driven by customer bankruptcies
and additional allowances for credit losses of $300 million, net of tax, which
had an unfavorable impact on diluted EPS from continuing operations of $0.22;
and
•gains on the sales of the Collins businesses of $240 million, net of tax, which
had a favorable impact on diluted EPS from continuing operations of $0.18.

Loss from Discontinued Operations Attributable to Common Shareowners (dollars in millions, except per share amounts)

                 2022             2021             2020

Loss from discontinued operations attributable to common shareowners

$   (19)         $   (33)         $  (410)
Diluted loss per share from discontinued operations          $ (0.01)

$ (0.02) $ (0.30)

On April 3, 2020, we completed the separation of our commercial businesses,
Carrier and Otis. Effective as of that date, the historical results of the
Carrier and Otis segments were reclassified to discontinued operations for all
periods presented. See "Note 3: Discontinued Operations" within Item 8 of this
Form 10-K for additional information.

Loss from discontinued operations attributable to common shareowners and the
related change in diluted loss per share from discontinued operations in 2022
was relatively consistent with 2021.

The change in Loss from discontinued operations attributable to common
shareowners of $377 million and the related change in diluted loss per share
from discontinued operations of $0.28 in 2021 compared to 2020 was primarily due
to higher prior year costs associated with the separation of our commercial
businesses, including debt extinguishment costs of $611 million, net of tax, in
connection with the early repayment of outstanding principal, partially offset
by prior year Carrier and Otis operating activity, as the Separation
Transactions occurred on April 3, 2020.

              Net Income (Loss) Attributable to Common Shareowners

(dollars in millions, except per share amounts) 2022 2021 2020

Net income (loss) attributable to common shareowners $ 5,197 $ 3,864 $ (3,519)

Diluted earnings (loss) per share from operations $ 3.50 $ 2.56 $ (2.59)

The changes in Net income (loss) attributable to common shareowners and diluted
EPS from operations for 2022 compared to 2021 and for 2021 compared to 2020 were
driven by the changes in continuing operations, as discussed above in Net Income
(Loss) from Continuing Operations Attributable to Common Shareowners and the
changes from discontinued operations, as discussed above in Loss from
Discontinued Operations Attributable to Common Shareowners.

                                 SEGMENT REVIEW

We operate in four principal business segments: Collins, Pratt & Whitney, RIS
and RMD. The results of RIS and RMD reflect the period subsequent to the
completion of the Raytheon merger on April 3, 2020. The historical results of
Carrier and Otis are presented as discontinued operations and, as such, have
been excluded from both continuing operations and segment results for all
periods presented. The Company recently announced its intention to streamline
the structure of its core businesses into three principal business segments:
Collins Aerospace, Pratt & Whitney and Raytheon. The Company plans to determine
the exact composition of each segment and implement the reorganization in the
second half of 2023. All segment information included in this Form 10-K is
reflective of the existing four segments of Collins, Pratt & Whitney, RIS and
RMD in accordance with the management structure in place as of December 31,
2022.

For a detailed description of our businesses, see "Business" within Item 1 of this Form 10-K.

We present a FAS/CAS operating adjustment outside of segment results, which
represents the difference between the service cost component of our pension and
postretirement benefit (PRB) expense under the Financial Accounting Standards
(FAS) requirements of U.S. GAAP and our pension and PRB expense under U.S.
government Cost Accounting Standards (CAS) primarily related to our RIS and RMD
segments. While the ultimate liability for pension and PRB costs under FAS and
CAS is similar, the pattern of cost recognition is different. Over time, we
generally expect to recover the related RIS and RMD pension and PRB liabilities
through the pricing of our products and services to the U.S. government. Collins
and Pratt & Whitney generally record pension and PRB expense on a FAS basis.

Segments are generally based on the management structure of the businesses and the grouping of similar operations, based on capabilities and technologies, where each management organization has general operating autonomy over diversified products

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and services. Segment Total Net Sales and Operating profit (loss) include intercompany sales and profit, which are ultimately eliminated within Eliminations and other, which also includes certain smaller non-reportable segments. Segment results exclude certain acquisition accounting adjustments, the FAS/CAS operating adjustment and certain corporate expenses, as further discussed below.

We provide the organic change in Net sales and Operating profit (loss) for our
segments as discussed above in "Results of Operations". We believe that these
non-GAAP measures are useful to investors because they provide transparency to
the underlying performance of our business, which allows for better
year-over-year comparability. For Pratt & Whitney only, Other also includes the
transactional impact of foreign exchange hedging at Pratt & Whitney Canada due
to its significance to Pratt & Whitney's overall operating results.

Given the nature of our business, we believe that Total Net Sales and Operating
profit (loss) (and the related operating profit (loss) margin percentage), which
we disclose and discuss at the segment level, are most relevant to an
understanding of management's view of our segment performance, as described
below.

Total Net Sales. Total Net Sales by segment were as follows:
(dollars in millions)               2022          2021          2020
Collins Aerospace                $ 20,597      $ 18,449      $ 19,288
Pratt & Whitney                    20,530        18,150        16,799
Raytheon Intelligence & Space      14,312        15,180        11,069
Raytheon Missiles & Defense        14,863        15,539        11,396
Total segment                      70,302        67,318        58,552
Eliminations and other(1)          (3,228)       (2,930)       (1,965)
Consolidated                     $ 67,074      $ 64,388      $ 56,587


(1)  Includes the operating results of certain smaller non-reportable business
segments. 2020 amounts include Forcepoint, LLC, which was acquired as part of
the Raytheon merger, and subsequently disposed of on January 8, 2021.

Operating Profit (Loss). Operating profit (loss) by segment was as follows:
(dollars in millions)                                   2022         2021          2020
Collins Aerospace                                     $ 2,343      $ 1,759      $  1,466
Pratt & Whitney                                         1,075          454          (564)
Raytheon Intelligence & Space                           1,342        1,833         1,020
Raytheon Missiles & Defense                             1,519        2,004           880
Total segment                                           6,279        6,050         2,802
Eliminations and other(1)                                (174)        (133)         (107)

Corporate expenses and other unallocated items(2) (318) (552)

(590)

FAS/CAS operating adjustment                            1,520        1,796  

1,106

Acquisition accounting adjustments(3)                  (1,893)      (2,203)       (5,100)
Consolidated                                          $ 5,414      $ 4,958      $ (1,889)


(1)  Includes the operating results of certain smaller non-reportable business
segments. 2020 amounts include Forcepoint, LLC, which was acquired as part of
the Raytheon merger, and subsequently disposed of on January 8, 2021.
(2)  Includes the net expenses related to the U.S. Army's Lower Tier Air and
Missile Defense Sensor (LTAMDS) project.
(3)  2020 includes the $3.2 billion goodwill impairment loss in the second
quarter of 2020 related to two Collins reporting units. Refer to "Note 2:
Business Acquisitions, Dispositions, Goodwill and Intangible Assets" in Item 8
of this Form 10-K for additional information.

Included in segment Operating profit (loss) are Estimate at Completion (EAC)
adjustments, which relate to changes in Operating profit (loss) and margin due
to revisions to total estimated revenues and costs at completion. These changes
may reflect improved or deteriorated operating performance, as well as changes
in facts and assumptions related to contract options, contract modifications,
incentive and award fees associated with program performance, customer activity
levels, and other customer-directed changes. For a full description of our EAC
process, refer to "Note 1: Basis of Presentation and Summary of Accounting
Principles" within Item 8 of this Form 10-K. Given that we have thousands of
individual contracts and given the types and complexity of the assumptions and
estimates we must make on an on-going basis and the nature of the work required
to be performed under our contracts, we have both favorable and unfavorable EAC
adjustments in the ordinary course.
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We had the following aggregate EAC adjustments for the periods presented:

(dollars in millions)         2022         2021         2020
Gross favorable             $ 1,368      $ 1,286      $   994
Gross unfavorable            (1,405)      (1,176)      (1,637)
Total net EAC adjustments   $   (37)     $   110      $  (643)


As a result of the Raytheon merger, RIS's and RMD's long-term contracts that are
accounted for on a percentage of completion basis, were reset to zero percent
complete as of the merger date because only the unperformed portion of the
contract at the merger date represented an obligation of the Company. This had
the impact of reducing gross favorable and unfavorable EAC adjustments for these
segments in the short term period following the merger, most notably in 2020.

The change in net EAC adjustments of $147 million in 2022 compared 2021 was
primarily due to unfavorable changes in net EAC adjustments of $183 million at
RMD and $108 million at RIS, including the impact of acquisitions and
dispositions, both spread across numerous individual programs, with no
individual or common significant driver, and includes the impact of continued
supply chain and labor market constraints. These unfavorable changes were
partially offset by a favorable change in net EAC adjustments of $119 million at
Collins, spread across numerous individual programs, with no individual or
common significant driver, and a favorable change in net EAC adjustments of
$26 million at Pratt & Whitney primarily due to a $50 million favorable contract
adjustment resulting from a contract modification on a commercial aftermarket
program in the second quarter of 2022.

The change in net EAC adjustments of $753 million in 2021 compared 2020 was
primarily due to a favorable change in net EAC adjustments of $635 million at
Pratt & Whitney, due to the absence of significant unfavorable contract
adjustments in 2020, and a favorable change in net EAC adjustments of
$126 million at RIS and $40 million at RMD, primarily due to the Raytheon
merger. This was partially offset by an unfavorable change in net EAC
adjustments of $48 million at Collins spread across numerous individual programs
with no individual or common significant driver.

