RTX CORPORATION BUSINESS OVERVIEW We are a global premier systems provider of high technology products and services to the aerospace and defense industries. OnApril 3, 2020 ,United Technologies Corporation (UTC) completed the separation of its business into three independent, publicly traded companies - UTC, Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis ) (the Separation Transactions). UTC distributed all of the outstanding shares of Carrier common stock and all of the outstanding shares ofOtis common stock to UTC shareowners who held shares of UTC common stock as of the close of business onMarch 19, 2020 , the record date for the distributions (the Distributions) effective at12:01 a.m., Eastern Time , onApril 3, 2020 . Immediately following the Separation Transactions and Distributions, on April 3, 2020,UTC andRaytheon Company completed their all-stock merger of equals transaction (theRaytheon Merger ), pursuant to whichRaytheon Company became a wholly-owned subsidiary of UTC and UTC was renamedRaytheon Technologies Corporation . As a result of these transactions, we now operate in four principal business segments: Collins Aerospace Systems (Collins Aerospace ),Pratt & Whitney ,Raytheon Intelligence & Space (RIS) andRaytheon Missiles & Defense (RMD). UTC was determined to be the accounting acquirer in theRaytheon Merger, and, as a result, the financial statements ofRaytheon Technologies includeRaytheon Company's financial position and results of operations for all periods subsequent to the completion of theRaytheon Merger onApril 3, 2020 . RIS and RMD follow a 4-4-5 fiscal calendar with a quarter end ofApril 4, 2021 whileCollins Aerospace andPratt & Whitney continue to use a quarter calendar end ofMarch 31, 2021 . Throughout this Quarterly Report on Form 10-Q, when we refer to the quarter endedMarch 31 with respect to RIS or RMD, we are referring to theirApril 4, 2021 fiscal quarter end. The historical results of Carrier andOtis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. See "Note 3: Discontinued Operations" within Item 1 of this Form 10-Q for additional information. Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated, amounts and activity are presented on a continuing operations basis. Unless the context otherwise requires, the terms "we," "our," "us," "the Company," "Raytheon Technologies ," and "RTC" meanUnited Technologies Corporation and its subsidiaries when referring to periods prior to theRaytheon Merger and to the combined company,Raytheon Technologies Corporation , when referring to periods after theRaytheon Merger. Unless the context otherwise requires, the terms "Raytheon Company ," or "Raytheon" meanRaytheon Company and its subsidiaries prior to theRaytheon Merger. The current status of significant factors affecting our business environment in 2021 is discussed below. For additional discussion, refer to the "Business Overview" section in Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in our 2020 Annual Report on Form 10-K. 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 on 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. Government legislation, policies and regulations, including regulations related to global warming, carbon footprint and fuel efficiency, can have a negative impact on our worldwide operations. Government and industry-driven safety and performance regulations, restrictions on aircraft engine noise and emissions, government imposed travel restrictions, and government procurement practices can impact our businesses.Collins Aerospace andPratt & 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 operations' customers are covered under long-term aftermarket service agreements at bothCollins Aerospace andPratt & Whitney , which are inclusive of both spare parts and services. RIS, RMD, and the defense operations ofCollins Aerospace andPratt & Whitney are affected byU.S. Department of Defense (DoD ) budget and spending levels, changes in demand, changes in policy positions or priorities from a newU.S. Administration and the global political environment. Total sales to theU.S. government, excluding foreign military sales, were$7.7 billion and$2.5 billion for the quarters endedMarch 31, 2021 and 2020, or 51% and 22% of total net sales for those periods, respectively. 36 -------------------------------------------------------------------------------- Table of Contents Impact of the COVID-19 Pandemic In 2020, the coronavirus disease 2019 (COVID-19) negatively impacted both theU.S. and global economy and our business and operations and the industries in which we operate. The continued disruption to air travel and commercial activities and the significant restrictions and limitations on businesses, particularly within the aerospace and commercial airline industries, have negatively impacted global supply, demand and distribution capabilities. In particular, the unprecedented decrease in air travel resulting from the COVID-19 pandemic has adversely affected our airline and airframer customers, and their demand for the products and services of ourCollins Aerospace andPratt & Whitney businesses. We continue to monitor these trends and are working closely with our customers to actively mitigate costs and adjust production schedules to accommodate these declines in demand. Our RIS and RMD businesses, although experiencing minor impacts, have not experienced significant business disruptions as a result of the COVID-19 pandemic. Given the significant reduction in business and leisure passenger air travel, the number of planes temporarily grounded, and continued travel restrictions that have resulted from the ongoing COVID-19 pandemic, and the resulting impacts on our customers and their business activities, we expect our future operating results, particularly those of ourCollins Aerospace andPratt & Whitney businesses, to continue to be negatively impacted when compared to pre-COVID-19 results. Our expectations regarding the COVID-19 pandemic and its 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. While we believe that the long-term outlook for the aerospace industry remains positive due to the fundamental drivers of air travel demand, there is significant uncertainty with respect to the point at which commercial air traffic capacity will return to and/or exceed pre-COVID-19 levels. While