Significant EAC adjustments, when they occur, are discussed in each business segment's discussion below.

Backlog and Defense Bookings. Total backlog was approximately $175 billion and
$156 billion as of December 31, 2022 and 2021. Our backlog by segment, which
does not include intercompany backlog, was as follows at December 31:

(dollars in billions)             2022       2021
Collins Aerospace                $  25      $  24
Pratt & Whitney                    100         85
Raytheon Intelligence & Space       16         18
Raytheon Missiles & Defense         34         29

Total backlog                    $ 175      $ 156


Included in total backlog is defense backlog of $69 billion and $63 billion as
of December 31, 2022 and 2021, respectively. Our defense operations consist
primarily of our RIS and RMD businesses and operations in the defense businesses
within our Collins and Pratt & Whitney segments. Defense bookings were
approximately $47 billion, $40 billion and $31 billion for 2022, 2021 and 2020
respectively. In the quarter ended March 31, 2022, we reversed $1.3 billion of
total backlog related to our sales contracts in Russia at Pratt & Whitney and
Collins as discussed further in "Note 1: Basis of Presentation and Summary of
Accounting Principles" within Item 8 of this Form 10-K.

Backlog, which is equivalent to our RPO for our sales contracts, represents the
aggregate dollar value of firm orders for which products have not been provided
or service has not been performed and excludes unexercised contract options and
potential orders under ordering-type contracts (e.g., IDIQ type contracts).
Backlog generally increases with bookings and generally decreases as sales are
recognized on these bookings and is affected by changes in foreign exchange
rates, as well as contract cancellations and terminations as discussed further
below.

We believe defense bookings are an important measure of future performance for
our defense operations and are an indicator of potential future changes in these
operations' Total Net Sales, because we cannot record revenues under a new
contract without first having a booking in the current or a preceding period.
Defense bookings generally represent the dollar value of new external defense
contracts awarded to us during the reporting period and include firm orders for
which funding has not been appropriated.

Defense bookings exclude unexercised contract options and potential orders under ordering-type contracts (e.g., IDIQ type contracts). We reflect contract cancellations and terminations, as well as the impact of changes in foreign exchange rates,

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directly as an adjustment to backlog in the period in which the cancellation or
termination occurs and the impact is determinable. Contract cancellations and
terminations also include contract underruns on cost-type programs.

Collins Aerospace
                                                                                                                    % Change
                                                                                                      2022 compared           2021 compared
(dollars in millions)                            2022              2021              2020               with 2021               with 2020
Net sales                                     $ 20,597          $ 18,449          $ 19,288                      12  %                   (4) %
Operating profit                                 2,343             1,759             1,466                      33  %                   20  %
Operating profit margins                          11.4  %            9.5  %            7.6  %


                            2022 Compared with 2021
                                                           Factors Contributing to Total Change
                                                            Acquisitions /             Restructuring
(dollars in millions)                Organic(1)            Divestitures, net               Costs                Other             Total Change
Net sales                         $       2,384          $              (49)         $            -          $    (187)         $       2,148

Operating profit                            724                         (12)                     19               (147)                   584


                            2021 Compared with 2020
                                                           Factors Contributing to Total Change
                                                           Acquisitions /             Restructuring
(dollars in millions)               Organic(1)            Divestitures, net               Costs                 Other            Total Change
Net sales                         $       (574)         $             (333)         $            -          $       68          $       (839)

Operating profit                           653                         (91)                    320                (589)                  293

(1) See "Segment Review" above for definition of organic. A reconciliation of these measures to reported U.S. GAAP amounts is provided in the table above.

2022 Compared with 2021

The organic sales increase of $2.4 billion in 2022 compared to 2021 primarily
relates to higher commercial aerospace aftermarket sales of $1.7 billion,
including increases across all aftermarket sales channels, and higher commercial
aerospace OEM sales of $1.0 billion, both principally driven by the recovery of
commercial air traffic which has resulted in an increase in flight hours,
aircraft fleet utilization and narrow-body commercial OEM volume growth. These
increases were partially offset by lower military sales of $0.3 billion in 2022
compared to 2021 primarily due to lower material receipts and decreased volume.

The organic profit increase of $0.7 billion in 2022 compared to 2021 was
primarily due to higher commercial aerospace operating profit of $1.2 billion
principally driven by the higher commercial aerospace aftermarket sales
discussed above, partially offset by the absence of a favorable $52 million
impact from a contract-related matter in 2021. The increase in commercial
aerospace operating profit was partially offset by lower military operating
profit of $0.2 billion principally driven by the lower military sales discussed
above, and higher selling, general and administrative expenses of $0.2 billion,
which includes the benefits of cost reduction initiatives.

The decrease in net sales and operating profit due to acquisitions / divestitures, net primarily relates to the disposition of two non-core businesses in the second quarter of 2022.

The decrease in Other operating profit of $0.1 billion in 2022 compared to 2021
primarily relates to $141 million of pretax charges related to increased
estimates for credit losses, inventory reserves, recognition of purchase order
obligations and a loss resulting from the exit of our investment in a
Russia-based joint venture, all due to global sanctions on and export controls
with respect to Russia in the first quarter of 2022. In addition, we recognized
$69 million of charges associated with the disposition of two non-core
businesses in the second quarter of 2022. See "Note 1: Basis of Presentation and
Summary of Accounting Principles" within Item 1 of this Form 10-K for additional
information on Russia sanctions.

2021 Compared with 2020

The organic sales decrease of $0.6 billion in 2021 compared to 2020 primarily
relates to lower commercial aerospace OEM sales of $0.8 billion, predominantly
due to wide body volume declines principally driven by lower 787 deliveries.
This was partially offset by higher commercial aerospace aftermarket sales of
$0.3 billion primarily due to an increase in flight hours and aircraft fleet
utilization as commercial aerospace continued to recover from the unfavorable
economic environment principally driven by the COVID-19 pandemic. Military sales
were down slightly in 2021 compared to 2020.
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The organic profit increase of $0.7 billion in 2021 compared to 2020 was
primarily due to higher commercial aerospace operating profit of $0.5 billion
and lower selling, general and administrative expenses of $0.1 billion. The
higher commercial aerospace operating profit was principally driven by the
higher commercial aerospace aftermarket sales discussed above, the benefit of
cost reduction initiatives, the absence of $157 million of prior year
significant unfavorable adjustments, and a $52 million favorable impact from a
contract-related matter in 2021. The significant unfavorable adjustments in 2020
were primarily driven by the expected acceleration of fleet retirements of a
certain aircraft type. The lower selling, general and administrative expenses
were primarily driven by the absence of a $125 million charge for allowances for
credit losses in 2020, primarily related to the impact of the COVID-19 pandemic.
Included in organic profit in 2020 was $72 million of foreign government wage
subsidies related to COVID-19.

The decrease in net sales and operating profit due to acquisitions /
divestitures, net primarily relates to the sale of our Collins military GPS and
space-based precision optics businesses in the third quarter of 2020, as further
discussed in "Note 2: Business Acquisitions, Dispositions, Goodwill and
Intangible Assets" within Item 8 of this Form 10-K.

The decrease in other operating profit of $0.6 billion in 2021 compared to 2020
primarily relates to the absence of prior year gains of $595 million on the
sales of the Collins military GPS and space-based precision optics businesses.

Pratt & Whitney
                                                                                                                % Change
                                                                                                  2022 compared           2021 compared
(dollars in millions)                   2022                2021                2020                with 2021               with 2020
Net sales                           $      20,530       $      18,150       $      16,799                   13  %                    8  %
Operating profit (loss)                     1,075                 454               (564)                  137  %                  180  %
Operating profit (loss)
margins                                   5.2   %             2.5   %            (3.4)  %


                            2022 Compared with 2021
                                                             Factors Contributing to Total Change
                                                              Acquisitions /             Restructuring
(dollars in millions)                 Organic(1)             Divestitures, net               Costs                Other             Total Change
Net sales                          $        2,478          $                -          $            -          $     (98)         $       2,380

Operating profit (loss)                       773                           -                     (13)              (139)                   621


                            2021 Compared with 2020
                                                              Factors 

Contributing to Total Change

                                                                Acquisitions /             Restructuring
(dollars in millions)                  Organic(1)              Divestitures, net               Costs                 Other             Total Change
Net sales                          $          1,255          $                -          $            -          $       96          $       1,351

Operating profit (loss)                         702                        

  -                     173                 143                  1,018

(1) See "Segment Review" above for definition of organic. A reconciliation of these measures to reported U.S. GAAP amounts is provided in the table above.

2022 Compared with 2021

The organic sales increase of $2.5 billion in 2022 compared to 2021 primarily
reflects higher commercial aftermarket sales of $1.8 billion primarily due to an
increase in shop visits and related spare part sales as the commercial aerospace
environment continues to recover. The increase also includes higher commercial
OEM sales of $0.9 billion driven by favorable mix and higher volume on
commercial engine shipments. These increases were partially offset by lower
military sales of $0.2 billion primarily due to lower sales on F135 production
volume and lower volume on legacy aftermarket programs, partially offset by
higher F135 sustainment volume.