we have begun to see some indications that commercial air travel is recovering in certain areas of demand, other areas continue to lag. As a result, we continue to estimate that a full recovery may occur in 2023 or 2024. New information may emerge concerning the scope, severity and duration of the COVID-19 pandemic, as well as any worsening of the pandemic, the effect of mutating strains and whether additional outbreaks of the pandemic will continue to occur, actions to contain the pandemic's spread or treat its impact, continued availability of vaccines, and their distribution, acceptance and efficacy, and governmental, business and individual personal actions taken in response to the pandemic (including restrictions and limitations on travel and transportation, and changes in leisure and business travel patterns and work environments) among others. Some of these actions and related impacts may be trends that continue in the future even after the pandemic no longer poses a significant public health risk. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contains numerous provisions which may impact us. We continue to refine our understanding of the impact of the CARES Act on our business, and ongoing government guidance related to COVID-19 that may be issued. In addition,Congress passed the American Rescue Plan Act of 2021 (ARPA) inMarch 2021 , which included pension funding relief provisions. For further discussion, refer to the "FAS/CAS operating adjustment" subsection under the "Segment Review" section below. Other Matters Global economic and political conditions, changes in raw material and commodity prices, interest rates, foreign currency exchange rates, energy costs, 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 business for the remainder of 2021. With regard to political conditions, inJuly 2019 , theU.S. government suspendedTurkey's participation in the F-35 Joint Strike Fighter program becauseTurkey accepted delivery of the Russian-built S-400 air and missile defense system. TheU.S. has imposed, and may impose additional, sanctions onTurkey as a result of this or other political disputes. Turkish companies supply us with components, some of which are sole-sourced, primarily in our aerospace operations for commercial and military engines and aerospace products. Depending upon the scope and timing ofU.S. sanctions onTurkey and potential reciprocal actions, if any, such sanctions or actions could impact our sources of supply and could have a material adverse effect on our results of operations, cash flows or financial condition. In addition, inOctober 2020 ,the People's Republic of China (China ) announced that it may sanction RTC in connection with a possible Foreign Military Sale toTaiwan of six MS-110 Reconnaissance Pods and related equipment manufactured byCollins Aerospace . Foreign Military Sales are government-to-government transactions that are initiated by, and carried out at the direction of, theU.S. government. To date, the Chinese government has not imposed sanctions on RTC or indicated the nature or timing of any future potential sanctions or other actions. IfChina were to impose sanctions or take other regulatory action against RTC, our suppliers, teammates or partners, it could potentially disrupt our business operations. The impact of potential sanctions or other actions byChina cannot be determined at this time. The recent change in theU.S. administration could result in changes to theU.S. government's foreign policies that may impact regulatory approval for direct commercial sales contracts for certain of our products and services to certain foreign customers. 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 ofMarch 31, 2021 , our contract liabilities 37 -------------------------------------------------------------------------------- Table of Contents include approximately$440 million of advance payments received from a certainMiddle East customer on contracts for which we no longer believe we will be able to execute on or obtain required regulatory approvals. These advance payments may become refundable to the customer if the contracts are ultimately terminated. See Part II, Item 1A, "Risk Factors" in our 2020 Annual Report on Form 10-K for further discussion of these items. 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 Condensed Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. See "Critical Accounting Estimates" within Item 7 and "Note 1: Basis of Presentation and Summary of Accounting Principles" within Item 8 of our 2020 Annual Report on Form 10-K, which describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements. Actual results in these areas could differ from management's estimates. There have been no significant changes in our critical accounting estimates during the quarter endedMarch 31, 2021 . RESULTS OF OPERATIONS As described in our "Cautionary Note Regarding Forward-Looking Statements" in this Form 10-Q, our interim period results of operations and period-to-period comparisons of such 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. As discussed further above in "Business Overview," the results of RIS and RMD reflect the period subsequent to the completion of theRaytheon Merger onApril 3, 2020 . In addition, as a result of the Separation Transactions and the Distributions, the historical results of Carrier andOtis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Net Sales Quarter Ended March 31, (dollars in millions) 2021 2020 Net Sales$ 15,251 $ 11,360
The factors contributing to the total change year-over-year in total net sales
for the quarter ended
Quarter Ended March 31, 2021
Organic(1) $ (3,180)
Acquisitions and divestitures, net 7,039
Other 32
Total change $ 3,891
(1) We provide the organic change in net sales for our consolidated results of
operations. We believe that this measure is useful to investors because it
provides transparency to the underlying performance of our business, which
allows for better year-over-year comparability. The organic change excludes
acquisitions and divestitures, net and the effect of foreign currency exchange
rate fluctuations and other significant non-recurring and non-operational items
("Other"). A reconciliation of this measure to reported U.S Generally Accepted
Accounting Principles (GAAP) amounts is provided in the table above.