The organic profit increase of $0.8 billion in 2022 compared to 2021 was
primarily driven by higher commercial aerospace operating profit of $1.1 billion
principally due to the aftermarket sales volume increase discussed above and
favorable OEM mix. The organic profit increase also includes slightly higher
military operating profit primarily driven by favorable mix. These increases
were partially offset by a combined increase in selling, general and
administrative expenses and research and development costs of $0.3 billion. The
year over year increase in commercial aerospace operating profit includes a $50
million favorable contract adjustment on a commercial aftermarket program in the
second quarter of 2022. In 2021, our organic profit included approximately $50
million related to foreign government wage subsidies due to COVID-19.

The decrease in other operating profit of $0.1 billion in 2022 compared to 2021
was primarily due to $155 million of pretax charges related to impairment of
customer financing assets for products under lease, increased estimates for
credit losses,
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inventory reserves and recognition of purchase order obligations, all due to
global sanctions on and export controls with respect to Russia in the first
quarter of 2022. See "Note 1: Basis of Presentation and Summary of Accounting
Principles" within Item 1 of this Form 10-K for additional information on Russia
sanctions.

2021 Compared with 2020

The organic sales increase of $1.3 billion in 2021 compared to 2020 primarily
reflects higher commercial aftermarket sales of $1.2 billion, primarily due to
an increase in shop visits and related spare part sales driven by the recovery
from the unfavorable economic environment largely due to the COVID-19 pandemic,
and higher commercial OEM sales of $0.1 billion. Prior year commercial
aftermarket sales include unfavorable EAC adjustments of $0.4 billion, discussed
further below. These increases were partially offset by lower military sales of
$0.1 billion in 2021 compared to 2020.

The organic profit increase of $0.7 billion in 2021 compared to 2020 was
primarily driven by higher commercial aerospace operating profit of $0.7 billion
principally due to favorable change in net EAC adjustments of $0.6 billion, and
lower selling, general and administrative expenses of $0.1 billion. The higher
commercial aerospace operating profit also includes the impact of the
aftermarket sales volume increase discussed above, which was partially offset by
lower commercial OEM operating profit due to unfavorable mix on the increased
sales volume. The lower year-over-year unfavorable commercial aerospace EAC
adjustments were principally driven by prior year unfavorable EAC adjustments
including a $334 million unfavorable EAC adjustment on a commercial engine
aftermarket contract due to lower estimated revenues driven by a change in the
estimated maintenance coverage period, an unfavorable EAC adjustment of $129
million related to lower estimated revenues due to the restructuring of a
customer contract, and $86 million related to an unfavorable EAC adjustment and
increased allowances for warranty for legacy fleet related retrofits. The lower
selling, general and administrative expenses were primarily driven by the
absence of a $257 million charge in 2020 for allowances for credit losses,
partially offset by higher employee-related costs. The change in organic
operating profit was also impacted by $106 million of lower government wage
subsidies, and the absence of prior year unfavorable EAC adjustments on certain
commercial aftermarket and military programs.

The increase in other operating profit of $0.1 billion in 2021 compared to 2020
was primarily driven by the absence of an $89 million impairment of commercial
aircraft program assets and $43 million of reserves related to a commercial
financing arrangement, both recorded in 2020.

Defense Bookings - In addition to a number of smaller bookings, in 2022 Pratt &
Whitney booked $4.9 billion for F135 production Lots 15, 16 and 17, $1.4 billion
for F135 sustainment, $251 million for tanker production Lots 7 and 8 and $210
million for F117 sustainment.

Raytheon Intelligence & Space
                                                                                                                      % Change
                                                                                                        2022 compared           2021 compared
(dollars in millions)                             2022               2021              2020               with 2021               with 2020
Net sales                                     $      14,312       $ 15,180          $ 11,069                      (6) %                   37  %
Operating profit                                      1,342          1,833             1,020                     (27) %                   80  %
Operating profit margins                            9.4   %           12.1  %            9.2  %
Bookings                                      $      12,391       $ 14,019          $ 10,568                     (12) %                   33  %


                            2022 Compared with 2021

                                Factors Contributing to Total Change in Net Sales
                                                                  Acquisitions /
(dollars in millions)              Organic(1)                    Divestitures, net                    Other               Total Change
Net sales                     $            (184)               $             (627)               $         (57)         $         (868)


(1)  See "Segment Review" above for definition of organic. A reconciliation of
these measures to reported U.S. GAAP amounts is provided in the table above.

                                                   Factors Contributing to Change in Operating Profit
                                                  Net change in EAC           Acquisitions /             Mix and other
(dollars in millions)          Volume                adjustments             Divestitures, net            performance            Total Change

Operating profit          $          (9)         $            (69)         $             (118)         $          (295)         $       (491)


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                            2021 Compared with 2020

                                 Factors Contributing to Total Change in Net Sales
                                                                    Acquisitions /
(dollars in millions)               Organic(1)                     Divestitures, net                     Other               Total Change
Net sales                     $                86                $            3,991                $           34          $        4,111


(1)  See "Segment Review" above for definition of organic. A reconciliation of
these measures to reported U.S. GAAP amounts is provided in the table above.

                                                   Factors Contributing to Change in Operating Profit
                                                  Net change in EAC           Acquisitions /             Mix and other
(dollars in millions)          Volume                adjustments             Divestitures, net            performance             Total Change

Operating profit          $         (10)         $            132          $              399          $           292          $         813


2022 Compared with 2021

The organic sales decrease of $0.2 billion in 2022 compared to 2021 was driven
by lower Command, Control and Communications sales of $0.3 billion partially
offset by higher sales at both Cyber, Training and Services and Sensing and
Effects. The lower Command, Control and Communications sales were primarily
driven by an anticipated decrease in production volumes on certain tactical
communications systems programs. The higher Cyber, Training and Services sales
were driven by certain classified cyber programs. The higher Sensing and Effects
sales were primarily driven by an increase in sales on classified programs and
an increase due to certain electro-optical development programs transitioning
into production, partially offset by a decrease in surveillance and targeting
systems due to lower production volume on certain legacy programs.

The decrease in operating profit of $0.5 billion and the related decrease in
operating profit margins in 2022 compared to 2021, were primarily due to an
unfavorable change in mix and other performance of $0.3 billion driven by the
absence of a prior year $239 million gain, net of transaction costs, on the sale
of the global training and services business, as further discussed in "Note 2:
Business Acquisitions, Dispositions, Goodwill and Intangible Assets" within Item
8 of this Form 10-K and acquisition / divestitures, net of $0.1 billion
described below.

The decrease in net sales and operating profit due to acquisitions / divestitures, net primarily relates to the sale of the global training and services business in the fourth quarter of 2021.

2021 Compared with 2020

Organic sales in 2021 were relatively consistent with 2020. The increase in net
sales due to acquisitions / divestitures, net primarily relates to the Raytheon
merger on April 3, 2020.

The increase in operating profit of $0.8 billion and the related increase in
operating profit margins in 2021 compared to 2020, were primarily due to the
change in acquisitions / divestitures, net of $399 million, primarily due to the
Raytheon merger on April 3, 2020, a favorable change in mix and other
performance of $292 million primarily due to a $239 million gain, net of
transaction costs, on the sale of RIS's global training and services business in
December 2021, as further discussed in "Note 2: Business Acquisitions,
Dispositions, Goodwill and Intangible Assets" within Item 8 of this Form 10-K,
and the net favorable change in EAC adjustments of $132 million, which was
primarily driven by the absence of $124 million of unfavorable EAC adjustments
in 2020 for loss reserves related to a domestic classified fixed price
development program in a net loss position.

Backlog and Bookings - Backlog was $16 billion at December 31, 2022 compared to
$18 billion at December 31, 2021. In addition to a number of smaller bookings,
in 2022, RIS booked $5.0 billion on a number of classified contracts, and a
major award for a prototype Missile Track Custody system for the U.S. Space
Force. RIS also booked $311 million on the Next-Generation Overhead Persistent
Infrared (Next-Gen OPIR) GEO missile warning and defense contract for the U.S.
Space Force, $271 million to provide communications satellite payloads to a
commercial customer, and $253 million on the Development, Operations and
Maintenance (DOMino) cyber program for the Department of Homeland Security
(DHS).

Raytheon Missiles & Defense
                                                                                                                      % Change
                                                                                                        2022 compared           2021 compared
(dollars in millions)                             2022               2021              2020               with 2021               with 2020
Net sales                                     $      14,863       $ 15,539          $ 11,396                      (4) %                   36  %
Operating profit                                      1,519          2,004               880                     (24) %                  128  %
Operating profit margins                           10.2   %           12.9  %            7.7  %
Bookings                                      $      20,048       $ 15,650          $  9,716                      28  %                   61  %


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                            2022 Compared with 2021

                                 Factors Contributing to Total Change in Net Sales
                                                                   Acquisitions /
(dollars in millions)              Organic(1)                     Divestitures, net                    Other               Total Change
Net sales                     $             (628)               $                -                $         (48)         $         (676)


(1)  See "Segment Review" above for definition of organic. A reconciliation of
these measures to reported U.S. GAAP amounts is provided in the table above.

                                                   Factors Contributing to Change in Operating Profit
                                                 Net change in EAC           Acquisitions /             Mix and other
(dollars in millions)          Volume               adjustments             Divestitures, net            performance            Total Change

Operating profit          $         (25)         $          (183)         $                -          $          (277)         $       (485)


                            2021 Compared with 2020

                                   Factors Contributing to Total Change in Net Sales
                                                                       Acquisitions /
(dollars in millions)                Organic(1)                       Divestitures, net                     Other               Total Change
Net sales                     $                  130                $            3,999                $           14          $        4,143


(1)  See "Segment Review" above for definition of organic. A reconciliation of
these measures to reported U.S. GAAP amounts is provided in the table above.

                                                   Factors Contributing to Change in Operating Profit
                                                  Net change in EAC           Acquisitions /             Mix and other
(dollars in millions)          Volume                adjustments             Divestitures, net            performance             Total Change

Operating profit          $           7          $            (14)         $              521          $           610          $       1,124


2022 Compared with 2021

The organic sales decrease of $0.6 billion in 2022 compared to 2021 was
primarily due to lower net sales of $0.7 billion from our Land Warfare and Air
Defense programs, lower net sales of $0.3 billion from our Air Power programs,
and lower net sales of $0.2 billion on our Naval Power programs. These decreases
were partially offset by higher net sales of $0.4 billion from our Strategic
Missile Defense programs. The decrease in Land Warfare and Air Defense programs
includes lower sales on certain international air and missile defense programs
primarily driven by lower material receipts as a result of supply chain
constraints and anticipated decreases in production. The decrease in Air Power
programs includes lower net sales on the Paveway program and the Advanced Medium
Range Air-to-Air Missile (AMRAAM) program. The lower net sales in Naval Power
programs was driven by lower volume across multiple programs, partially offset
by higher net sales from SPY-6 programs. The increased sales in Strategic
Missile Defense programs included higher net sales from the Next Generation
Interceptor (NGI) program.

The decrease in operating profit of $0.5 billion and the related decrease in
operating profit margins in 2022 compared to 2021 were primarily due to a change
in mix and other performance of $0.3 billion and a net unfavorable change in EAC
adjustments of $0.2 billion. The change in mix and other performance includes
unfavorable program mix and a $42 million charge associated with a divestiture
of a small non-core Naval Power business. The net unfavorable change in EAC
adjustments was spread across numerous programs and includes the impact of
continued supply chain and labor market constraints.

2021 Compared with 2020

Organic sales in 2021 were relatively consistent with 2020. The increase in net
sales due to acquisitions / divestitures, net relates to the Raytheon merger on
April 3, 2020.

The increase in operating profit of $1.1 billion and the related increase in
operating profit margins in 2021 compared to 2020 was primarily due to a change
in mix and other performance of $0.6 billion, primarily driven by the absence of
an unfavorable profit impact of $516 million in 2020 related to certain
international contracts as further described below, and a change in acquisitions
/ divestitures, net of $0.5 billion due to the Raytheon merger on April 3, 2020.

In the fourth quarter of 2020, RMD reversed $119 million of sales for work
performed subsequent to the date of the Raytheon merger through the end of the
third quarter of 2020, and the related operating profit, on our direct
commercial sales contracts for precision guided munitions with a certain Middle
East customer, for which we have not yet obtained regulatory approval. Due to
the U.S. presidential and congressional elections and the resulting uncertainty
surrounding U.S. foreign policy on direct commercial sales for precision guided
munitions with this customer, we determined that it was no longer probable that
we will be able to obtain regulatory approvals for these contracts. RMD also
recognized an unfavorable profit impact of $516 million related to these
contracts, primarily related to inventory reserves, contract asset impairments
and recognition of supplier related obligations related to termination
liability, which we do not expect to be utilized or otherwise directed to other
customers.
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Backlog and Bookings- Backlog was $34 billion at December 31, 2022 compared to
$29 billion at December 31, 2021. In 2022, RMD booked $3.5 billion on a number
of classified contracts, including a strategic competitive award. RMD also
booked $1.1 billion for the SPY-6 Hardware Production and Sustainment contract
for the U.S. Navy, $1.0 billion to provide Guidance Enhanced Missile (GEM-T) for
an international customer, $1.0 billion for the first Hypersonic Attack Cruise
Missile (HACM) for the U.S. Air Force, $972 million for AMRAAM for the U.S. Air
Force and Navy and international customers, $762 million for AIM-9X Sidewinder
short-range air-to-air missiles for the U.S. Navy and Air Force and
international customers, $698 million to provide National Advanced
Surface-to-Air Missile System (NASAMS) for Ukraine, $662 million on Stinger for
the U.S. Army, $648 million for Standard Missile-3 (SM-3) for the Missile
Defense Agency (MDA), $415 million on Evolved Seasparrow Missile (ESSM) for the
U.S. Navy and international customers, $405 million on a Surveillance Radar
Program (SRP) for an international customer, $384 million for Excalibur Rapid
Demonstration Phase 2 for the U.S. Army, $353 million for the Lower Tier Air and
Missile Defense Sensor (LTAMDS) Pre-planned Product Improvement program for the
U.S. Army, $247 million on MIR replenishment for an international customer
through our consolidated Raytheon-Rafael joint venture, $218 million to provide
Patriot engineering support services for the U.S. Army and international
customers, $217 million on Tomahawk for the U.S. Navy, $209 million for Naval
Strike Missiles (NSM) Coastal Defense System (CDS) for the U.S. Navy, and $207
million for integrated effectors and sensors for Counter-Unmanned Aircraft
Systems (C-UAS) defense system for the U.S. Army.

Corporate and Eliminations and other

Eliminations and other reflects the elimination of sales, other income and
operating profit transacted between segments, as well as the operating results
of certain smaller non-reportable business segments, including Forcepoint, which
was acquired as part of the Raytheon merger and subsequently disposed of on
January 8, 2021, as further discussed in "Note 2: Business Acquisitions,
Dispositions, Goodwill and Intangible Assets" within Item 8 of this Form 10-K.

Corporate expenses and other unallocated items consists of costs and certain
other unallowable corporate costs not considered part of management's evaluation
of reportable segment operating performance including restructuring and merger
costs related to the Raytheon merger, net costs associated with corporate
research and development, including the LTAMDS program and certain reserves.

                                                        Net Sales                                      Operating Profit
(dollars in millions)                   2022              2021              2020             2022            2021            2020
Eliminations and other               $ (3,228)         $ (2,930)         $ (1,965)         $ (174)         $ (133)         $ (107)
Corporate expenses and other
unallocated items                           -                 -                 -            (318)           (552)           (590)


The increase in eliminations and other sales in 2022 compared to 2021 was
primarily due to an increase in intersegment eliminations, principally driven by
Collins and RIS. Eliminations and other operating profit in 2022 was relatively
consistent with 2021.

The increase in eliminations and other sales in 2021 compared to 2020 was
primarily due to the sale of our Forcepoint business in the first quarter of
2021 and an increase in intersegment eliminations, principally driven by RIS.
The change in eliminations and other operating profit in 2021 compared to 2020
was primarily due to the sale of our Forcepoint business in the first quarter of
2021.

The change in corporate expenses and other unallocated items of $234 million in
2022 compared to 2021 was primarily driven by the absence of an accrual of
$147 million in the fourth quarter of 2021 related to the ongoing DOJ
investigation into contract pricing matters at RMD, a decrease in expenses
related to the LTAMDS project and lower restructuring costs, partially offset by
an increase in information technology-related costs.

The change in corporate expenses and other unallocated items of $38 million in
2021 compared to 2020 was primarily driven by a decrease in merger-related costs
related to the Raytheon merger of $148 million and lower restructuring costs of
$112 million, partially offset by an accrual of $147 million in the fourth
quarter of 2021 related to the ongoing DOJ investigation into contract pricing
matters at RMD and an increase in net expenses related to the LTAMDS project.

FAS/CAS operating adjustment

The segment results of RIS and RMD include pension and PRB expense as determined
under U.S. government Cost Accounting Standards (CAS), which we generally
recover through the pricing of our products and services to the U.S. government.
The difference between our CAS expense and the Financial Accounting Standards
(FAS) service cost attributable to these segments under U.S. GAAP is the FAS/CAS
operating adjustment. The FAS/CAS operating adjustment results in
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consolidated pension expense in operating profit equal to the service cost component of FAS expense under U.S. GAAP. The segment results of Collins Aerospace and Pratt & Whitney generally include FAS service cost.

The CAS expense calculation is different from the FAS requirements and
calculation methodology. While the ultimate liability for pension costs under
FAS and CAS is similar, the pattern of cost recognition is different. Our CAS
pension expense is comprised primarily of CAS service cost, as well as
amortization amounts resulting from demographic or economic experience different
than expected, changes in assumptions, or changes in plan provisions. Unlike
FAS, CAS expense is only recognized for plans that are not fully funded.
Consequently, if plans become or cease to be fully funded under CAS due to our
asset or liability experience, our CAS expense will change accordingly.

The components of the FAS/CAS operating adjustment were as follows:

(dollars in millions)            2022         2021         2020

FAS service cost (expense) $ (365) $ (405) $ (354) CAS expense

                      1,885        2,201        1,460

FAS/CAS operating adjustment $ 1,520 $ 1,796 $ 1,106

The change in our FAS/CAS operating adjustment of $276 million in 2022 compared
to 2021 was driven by a $316 million decrease in CAS expense, partially offset
by a $40 million decrease in FAS service cost. The decrease in CAS expense was
primarily due to an increase in applicable discount rates as a result of U.S.
qualified pension plan funding relief included in the American Rescue Plan Act
of 2021 (ARPA).

The change in our FAS/CAS operating adjustment of $690 million in 2021 compared
to 2020 was driven by a $741 million increase in CAS expense, partially offset
by a $51 million increase in FAS service cost. The increase in our CAS expense
was primarily due to the Raytheon merger.