Net sales decreased $3,180 million organically in the quarter ended
March 31, 2021 compared to the quarter ended March 31, 2020 . This decrease
reflects lower organic sales of $2.0 billion at Collins Aerospace , primarily
driven by lower commercial aerospace aftermarket sales and lower commercial
aerospace OEM sales primarily due to the current economic environment
principally driven by the COVID-19 pandemic which has resulted in lower flight
hours, aircraft fleet utilization and commercial OEM deliveries. The decrease in
net sales also reflects lower organic sales of $1.4 billion at Pratt & Whitney
primarily driven by lower commercial aftermarket sales, primarily due to a
significant reduction in shop visits and related spare part sales, and lower
commercial OEM sales, primarily due to a significant reduction in commercial
engine deliveries, all principally driven by the current economic environment
primarily due to the COVID-19 pandemic. The $7,039 million increase in net sales
related to Acquisitions and divestitures, net for the quarter ended
March 31, 2021 compared to the quarter ended March 31, 2020 , is primarily driven
by the Raytheon Merger on April 3, 2020 . Included in the change in Acquisitions
and divestitures, net is the impact of the sale of the Collins Aerospace
military GPS and space-based precision optics businesses sold in the third
quarter of 2020.
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Quarter Ended March 31, % of Total Net Sales
(dollars in millions) 2021 2020 2021 2020
Net Sales
Products $ 11,664 $ 8,165 76.5 % 71.9 %
Services 3,587 3,195 23.5 % 28.1 %
Total net sales $ 15,251 $ 11,360 100 % 100 %
Refer to "Note 19: Segment Financial Data" within Item 1 of this Form 10-Q for
the composition of external net sales by products and services by segment.
Net products sales increased $3,499 million in the quarter ended March 31, 2021
compared to the quarter ended March 31, 2020 primarily due to an increase in
external product sales of $6.1 billion due to the Raytheon Merger on April 3,
2020 , partially offset by decreases in external product sales of $1.7 billion at
Collins Aerospace and $0.8 billion at Pratt & Whitney .
Net services sales increased $392 million in the quarter ended March 31, 2021
compared to the quarter ended March 31, 2020 primarily due to an increase in
external services sales of $1.1 billion due to the Raytheon Merger on April 3,
2020 , partially offset by decreases in external services sales of $0.5 billion
at Pratt & Whitney and $0.2 billion at Collins Aerospace .
Our sales to major customers were as follows:
Quarter Ended March 31, % of Total Net Sales
(dollars in millions) 2021 2020 2021 2020
Sales to the U.S. government(1) $ 7,748 $ 2,528 50.8 % 22.3 %
Foreign military sales through the U.S.
government 1,295 326 8.5 % 2.9 %
Foreign government direct commercial
sales 1,180 363 7.7 % 3.2 %
Commercial aerospace and other commercial
sales 5,028 8,143 33.0 % 71.7 %
Total net sales $ 15,251 $ 11,360 100 % 100 %
(1) Excludes foreign military sales through the U.S. government.
Cost of Sales
Quarter Ended March 31,
(dollars in millions) 2021 2020
Total cost of sales $ 12,537 $ 8,572
Percentage of net sales 82.2 % 75.5 %
The factors contributing to the change year-over-year in total cost of sales for
the quarter ended March 31, 2021 are as follows:
(dollars in millions) Quarter Ended March 31, 2021
Organic(1) $ (1,677)
Acquisitions and divestitures, net 5,672
Restructuring 14
FAS/CAS operating adjustment (375)
Acquisition accounting adjustments 284
Other 47
Total change $ 3,965
(1) We provide the organic change in cost of sales for our consolidated results
of operations. We believe that this measure is useful to investors because it
provides transparency to the underlying performance of our business, which
allows for better year-over-year comparability. The organic change excludes
acquisitions and divestitures, net; restructuring costs; the FAS/CAS operating
adjustment; costs related to certain acquisition accounting adjustments; and the
effect of foreign currency exchange rate translation fluctuations and other
significant non-recurring and non-operational items ("Other"). A reconciliation
of this measure to reported U.S. GAAP amounts is provided in the table above.
The organic decrease in total cost of sales of $1,677 million for the quarter
ended March 31, 2021 compared to the quarter ended March 31, 2020 was primarily
driven by the organic sales decreases noted above. The increase in cost of sales
related to Acquisitions and divestitures, net of $5,672 million for the quarter
ended March 31, 2021 compared to the quarter ended March 31, 2020 is primarily
driven by the Raytheon Merger on April 3, 2020 . Included in the change in
Acquisitions and divestitures, net is the impact of the sale of the Collins
Aerospace military GPS and space-based precision optics businesses sold in the
third quarter of 2020.
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For further discussion on Restructuring costs see the "Restructuring Costs"
section below. 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.
Quarter Ended March 31, % of Total Net Sales
(dollars in millions) 2021 2020 2021 2020
Cost of sales
Products $ 9,974 $ 6,629 65.4 % 58.4 %
Services 2,563 1,943 16.8 % 17.1 %
Total cost of sales $ 12,537 $ 8,572 82.2 % 75.5 %
Net products cost of sales increased $3,345 million in the quarter ended
March 31, 2021 compared to the quarter ended March 31, 2020 primarily due to an
increase in external product cost of sales due to the Raytheon Merger on April
3, 2020 , partially offset by decreases in external product cost of sales at
Collins Aerospace and Pratt & Whitney principally driven by the products sales
decreases noted above.
Net services cost of sales increased $620 million in the quarter ended
March 31, 2021 compared to the quarter ended March 31, 2020 primarily due to an
increase in external services cost of sales due to the Raytheon Merger on April
3, 2020 , partially offset by decreases in external services cost of sales at
Pratt & Whitney and Collins Aerospace principally driven by the services sales
decreases noted above.
Research and Development
Quarter Ended March 31,
(dollars in millions) 2021 2020
Company-funded $ 589 $ 535
Percentage of net sales 3.9 % 4.7 %
Customer-funded (1) $ 1,132 $ 627
Percentage of net sales 7.4 % 5.5 %
(1) Customer-funded research and development costs are included in cost of
sales in our Condensed 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. The increase in company-funded research and development of
$54 million for the quarter ended March 31, 2021 compared to the quarter ended
March 31, 2020 was primarily driven by $0.2 billion related to the Raytheon
Merger on April 3, 2020 , partially offset by lower expenses of $0.1 billion
across various commercial programs at Pratt & Whitney and Collins Aerospace ,
which includes the impact of cost reduction initiatives.
The increase in customer-funded research and development of $505 million for the
quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 , was
primarily driven by $0.6 billion related to the Raytheon Merger on April 3,
2020 .
Selling, General and Administrative
Quarter Ended March 31,
(dollars in millions) 2021
2020
Selling, general and administrative expenses $ 1,220$ 977 Percentage of net sales 8.0 % 8.6 % Selling, general and administrative expenses increased$243 million in the quarter endedMarch 31, 2021 compared to the quarter endedMarch 31, 2020 primarily driven by$0.4 billion related to theRaytheon Merger onApril 3, 2020 , partially offset by lower expenses of$0.1 billion at Pratt &Whitney andCollins Aerospace , primarily driven by prior year charges related to increased estimates of expected credit losses due to customer bankruptcies and additional allowances for credit losses, and includes the impact of cost reduction initiatives. We are continuously evaluating our cost structure and have implemented restructuring actions in an effort to keep our cost structure competitive. As appropriate, the amounts reflected above include the beneficial impact of previous restructuring actions on Selling, general and administrative expenses. See "Note 12: Restructuring Costs" within Item 1 of this Form 10-Q and Restructuring Costs, below, for further discussion. 40
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Other Income, Net
Quarter Ended March 31,
(dollars in millions) 2021 2020
Other income, net $ 108 $ 19
Other income, net includes equity earnings in unconsolidated entities, royalty
income, foreign exchange gains and losses, as well as other ongoing and
nonrecurring items. The increase in Other income, net of $89 million for the
quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was
primarily due to a prior year impairment of a Collins Aerospace tradename of $40
million resulting from the projected impact of COVID-19 and $29 million related
to foreign government wage subsidies due to COVID-19 at Pratt & Whitney in the
quarter ended March 31, 2021 .