In December 2020, we approved a change to the Raytheon Company domestic defined
benefit pension plans for non-union participants to cease future benefit
accruals based on an employee's years of service and compensation under the
historical formula effective December 31, 2022. The plan change does not impact
participants' historical benefit accruals. Benefits for service after December
31, 2022 will be based on a cash balance formula.

Acquisition accounting adjustments

Acquisition accounting adjustments include the amortization of acquired
intangible assets related to acquisitions, the amortization of the property,
plant and equipment fair value adjustment acquired through acquisitions, the
amortization of customer contractual obligations related to loss making or below
market contracts acquired, and goodwill impairment. These adjustments are not
considered part of management's evaluation of segment results.

The components of Acquisition accounting adjustments were as follows:

(dollars in millions)                                     2022               2021               2020
Goodwill impairment charge                            $       -          $       -          $  (3,183)
Amortization of acquired intangibles                     (1,912)            (2,404)            (2,142)

Amortization of property, plant and equipment fair value adjustment

                                            (89)              (111)               (69)
Amortization of customer contractual obligations
related to acquired loss-making and below-market
contracts                                                   108                312                294
Acquisition accounting adjustments                    $  (1,893)         $  (2,203)         $  (5,100)


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Acquisition accounting adjustments related to acquisitions in each segment were
as follows:

(dollars in millions)                   2022          2021          2020
Collins Aerospace                    $   (800)     $   (641)     $ (3,926)
Pratt & Whitney                          (243)         (160)         (117)
Raytheon Intelligence & Space            (303)         (563)         (394)
Raytheon Missiles & Defense              (547)         (838)         (607)
Total segment                          (1,893)       (2,202)       (5,044)
Eliminations and other                      -            (1)          (56)

Acquisition accounting adjustments $ (1,893) $ (2,203) $ (5,100)

The change in the Acquisition accounting adjustments of $0.3 billion in 2022
compared to 2021, is primarily driven by a decrease in RIS and RMD intangibles
amortization related to the Raytheon merger, partially offset by the absence of
$116 million of amortization of customer contractual obligations due to the
accelerated liquidation of below-market contract reserves at Collins in 2021
driven by the termination of two customer contracts.

The change in the Acquisition accounting adjustments of $2.9 billion in 2021
compared to 2020, is primarily driven by the absence of the $3.2 billion
goodwill impairment loss in the second quarter of 2020 related to two Collins
reporting units partially offset by an increase of $0.4 billion for acquisition
accounting adjustments related to the Raytheon merger, primarily due to the
timing of the merger in 2020. Included in Acquisition accounting adjustments in
2021 was $116 million of amortization of customer contractual obligations due to
the accelerated liquidation of below-market contract reserves at Collins driven
by the termination of two customer contracts. Refer to "Note 2: Business
Acquisitions, Dispositions, Goodwill and Intangible Assets" within Item 8 of
this Form 10-K for additional information on the goodwill impairment.

                       LIQUIDITY AND FINANCIAL CONDITION

    (dollars in millions)                                      2022           2021
    Cash and cash equivalents                               $  6,220       $  7,832
    Total debt                                                31,914         31,485

    Total equity                                              74,178         74,664

Total capitalization (total debt plus total equity) 106,092 106,149

    Total debt to total capitalization                            30  %    

30 %

We assess our liquidity in terms of our ability to generate cash to fund our
operating, investing and financing activities. Our principal source of liquidity
is cash flows from operating activities. In addition to operating cash flows,
other significant factors that affect our overall management of liquidity
include: capital expenditures, customer financing requirements, investments in
and divestitures of businesses, dividends, common stock repurchases, pension
funding, access to the commercial paper markets, adequacy of available bank
lines of credit, redemptions of debt and the ability to attract long-term
capital at satisfactory terms.

At December 31, 2022, we had cash and cash equivalents of $6.2 billion, of which
approximately 34% was held by RTC's foreign subsidiaries. We manage our
worldwide cash requirements by reviewing available funds among the many
subsidiaries through which we conduct our business and the cost effectiveness
with which those funds can be accessed. The Company does not intend to reinvest
certain undistributed earnings of its international subsidiaries that have been
previously taxed in the U.S. Taxes associated with the future remittance of
these earnings have been recorded. For the remainder of the Company's
undistributed international earnings, unless tax effective to repatriate, RTC
will continue to permanently reinvest these earnings.

Historically, our strong credit ratings and financial position have enabled us to issue long-term debt at favorable market rates.

As of December 31, 2022, we had revolving credit agreements with various banks
permitting aggregate borrowings of up to $7.0 billion, consisting of a $5.0
billion revolving credit agreement, which expires in April 2025, and a $2.0
billion revolving credit agreement, which was renewed in September 2022 and
expires in September 2023. As of December 31, 2022, there were no borrowings
outstanding under these agreements.

From time to time, we use commercial paper borrowings for general corporate
purposes, including the funding of potential acquisitions, pension
contributions, debt refinancing, dividend payments and repurchases of our common
stock. The commercial paper notes have original maturities of not more than 364
days from the date of issuance. As of December 31, 2022, our maximum commercial
paper borrowing limit was $5.0 billion as the commercial paper is backed by our
$5.0 billion revolving credit agreement. We had $0.5 billion of commercial paper
outstanding at December 31, 2022, which is reflected in Short-term borrowings in
our Consolidated Balance Sheet. The proceeds from these borrowings have
primarily been used to
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fund payments related to the impact of a provision enacted in the Tax Cuts and
Jobs Act of 2017 requiring the capitalization of research and experimental
expenditures for tax purposes. At December 31, 2022, short-term commercial paper
borrowings outstanding had a weighted-average interest rate of 4.4%.

We have an existing universal shelf registration statement, which we filed with
the Securities and Exchange Commission (SEC) on September 22, 2022, for an
indeterminate amount of debt and equity securities for future issuance, subject
to our internal limitations on the amount of debt to be issued under this shelf
registration statement.

The Company offers voluntary supply chain finance (SCF) programs with global
financial institutions which enables our suppliers, at their sole discretion, to
sell their receivables from the Company to the financial institutions at a rate
that leverages our credit rating, which might be beneficial to them. Our
suppliers' participation in the SCF programs does not impact or change our terms
and conditions with those suppliers, and therefore, we have no economic interest
in a supplier's decision to participate in the programs. In addition, we do not
pay for any of the costs of the programs incurred by those suppliers that choose
to participate, and have no direct financial relationship with the financial
institutions, as it relates to sales of receivables made by those suppliers. As
such, the SCF programs do not impact our working capital, cash flows or overall
liquidity.

We believe our cash on hand and future operating cash flows will be sufficient
to meet our future operating cash needs. Further, we continue to have access to
the commercial paper markets and our existing credit facilities, and our ability
to obtain debt or equity financing, as well as the availability under committed
credit lines, provides additional potential sources of liquidity should they be
required or appropriate.

                        Cash Flow - Operating Activities

(dollars in millions)                                            2022             2021             2020

Net cash flows provided by operating activities from continuing operations

$ 7,168

$ 7,142 $ 4,334 Net cash flows used in operating activities from discontinued operations

                                                          -              (71)            (728)

2022 Compared with 2021 Operating Activities - Continuing Operations

Cash flows provided by operating activities in 2022 were relatively consistent
with 2021 and benefited from an improvement in working capital, which was more
than offset by the net increase in tax payments resulting from a change in tax
law discussed below. Included in the change in working capital was a favorable
impact from accounts receivable driven by higher collections resulting from
increased sales volume and a related increase in factoring as discussed below.
The change in working capital also included a favorable impact from contract
assets compared to 2021 primarily due to the timing of billings and collections,
and increases in accounts payable and accrued liabilities primarily driven by
higher inventory purchasing activity, deferred revenue and advanced payments.
This impact was largely offset by an unfavorable impact from inventory
principally due to current year increases to support sales volume growth.

The Company enters into various factoring agreements with third-party financial
institutions to sell certain of its receivables. Higher sales volume in the
current year supported increased factoring activity that resulted in
approximately $2.3 billion of increased cash flows provided by operating
activities during 2022, compared to a decrease in cash flows provided by
operating activities of $0.2 billion during 2021. Factoring activity includes
amounts factored on certain aerospace receivables at the customers' request for
which we may be compensated by the customer.

2021 Compared with 2020 Operating Activities - Continuing Operations

Cash generated from operating activities in 2021 was $2.8 billion higher than
2020. This increase was primarily due to higher net income of $4.1 billion after
adjustments for depreciation and amortization, deferred income tax provision,
stock compensation costs, net periodic pension and other postretirement benefit,
the goodwill impairment charge and debt extinguishment costs, as well as lower
pension and PRB contributions to trusts of $1.0 billion in 2021 compared to
2020. This was partially offset by an unfavorable change in working capital of
$1.1 billion in 2021 compared to 2020, primarily due to activity at the RIS and
RMD segments in the first quarter of 2021 with no comparable activity in the
first quarter of 2020 as a result of the Raytheon merger. This unfavorable
change in working capital at RIS and RMD includes a cash outflow for accounts
payable and accrued liabilities due to the timing of incentive compensation
payments. Also included in the total unfavorable change in working capital was
an increase in contract assets principally driven by sales in excess of billings
at Pratt & Whitney and contractual billing terms on U.S. government and foreign
military sales contracts at RMD, and growth in accounts payable and accounts
receivable at Collins and Pratt & Whitney due to an increase in sales volume as
commercial aerospace recovered.