Operating Profit
Quarter Ended March 31,
(dollars in millions) 2021 2020
Operating profit $ 1,013 $ 1,295
Operating profit margin 6.6 % 11.4 %
The decrease in Operating profit of $282 million for the quarter ended
March 31, 2021 compared to the quarter ended March 31, 2020 was primarily driven
by the operating performance at our segments as described below in the
individual segment results and an increase in acquisition accounting adjustments
of $245 million primarily related to the Raytheon Merger, partially offset by an
increase in our FAS/CAS operating adjustment of $423 million due to the Raytheon
Merger. Included in the decrease in Operating profit was an increase in
restructuring costs of $35 million primarily related to restructuring actions
taken at our Collins Aerospace and Pratt & Whitney segments.
Non-service Pension (Income) Expense
Quarter Ended March 31,
(dollars in millions) 2021 2020
Non-service pension (income) expense $ (491) $ (168)
The change in Non-service pension (income) expense of $323 million for the
quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 was
primarily driven by the inclusion of the Raytheon Company plans as a result of
the Raytheon Merger, and to a lesser extent, a decrease in the discount rate and
prior year pension asset returns exceeding our expected return on assets (EROA)
assumption.
Interest Expense, Net
Quarter Ended March 31,
(dollars in millions) 2021 2020
Interest expense $ 357 $ 339
Interest income (11) (7)
Interest expense, net $ 346 $ 332
Average interest expense rate 4.1 % 3.8 %
Interest expense, net in the quarter ended March 31, 2021 , was relatively
consistent with the quarter ended March 31, 2020 . Included in the increase in
interest expense was a $45 million change in the mark-to-market fair value of
marketable securities held in trusts associated with certain of our nonqualified
deferred compensation and employee benefit plans, which was partially offset by
a decrease in interest expense primarily due to the repayment of long-term debt.
The average maturity of certain long-term debt at March 31, 2021 is
approximately 14 years.
Income Taxes
Quarter Ended March 31,
2021 2020
Effective income tax rate 29.8 % 56.5 %
The effective tax rate for the quarter ended
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Net Income from Continuing Operations Attributable to Common Shareowners
Quarter Ended March 31,
(dollars in millions, except per share amounts) 2021 2020
Net income from continuing operations attributable to common shareowners
$ 772 $ 438 Diluted earnings per share from continuing operations $
0.51
Net income from continuing operations attributable to common shareowners for the quarter endedMarch 31, 2021 includes the following: •acquisition accounting adjustments primarily related to theRaytheon Merger of$398 million , net of tax, which had an unfavorable impact on diluted earnings per share (EPS) from continuing operations of$0.26 ; •tax expense of$148 million related to the sale of our Forcepoint business, which had an unfavorable impact on diluted EPS from continuing operations of$0.10 ; and •restructuring charges of$33 million , net of tax, which had an unfavorable impact on diluted EPS from continuing operations of$0.02 . Net income from continuing operations attributable to common shareowners for the quarter endedMarch 31, 2020 includes the following: •acquisition accounting adjustments of$179 million , net of tax, which had an unfavorable impact on diluted EPS from continuing operations of$0.21 ; •net deferred tax charges of$415 million resulting from the Separation Transactions primarily related to the impairment of deferred tax assets, which had an unfavorable impact on diluted EPS from continuing operations of$0.48 ; •increased estimates of expected credit losses driven by customer bankruptcies and additional allowances for credit losses of$55 million , net of tax, which had an unfavorable impact on diluted EPS from continuing operations of$0.06 ; and •the impairment of aCollins Aerospace tradename of$31 million , net of tax, which had an unfavorable impact on diluted EPS from continuing operations of$0.04 .