Factoring activity resulted in a decrease of approximately $0.2 billion in cash
provided by operating activities during 2021, compared to a decrease of
approximately $1.3 billion in cash provided by operating activities during 2020.
The year over year
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favorable impact from factoring activity was primarily due to the significant
decline in sales volume in 2020 principally driven by the economic environment
primarily due to COVID-19.

Operating Activities - Continuing Operations

We made pension and PRB contributions to trusts of $94 million, $59 million, and
$1,025 million in 2022, 2021, and 2020, respectively. The contributions in 2020
include discretionary contributions of $801 million. We make both required and
discretionary contributions to our pension plans. Required contributions are
primarily determined by Employee Retirement Income Security Act of 1974 (ERISA)
funding rules, which require us to fully fund our U.S qualified pension plans
over a rolling seven-year period as determined annually based on the Pension
Protection Act of 2006 (PPA) calculated funded status at the beginning of each
year. The funding requirements are primarily based on the year's expected
service cost and amortization of other previously unfunded liabilities, which
are dependent upon many factors, including returns on invested assets, the level
of market interest rates and actuarial assumptions. We can contribute cash or
RTC shares to our plans at our discretion, subject to applicable regulations. As
of December 31, 2022, the total investment by the U.S. qualified pension plans
in RTC shares was less than 1% of total plan assets.

In response to the economic environment resulting from the COVID-19 pandemic,
Congress passed the ARPA in March 2021, which included pension funding relief
provisions. These provisions extended and expanded upon existing pension funding
relief, most notably by increasing the liability interest rates used to
determine the required cash contributions for our U.S. qualified pension plans.
The Infrastructure Investment and Jobs Act passed by Congress in November 2021
further extended the interest rate pension funding relief provisions included in
ARPA. Global pension and PRB cash funding requirements are expected to be
approximately $0.4 billion in 2023, which includes benefit payments to be paid
directly by the company.

We made net tax payments of $2.4 billion, $1.1 billion, and $1.7 billion in
2022, 2021, and 2020, respectively. A provision enacted in the Tax Cuts and Jobs
Act of 2017 related to the capitalization of research and experimental
expenditures for tax purposes became effective on January 1, 2022. As this
provision was not deferred legislatively, we have made incremental tax payments
of $1.6 billion in 2022.

Included in cash flows from operating activities are payments related to our
operating lease obligations. See "Note 12: Leases" within Item 8 of this Form
10-K for actual and expected payments on operating lease obligations.

In addition, the majority of our cash flows for purchase obligations are
classified as cash flows from operating activities. We expect future payments
related to our purchase obligations to be $27.6 billion, of which $19.4 billion
is payable in 2023. Purchase obligations include current amounts committed for
the purchase of goods and services under legally enforceable contracts or
purchase orders, and do not represent our entire anticipated purchases in the
future. Approximately 50% of our purchase obligations described above represent
purchase orders for products to be delivered under firm contracts with the U.S.
government for which we have full recourse under customary contract termination
clauses.

Operating Activities - Discontinued Operations

Cash flows provided by operating activities from discontinued operations in 2022
and 2021 were not significant as the Separation Transactions occurred on April
3, 2020. The $657 million increase in cash flows provided by operating
activities from discontinued operations in 2021 compared to 2020 was primarily
driven by the absence of prior year separation costs as the Separation
Transactions occurred in 2020.

                        Cash Flow - Investing Activities

(dollars in millions)                                            2022              2021              2020

Net cash flows (used in) provided by investing activities from continuing operations

$ (2,829)

$ (1,364) $ 3,343 Net cash flows used in investing activities from discontinued operations

                                                           -                 -             (241)


Our investing activities primarily include capital expenditures, cash
investments in customer financing assets, investments in and dispositions of
businesses, payments related to our collaboration intangible assets and
contractual rights to provide product on new aircraft platforms, and settlements
of derivative contracts not designated as hedging instruments.

2022 Compared with 2021 Investing Activities - Continuing Operations

The $1.5 billion change in cash flows (used in) provided by investing activities
in 2022 compared to 2021 primarily relates to the absence of 2021 investments in
and dispositions of businesses, as discussed below.
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2021 Compared with 2020 Investing Activities - Continuing Operations

The $4.7 billion change in cash flows (used in) provided by investing activities
in 2021 compared to 2020 primarily relates to the absence of cash acquired in
the Raytheon merger in 2020 of $3.2 billion, and investments in and dispositions
of businesses, as discussed below.

Investing Activities - Continuing Operations

There were no material acquisitions in 2022. Investments in businesses in 2021
of $1.1 billion primarily related to the acquisitions of FlightAware at Collins
and SEAKR Engineering Inc. at RIS. Investments in businesses in 2020 of $0.4
billion primarily related to the acquisition of Blue Canyon Technologies at RIS.
For additional detail, see "Note 2: Business Acquisitions, Dispositions,
Goodwill and Intangible Assets" within Item 8 of this Form 10-K.

There were no material dispositions of businesses in 2022. Dispositions of
businesses in 2021 of $1.9 billion, net of cash transferred, primarily related
to the sale of our Forcepoint business and the sale of our global training and
services business within RIS. Dispositions of businesses in 2020 of $2.6
billion, net of cash transferred, primarily related to the sale of our Collins
military GPS and space-based precision optics businesses. For additional detail,
see "Note 2: Business Acquisitions, Dispositions, Goodwill and Intangible
Assets" within Item 8 of this Form 10-K.

Capital expenditures were $2.3 billion, $2.1 billion and $1.8 billion in 2022,
2021, and 2020, respectively. Capital expenditures increased $154 million in
2022 compared to 2021, primarily due to investments in production facilities at
Pratt & Whitney. Capital expenditures increased $339 million in 2021 from 2020,
primarily due to increases at RIS and RMD principally driven by the Raytheon
merger and increases at Pratt & Whitney.

Payments on customer financing assets were $150 million, $231 million, and $280
million in 2022, 2021 and 2020, respectively. The decrease in payments in 2022
compared to 2021 was primarily due to fewer engines added to our leased asset
pool. The decrease in payments in 2021 compared to 2020 was due to fewer engines
added to our leased asset pool, partially offset by increased customer
financing. Receipts from customer financing assets were $179 million, $389
million and $368 million in 2022, 2021 and 2020, respectively. The decrease in
receipts in 2022 compared to 2021 was primarily driven by the absence of the
prior year sale and leaseback transaction. Receipts in 2021 were relatively
consistent with 2020, as both periods included similar sale and leaseback
transactions for the sale of equipment. Refer to "Note 12: Leases" within Item 8
of this Form 10-K for additional discussion of these transactions.

In 2022, 2021, and 2020 we increased other intangible assets by approximately
$487 million, $308 million, $312 million, respectively, which primarily relates
to collaboration payment commitments made under our 2012 agreement to acquire
Rolls-Royce's collaboration interests in International Aero Engines AG (IAE) and
exclusivity payments made on contractual commitments included within intangible
assets that are amortized over the term of the underlying economic benefit. At
December 31, 2022, we had commercial aerospace financing and other contractual
commitments, including exclusivity and collaboration payment commitments, of
approximately $15.3 billion, on a gross basis before reduction for our
collaboration partners' share. Refer to "Note 18: Commitments and Contingencies"
within Item 8 of this Form 10-K for further details on our commercial aerospace
financing and other contractual commitments.

As discussed in "Note 14: Financial Instruments" within Item 8 of this Form
10-K, we enter into derivative instruments primarily for risk management
purposes, including derivatives designated as hedging instruments and those
utilized as economic hedges. We operate internationally and in the normal course
of business, are exposed to fluctuations in interest rates, foreign exchange
rates and commodity prices. These fluctuations can increase the costs of
financing, investing and operating the business. We have used derivative
instruments, including swaps, forward contracts and options, to manage certain
foreign currency, interest rate and commodity price exposures. During 2022,
2021, and 2020 we had net cash payments of $205 million, $16 million, and $32
million, respectively, from the settlement of these derivative instruments not
designated as hedging instruments.

Investing Activities - Discontinued Operations

Cash flows used in investing activities from discontinued operations in 2022 and
2021 were not significant as the Separation Transactions occurred on April 3,
2020. The $241 million decrease in cash flows used in investing activities from
discontinued operations in 2021 compared to 2020 was due to the fact that the
Separation Transactions occurred in 2020.
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                        Cash Flow - Financing Activities

(dollars in millions)                                            2022              2021              2020

Net cash flows used in financing activities from continuing operations

$ (5,859)

$ (6,756) $ (3,860) Net cash flows provided by (used in) financing activities from discontinued operations

                                         -                71            (1,414)

Our financing activities primarily include the issuance and repayment of commercial paper and other short-term and long-term debt, payment of dividends and stock repurchases.

2022 Compared with 2021 Financing Activities- Continuing Operations

The $0.9 billion change in cash flows used in financing activities in 2022
compared to 2021 was primarily driven by the absence of 2021 repayments of
long-term debt, including debt extinguishment costs, net of issuances of $0.8
billion and an increase in commercial paper borrowings, net of $0.7 billion,
partially offset by an increase in share repurchases of $0.5 billion, as
discussed below.

2021 Compared with 2020 - Financing Activities- Continuing Operations

The $2.9 billion change in cash flows used in financing activities in 2021 compared to 2020 primarily relates to an increase in share repurchases of $2.3 billion, as discussed below. In addition, in 2021, we had debt repayments, including debt extinguishment costs, of $4.9 billion and long-term debt issuances of $4.1 billion.

Financing Activities- Continuing Operations

Included in cash flows from financing activities are payments related to our
long term debt, including both interest and principal payments. A summary of our
long-term debt commitments as of December 31, 2022 was as follows:

                                                  Payments Due by Period
(dollars in millions)                 2023        2024         2025        Thereafter
Long-term debt-principal            $  588      $ 1,270      $ 1,590      $    27,801

Long-term debt-future interest 1,257 1,220 1,193

14,552

Our share repurchases were as follows for the years ended December 31:

(dollars in millions; shares in
thousands)                                              2022                           2021                         2020
                                                  $         Shares               $         Shares               $       Shares

Shares of common stock repurchased (1) $ 2,803 29,943

$ 2,327       28,003           $   47        330

(1) Relates to share repurchases that were settled in cash during the period.

At December 31, 2022, management had remaining authority to repurchase
approximately $6.0 billion of our common stock under the December 12, 2022 share
repurchase program. Under this program, shares may be purchased on the open
market, in privately negotiated transactions, under accelerated share repurchase
programs, and under plans complying with Rules 10b5-1 and 10b-18 under the
Securities Exchange Act of 1934, as amended. We may also reacquire shares
outside of the program from time to time in connection with the surrender of
shares to cover taxes on vesting of restricted stock and as required under our
employee savings plan. Our ability to repurchase shares is subject to applicable
law.

Our Board of Directors authorized the following cash dividends for the years ended December 31:

(dollars in millions, except per share amounts) 2022 2021

2020

Dividends paid per share of common stock           $ 2.160      $ 2.005      $ 2.160
Total dividends paid                               $ 3,128      $ 2,957      $ 2,732


On February 3, 2023, the Board of Directors declared a dividend of $0.55 per
share payable March 23, 2023 to shareowners of record at the close of business
on February 24, 2023.

Financing Activities - Discontinued Operations

Cash flows provided by financing activities from discontinued operations in 2022
and 2021 were not significant as the Separation Transactions occurred on April
3, 2020. The $1.5 billion decrease in cash flows used in financing activities
from discontinued operations in 2021 compared to 2020 was due to the fact that
the Separation Transactions occurred in 2020.
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                         CRITICAL ACCOUNTING ESTIMATES

Preparation of our financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Management believes the most complex and sensitive
judgments, because of their significance to the Consolidated Financial
Statements, result primarily from the need to make estimates about the effects
of matters that are inherently uncertain. The most significant areas involving
management judgments and estimates are described below. Actual results in these
areas could differ from management's estimates.

Long-Term Contract Accounting. We recognize revenue on an over-time basis for
substantially all defense contracts and certain long-term aerospace aftermarket
contracts. We measure progress toward completion of these contracts on a
percentage of completion basis, generally using costs incurred to date relative
to total estimated costs at completion. Contract costs are incurred over a
period of time, which can be several years, and the estimation of these costs
requires management's judgment. We review our Estimates at Completion (EACs) at
least annually or when a change in circumstances warrants a modification to a
previous estimate. For significant contracts, we review our EACs more
frequently. Due to the nature of the work required to be performed on many of
the Company's performance obligations, the estimation of total revenue and cost
at completion is complex, subject to many variables and requires significant
judgment by management on a contract by contract basis. As part of this process,
management reviews information including, but not limited to, any outstanding
key contract matters, progress towards completion and the related program
schedule, identified risks and opportunities and the related changes in
estimates of revenues and costs. The risks and opportunities relate to
management's judgment about the ability and cost to achieve the schedule,
consideration of customer-directed delays or reductions in scheduled deliveries,
technical requirements, customer activity levels, such as flight hours or
aircraft landings, and related variable consideration. Management must make
assumptions and estimates regarding contract revenue and costs, including
estimates of labor productivity and availability, the complexity and scope of
the work to be performed, the availability and cost of materials, including any
impact from rising costs or inflation, the length of time to complete the
performance obligation, execution by our subcontractors, the availability and
timing of funding from our customer, overhead cost rates, and current and past
maintenance cost and frequency driven by estimated aircraft and engine
utilization and estimated useful lives of components, among others. In
particular, fixed-price development programs involve significant management
judgment, as development contracts by nature have elements that have not been
done before and thus, are highly subject to future unexpected cost changes. Cost
estimates may also include the estimated cost of satisfying our industrial
cooperation agreements, sometimes in the form of either offset obligations or
in-country industrial participation (ICIP) agreements, required under certain
contracts. These obligations may or may not be distinct depending on their
nature. If cash is paid to a customer to satisfy our offset obligations it is
recorded as a reduction in the transaction price. Changes in estimates of net
sales, cost of sales and the related impact to operating profit on contracts
recognized over time are recognized on a cumulative catch-up basis, which
recognizes the cumulative effect of the profit changes on current and prior
periods based on a performance obligation's percentage of completion in the
current period. A significant change in one or more of these estimates could
affect the profitability of one or more of our performance obligations. Our EAC
adjustments also include the establishment of and changes to loss provisions for
our contracts accounted for on a percentage of completion basis.

Net EAC adjustments had the following impact on our operating results:

(dollars in millions, except per share amounts)               2022               2021               2020
Total net sales                                           $     152          $     296          $    (407)
Operating profit (loss)                                         (37)               110               (643)
Income (loss) from continuing operations
attributable to common shareowners (1)                          (29)                87               (508)
Diluted earnings (loss) per share from continuing
operations attributable to common shareowners (1)         $   (0.02)

$ 0.06 $ (0.37)

(1) Amounts reflect a U.S. statutory tax rate of 21%, which approximates our tax rate on our EAC adjustments.

As a result of the Raytheon merger, Raytheon Company's contracts accounted for
on a percentage of completion basis were reset to zero percent complete as of
the merger date, because only the unperformed portion of the contract at the
merger date represented the obligation of the Company. This had the impact of
reducing EAC adjustments for these segments in the short term period following
the merger, most notably in 2020. For additional information related to the
Raytheon merger, see "Note 2: Business Acquisitions, Dispositions, Goodwill and
Intangible Assets" within Item 8 of this Form 10-K.
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Costs incurred for engineering and development of certain aerospace products
under contracts with customers are capitalized as contract fulfillment costs, to
the extent recoverable from the associated contract margin and customer funding,
and subsequently amortized as the products are delivered to the customer. The
estimation of contract costs, and margin, considered as part of this
recoverability assessment requires significant judgment. See "Note 1: Basis of
Presentation and Summary of Accounting Principles" within Item 8 of this Form
10-K for further discussion. We regularly assess capitalized contract
fulfillment costs for impairment. In 2020, we recognized impairment of
$111 million related to contract fulfillment costs in conjunction with the
related impacts of the COVID 19 pandemic.

Income Taxes. Management believes that our earnings during the periods when the
temporary differences become deductible will be sufficient to realize the
related future income tax benefits, which may be realized over an extended
period of time. For those jurisdictions where the expiration date of tax
carryforwards or the projected operating results indicate that realization is
not likely, a valuation allowance is provided.

In assessing the need for a valuation allowance, we consider available positive
and negative evidence including past operating results, projections of future
taxable income, the feasibility of ongoing tax planning strategies and the
realizability of tax loss carryforwards. Our projections of future taxable
income include estimates and assumptions regarding our volume, pricing, and
costs, as well as the timing and amount of reversals of taxable temporary
differences. Valuation allowances related to deferred tax assets can be affected
by changes to tax laws, changes to statutory tax rates and future taxable income
levels. In the event we were to determine that we would not be able to realize
all or a portion of our deferred tax assets in the future, we would reduce such
amounts through an increase to tax expense in the period in which that
determination is made or when tax law changes are enacted. Conversely, if we
were to determine that we would be able to realize our deferred tax assets in
the future in excess of the net carrying amounts, we would decrease the recorded
valuation allowance through a decrease to tax expense in the period in which
that determination is made.

In the ordinary course of business there is inherent uncertainty in quantifying
our income tax positions. Significant judgment is required when assessing our
income tax positions and in determining our tax expense and benefits. Management
assesses our tax positions based on an evaluation of the facts, circumstances,
applicable tax laws, including regulations, case law, and other interpretive
guidance, as well as any other relevant information. Adjustments to our tax
positions are made as new information becomes available or when our assessments
change. In addition, we have entered into certain internal legal entity
restructuring transactions necessary to effectuate the Separation Transactions.
We have accrued tax on these transactions based on our interpretation of the
applicable tax laws and our determination of appropriate entity valuations. See
"Note 1: Basis of Presentation and Summary of Accounting Principles" and
"Note 13: Income Taxes" within Item 8 of this Form 10-K for further discussion.

Management has determined that the distributions of Carrier and Otis on April 3,
2020, and certain related internal business separation transactions, qualified
as tax-free under applicable law. In making these determinations, we applied the
tax law in the relevant jurisdictions to our facts and circumstances and
obtained tax rulings from the relevant taxing authorities, tax opinions, and/or
other external tax advice related to the concluded tax treatment. If the
completed distributions of Carrier or Otis, in each case, or certain internal
business separation transactions, were to fail to qualify for tax-free
treatment, the Company could be subject to significant liabilities, and there
could be material adverse impacts on the Company's business, results of
operations, financial condition and liquidity in future reporting periods.