Net Loss from Discontinued Operations Attributable to Common Shareowners
Quarter Ended March 31,
(dollars in millions, except per share amounts) 2021 2020
Net loss from discontinued operations attributable to common shareowners
$ (19) $ (521) Diluted loss per share from discontinued operations $
(0.01)
OnApril 3, 2020 , we completed the separation of our commercial businesses, Carrier andOtis . Effective as of such date, the historical results of the Carrier andOtis segments have been reclassified to discontinued operations for all periods presented. See "Note 3: Discontinued Operations" within Item 1 of this Form 10-Q for additional information. The decrease in net loss from discontinued operations attributable to common shareowners of$502 million and the related change in diluted loss per share from discontinued operations of$0.59 in the quarter endedMarch 31, 2021 compared to the quarter endedMarch 31, 2020 was primarily due to higher prior year costs associated with the separation of our commercial businesses, including debt extinguishment costs of$577 million , net of tax in connection with the early repayment of outstanding principal, partially offset by prior year Carrier andOtis operating activity, as the Separation Transactions occurred onApril 3, 2020 . Net Income (Loss) Attributable to Common Shareowners Quarter Ended March 31, (dollars in millions, except per share amounts) 2021 2020 Net income (loss) attributable to common shareowners$ 753 $ (83) Diluted earnings (loss) per share from operations $
0.50
The increase in net income (loss) attributable to common shareowners and diluted earnings (loss) per share from operations for the quarter endedMarch 31, 2021 was driven by the change from discontinued operations, as discussed above in Net Loss from Discontinued Operations and the increase in continuing operations, as discussed above in Net Income from Continuing Operations Attributable to Common Shareowners. 42
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RESTRUCTURING COSTS
Quarter Ended March 31,
(dollars in millions) 2021 2020
Restructuring costs $ 43 $ 8
Restructuring actions are an essential component of our operating margin
improvement efforts and relate to both existing operations and recent mergers
and acquisitions. Charges generally arise from severance related to workforce
reductions and facility exit costs associated with the consolidation of field
and manufacturing operations and costs to exit legacy programs. We continue to
closely monitor the economic environment and may undertake further restructuring
actions to keep our cost structure aligned with the demands of the prevailing
market conditions.
2021 Actions. During the quarter ended March 31, 2021 , we recorded net pre-tax
restructuring charges of $36 million , primarily related to ongoing cost
reduction efforts including workforce reductions and the consolidation of
facilities initiated in 2021. We expect to incur additional restructuring
charges of $33 million to complete these actions. We are targeting to complete
the majority of the remaining workforce and facility related cost reduction
actions initiated in 2021 by 2022. We expect recurring pre-tax savings related
to these actions to reach approximately $40 million annually within one to two
years. Approximately 65% of the restructuring costs will require cash payments,
which we have funded and expect to continue to fund with cash generated from
operations. During the quarter ended March 31, 2021 , we had cash outflows of $2
million related to the 2021 actions.
2020 Actions. During the quarters ended March 31, 2021 and 2020, we recorded
$4 million and $2 million respectively, of net pre-tax restructuring charges for
actions initiated in 2020. We expect to incur additional restructuring charges
of $8 million to complete these actions. We are targeting to complete in 2021
the majority of the remaining workforce and facility related cost reduction
actions initiated in 2020. We expect annual recurring pre-tax savings related to
these actions to reach approximately $1.2 billion annually within two years of
initiating these actions. Approximately 85% of the restructuring costs will
require cash payments, which we have funded and expect to continue to fund with
cash generated from operations. During the quarter ended March 31, 2021 , we had
cash outflows of $132 million related to the 2020 actions.
In addition, during the quarters ended March 31, 2021 and 2020, we recorded
$3 million and $6 million , respectively, of net pre-tax restructuring charges
for restructuring actions initiated in 2019 and prior. For additional discussion
of restructuring, see "Note 12: Restructuring Costs" within Item 1 of this Form
10-Q.
SEGMENT REVIEW
As discussed further above in Business Overview, on April 3, 2020 , we completed
the Separation Transactions, Distributions and the Raytheon Merger. 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.
As previously announced, effective January 1, 2021 , we reorganized certain
product areas of our Raytheon Intelligence & Space (RIS) and Raytheon Missiles &
Defense (RMD) businesses to more efficiently leverage our capabilities. The
amounts and presentation of our business segments, including intersegment
activity, set forth in this Form 10-Q reflect this reorganization. The
reorganization does not impact our previously reported consolidated balance
sheets, statements of operations or statements of cash flows.
As a result of the Raytheon Merger, we now present a FAS/CAS operating
adjustment outside of segment results, which represents the difference between
the service cost component of our pension and PRB expense under the Financial
Accounting Standards (FAS) requirements of U.S. Generally Accepted Accounting
Principles (GAAP) and our pension and postretirement benefit (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. We generally
expect to recover the related RIS and RMD pension and PRB liabilities over time
through the pricing of our products and services to the U.S. government. Because
the Collins Aerospace and Pratt & Whitney segments generally record pension and
PRB expense on a FAS basis, historical results were not impacted by this change
in segment reporting.
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 and services. Segment total net sales and operating profit
include intercompany sales and profit, which are ultimately eliminated within
Eliminations and other, which also includes certain smaller non-reportable
segments. For our defense contracts, where the primary customer is the U.S.
government subject to Federal Acquisition Regulation (FAR) part 12, our
intercompany sales and profit is generally recorded at cost-plus a specified
fee, which may differ from what the selling entity would be able to
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obtain on sales to external customers. Segment results exclude certain
acquisition accounting adjustments, the FAS/CAS operating adjustment and certain
corporate expenses, as further discussed below.
Given the nature of our business, we believe that total net sales and operating
profit (and the related operating profit 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:
Quarter Ended March 31,
(dollars in millions) 2021 2020
Collins Aerospace Systems $ 4,370 $ 6,438
Pratt & Whitney 4,030 5,353
Raytheon Intelligence & Space 3,765 -
Raytheon Missiles & Defense 3,793 -
Total segment 15,958 11,791
Eliminations and other (707) (431)
Consolidated $ 15,251 $ 11,360 Operating Profit. Operating profit by segment was as follows:
Quarter Ended March 31,
(dollars in millions) 2021 2020
Collins Aerospace Systems $ 314 $ 1,246
Pratt & Whitney 20 475
Raytheon Intelligence & Space 388 -
Raytheon Missiles & Defense 496 -
Total segment 1,218 1,721
Eliminations and other (31) (25)
Corporate expenses and other unallocated items (81) (130)
FAS/CAS operating adjustment 423
-
Acquisition accounting adjustments (516) (271) Consolidated$ 1,013 $ 1,295 Included in segment operating profit are Estimate at Completion (EAC) adjustments, which relate to changes in operating profit and margin due to revisions to total estimated revenues and costs at completion. These changes reflect improved or deteriorated operating performance or award fee rates. For a full description of our EAC process, refer to "Note 5: Changes in Contract Estimates at Completion" within Item 1 of this Form 10-Q. 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, we have both favorable and unfavorable EAC adjustments. We had the following aggregate EAC adjustments for the periods presented: Quarter Ended March 31, (dollars in millions) 2021 2020 Gross favorable $ 312$ 137 Gross unfavorable (300) (116) Total net EAC adjustments $ 12$ 21 As a result of theRaytheon 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 represents an obligation of the Company. The decrease in net EAC adjustments of$9 million in the quarter endedMarch 31, 2021 compared to the quarter endedMarch 31, 2020 was primarily due to an unfavorable change in net EAC adjustments of$63 million atCollins Aerospace spread across numerous individual programs with no individual or common significant driver, partially offset by net favorable EAC adjustments of$35 million at RMD and$29 million at RIS in the quarter endedMarch 31, 2021 due to theRaytheon Merger. Significant EAC adjustments, when they occur, are discussed in each business segment's discussion below. 44 -------------------------------------------------------------------------------- Table of Contents Backlog and Defense Bookings. Total backlog was approximately$147.4 billion and$150.1 billion as ofMarch 31, 2021 andDecember 31, 2020 , respectively, which includes defense backlog of$65.2 billion and$67.3 billion as ofMarch 31, 2021 andDecember 31, 2020 , respectively. Our defense operations consist primarily of our RIS and RMD businesses and operations in the defense businesses within ourCollins Aerospace andPratt & Whitney segments. Defense bookings were approximately$8.5 billion and$3.2 billion for the quarters endedMarch 31, 2021 and 2020, respectively. Defense bookings are impacted by the timing and amounts of awards in a given period, which are subject to numerous factors, including: (1) the desired capability by the customer and urgency of customer needs, (2) customer budgets and other fiscal constraints, (3) political and economic and other environmental factors, (4) the timing of customer negotiations, (5) the timing of governmental approvals and notifications, and (6) the timing of option exercises or increases in scope. In addition, due to these factors, quarterly bookings tend to fluctuate from period to period, particularly on a segment basis. As a result, we believe comparing bookings on a quarterly basis or for periods less than one year is less meaningful than for longer periods and that shorter term changes in bookings may not necessarily indicate a material trend. Collins Aerospace Systems Quarter Ended March 31, (dollars in millions) 2021 2020 Change Net Sales $ 4,370$ 6,438 (32) % Operating Profit 314 1,246 (75) % Operating Profit Margins 7.2 % 19.4 %
Quarter Ended March 31, 2021 Compared with Quarter Ended March 31, 2020
Factors Contributing to Total Change
Acquisitions / Restructuring
Organic(1) Divestitures, net Costs Other Total Change
Net Sales $ (1,964) $ (136) $ - $ 32 $ (2,068)
Operating Profit (859) (45) (12) (16) (932)
(1) We provide the organic change in net sales and operating profit for our
segments. We believe that these 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 excludes
acquisitions and divestitures, net; restructuring costs; and the effect of
foreign currency exchange rate translation fluctuations and other significant
non-recurring and non-operational items ("Other"). A reconciliation of these
measures to reported U.S. GAAP amounts is provided in the table above.