Goodwill and Intangible Assets. The assets and liabilities of acquired
businesses are recorded under the acquisition method of accounting at their
estimated fair values at the dates of acquisition. Goodwill represents costs in
excess of fair values assigned to the underlying identifiable net assets of
acquired businesses. Intangible assets acquired in business combinations consist
of patents, trademarks/tradenames, developed technology, customer relationships,
and other intangible assets. The fair value for acquired customer relationship
intangibles is determined as of the acquisition date based on estimates and
judgments regarding expectations for the future after-tax cash flows arising
from the follow-on revenue from customer relationships that existed on the
acquisition date over their estimated lives, including the probability of
expected future contract renewals and revenue, less a contributory assets
charge, all of which is discounted to present value. The fair value of the
trademark and tradename intangible assets are determined utilizing the relief
from royalty method which is a form of the income approach. Under this method, a
royalty rate based on observed market royalties is applied to projected revenue
supporting the tradename and discounted to present value using an appropriate
discount rate. See "Note 1: Basis of Presentation and Summary of Accounting
Principles" within Item 8 of this Form 10-K for further details.

Also included within intangible assets are exclusivity assets, which are
payments made to secure certain contractual rights to provide products on new
commercial aerospace platforms. At December 31, 2022, our exclusivity assets,
net of accumulated amortization, were approximately $2.6 billion, and our
remaining estimated commitments, net of collaborator share, were approximately
$6.2 billion. We regularly assess the recoverability of these intangibles, which
is dependent upon our
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assumptions around the future success and profitability of the underlying aircraft platforms including the associated aftermarket revenue streams, and the related future cash flows.

Goodwill and intangible assets deemed to have indefinite lives are not
amortized, but are subject to impairment testing annually, or more frequently if
events or changes in circumstances indicate the asset might be impaired. The
impairment test compares carrying values of the reporting units and
indefinite-lived intangible assets to their estimated fair values. If the
carrying value exceeds the fair value, then the carrying value is reduced to
fair value. In testing our reporting units and indefinite-lived intangible
assets for impairment, we may perform both qualitative and quantitative
assessments. For the quantitative assessments that are performed for goodwill,
we utilize a combination of discounted cash flows (DCF) and market-based
valuation methodologies. For the quantitative assessments of indefinite-lived
intangible assets, fair value is primarily based on the relief from royalty
method. These quantitative assessments incorporate significant assumptions that
include sales growth rates, projected operating profit, terminal growth rates,
discount rates, royalty rates and comparable multiples from publicly traded
companies in our industry. Such assumptions are subject to variability from year
to year and are directly impacted by, among other things, global market
conditions.

We completed our annual goodwill impairment testing as of October 1, 2022 and
determined that no adjustments to the carrying value of goodwill were necessary.
For those reporting units where we performed a quantitative test, we estimated
the fair value of our reporting units using a combination of DCF and
market-based valuation methodologies. As noted above, these methodologies
involve significant assumptions that are subject to variability. The key
assumptions used in our quantitative analysis include our business projections,
including revenue growth rates and operating profit margins, the long-term
growth rate used to calculate the terminal value of the reporting unit, the
discount rate, and comparable multiples from publicly traded companies in our
industry. We consider both internal and external factors and refresh key
assumptions annually or as considered necessary. Material changes in these
estimates could occur and result in impairments in future periods.

Based on our annual impairment analysis as of October 1, 2022, the reporting
units that were closest to impairment were two previously combined Collins
reporting units with fair values in excess of book values, including goodwill,
of 15% and 17%. The combined value of goodwill allocated to these two reporting
units is approximately $9.5 billion as of the date testing was performed. All
other reporting units had a fair value substantially in excess of book value.
The Company continuously monitors and evaluates relevant events and
circumstances that could unfavorably impact the significant assumptions noted
above, including changes to U.S. treasury rates and equity risk premiums, tax
rates, recent market valuations from transactions by comparable companies,
volatility in the Company's market capitalization, and general industry, market
and macro-economic conditions. It is possible that future changes in such
circumstances or in the inputs and assumptions used in estimating the fair value
of our reporting units, could require the Company to record a non-cash
impairment charge.

In 2020, we recognized goodwill impairments of $3.2 billion related to two
Collins reporting units. Refer to "Note 2: Business Acquisitions, Dispositions,
Goodwill and Intangible Assets" within Item 8 of this Form 10-K for additional
details.

We also completed our annual indefinite-lived intangible assets impairment
testing as of October 1, 2022 and determined that no adjustments to the carrying
value of these assets were necessary. As noted above, our indefinite-lived
intangible assets impairment analysis involves significant assumptions that are
subject to variability. Material changes in these assumptions could occur and
result in impairments in future periods.

Contingent Liabilities. As described in "Note 18: Commitments and Contingencies"
within Item 8 of this Form 10-K, contractual, regulatory and other matters in
the normal course of business may arise that subject us to claims or litigation,
including with respect to matters relating to technical issues on programs,
government contracts, performance and operating cost guarantees, employee
benefit plans, legal, and environmental, health and safety matters. In
particular, the design, development, production and support of aerospace
technologies is inherently complex and subject to risk. Technical issues
associated with these technologies may arise in the normal course and may result
in financial impacts, including increased warranty provisions, customer contract
settlements, and changes in contract performance estimates. These impacts could
be material to the Company's results of operations, financial condition and
liquidity. Additionally, we have significant contracts with the U.S. government,
subject to government oversight and audit, which may require significant
adjustment of contract prices. We accrue for liabilities associated with these
matters when it is probable that a liability has been incurred and the amount
can be reasonably estimated. Estimating our liability based on both the
likelihood of any adverse judgments or outcomes, and the costs associated with
these matters, requires significant judgment. The inherent uncertainty related
to the outcome of these matters could result in amounts materially different
from any provisions made with respect to their resolution.

Employee Benefit Plans. We sponsor domestic and foreign defined benefit pension
and PRB plans. Assumptions used to calculate our funded status are determined
based on company data and appropriate market indicators. They are evaluated
annually at December 31 and when significant events require a mid-year
remeasurement. A change in any of these assumptions
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or actual experience that differs from these assumptions are subject to recognition in pension and postretirement net periodic benefit (income) expense reported in the Consolidated Financial Statements.

Assumptions used in the accounting for these employee benefit plans require
judgement. Major assumptions include the discount rate and EROA. Other
assumptions include mortality rates, demographic assumptions (such as retirement
age), rate of increase in employee compensation levels, and health care cost
increase projections.

The weighted-average discount rates used to measure pension and PRB liabilities
are based on yield curves developed using high-quality corporate bonds, which
are subject to macroeconomic factors, as well as plan specific expected cash
flows. For our significant plans, we utilize a full yield curve approach in the
estimation of the service cost and interest cost components of net periodic
benefit expense by applying the specific spot rates along the yield curve used
in determination of the benefit obligation to the relevant discounted projected
cash flows.

The following table shows the sensitivity of our pension and PRB plan
liabilities and net periodic benefit income to a 25 basis point change in the
discount rates for benefit obligations, interest cost and service cost as of
December 31, 2022:

                                                                      Increase in            Decrease in
                                                                        Discount               Discount
(dollars in millions)                                              Rate of 25 bps         Rate of 25 bps
Projected benefit obligation increase (decrease)                 $      (1,144)         $       1,194
Net periodic benefit income increase (decrease)                            (23)                    28


The discount rate sensitivities assume no change in the shape of the yield curve
that will be applied to the projected cash outflows for future benefit payments
in order to calculate interest and service cost. A flattening of the yield curve
results in a narrowing of the spread between interest and obligation discount
rates and would decrease our net periodic benefit income. Conversely, a
steepening of the yield curve would result in an increase in the spread between
interest and obligation discount rates and would increase our net periodic
benefit income.

The EROA is the average rate of earnings expected over the long term on assets
invested to fund anticipated future benefit payment obligations. In determining
the EROA assumption, we consider the target asset allocation of plan assets, as
well as economic and other indicators of future performance. We consult with and
consider the opinions of financial and other professionals in determining the
appropriate capital market assumptions. Return projections are validated using a
simulation model that incorporates yield curves, credit spreads and risk
premiums to project long-term prospective returns. As a result of this analysis
at year end 2022, our weighted average pension EROA assumption for 2023
increased to 7.1%. Differences between actual asset returns in a given year and
the EROA do not necessarily indicate a change in the assumption is required, as
the EROA represents the expected average returns over a long-term horizon.

Net periodic benefit income is also sensitive to changes in the EROA. An increase or decrease of 25 basis points in the EROA would have increased or decreased our 2022 net periodic benefit income by approximately $139 million.

Refer to "Note 11: Employee Benefit Plans" within Item 8 of this Form 10-K for discussion of current and prior year discount rate and EROA assumptions.

                              ACCOUNTING STANDARDS

For a discussion of recent accounting pronouncements, see the Accounting Pronouncements section in "Note 1: Basis of Presentation and Summary of Accounting Principles" within Item 8 of this Form 10-K.

                         COMMITMENTS AND CONTINGENCIES

Refer to "Note 18: Commitments and Contingencies" within Item 8 of this Form 10-K for discussion on contractual commitments and contingencies.

                               GOVERNMENT MATTERS

As described above in "Critical Accounting Estimates-Contingent Liabilities,"
our contracts with the U.S. government are subject to audits. Such audits may
recommend that certain contract prices should be reduced to comply with various
government regulations, or that certain payments be delayed or withheld. We are
also the subject of one or more investigations and legal proceedings initiated
by the U.S. government with respect to government contract matters. See
"Note 18: Commitments and Contingencies" within Item 8 of this Form 10-K for
further discussion of these and other government matters.


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