The organic sales decrease of $2.0 billion in the quarter ended March 31, 2021
compared to the quarter ended March 31, 2020 primarily relates to lower
commercial aerospace aftermarket sales of $1.0 billion , including declines
across all aftermarket sales channels, and lower commercial aerospace OEM sales
of $1.0 billion . These reductions were primarily due to the current economic
environment principally driven by the COVID-19 pandemic which has resulted in
lower flight hours, aircraft fleet utilization and commercial OEM deliveries.
This decrease was partially offset by an increase in military sales of $0.1
billion .
The organic profit decrease of $0.9 billion in the quarter ended March 31, 2021
compared to the quarter ended March 31, 2020 was primarily due to lower
commercial aerospace operating profit of $1.0 billion principally driven by the
lower commercial aerospace aftermarket sales volume discussed above. This
decrease was partially offset by lower Selling, general and administrative
expenses and Research and development costs of $0.1 billion in total, which
includes the impact of cost reduction initiatives.
The decrease in net sales and operating profit due to acquisitions /
divestitures, net primarily relates to the sale of our Collins Aerospace
military GPS and space-based precision optics businesses in the third quarter of
2020.
Pratt & Whitney
Quarter Ended March 31,
(dollars in millions) 2021 2020 Change
Net Sales $ 4,030 $ 5,353 (25) %
Operating Profit 20 475 (96) %
Operating Profit Margins 0.5 % 8.9 %
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Quarter Ended
Factors Contributing to Total Change
Acquisitions / Restructuring
Organic(1) Divestitures, net Costs Other Total Change
Net Sales $ (1,352) $ - $ - $ 29 $ (1,323)
Operating Profit (448) - (20) 13 (455)
(1) We provide the organic change in net sales and operating profit for our
segments. We believe that these 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 excludes
acquisitions and divestitures, net; restructuring costs; and the effect of
foreign currency exchange rate translation fluctuations and other significant
non-recurring and non-operational items ("Other"). A reconciliation of these
measures to reported U.S. GAAP amounts is provided in the table above. 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.
The organic sales decrease of $1.4 billion in the quarter ended March 31, 2021
compared to the quarter ended March 31, 2020 primarily reflects lower commercial
aftermarket sales of $0.9 billion , primarily due to a significant reduction in
shop visits and related spare part sales, and lower commercial OEM sales of $0.5
billion , primarily due to a significant reduction in commercial engine
deliveries, all principally driven by the current economic environment primarily
due to the COVID-19 pandemic. Military sales were up slightly in the quarter
ended March 31, 2021 compared to the quarter ended March 31, 2020 .
The organic profit decrease of $0.4 billion in the quarter ended March 31, 2021
compared to the quarter ended March 31, 2020 was primarily driven by lower
commercial aerospace operating profit of $0.6 billion principally due to the
aftermarket sales volume decrease discussed above and unfavorable mix. This
decrease was partially offset by lower Research and development costs of
$0.1 billion , which includes the impact of cost reduction initiatives, and lower
Selling, general and administrative expenses of $0.1 billion primarily driven by
the absence of a $62 million charge related to increased estimates of expected
credit losses due to customer bankruptcies and additional allowances for credit
losses in the quarter ended March 31, 2020 . Included in organic profit in the
quarter ended March 31, 2021 was other income of $29 million related to foreign
government wage subsidies due to COVID-19.
In the quarter ended March 31, 2021 , Pratt & Whitney had two notable defense
bookings for $593 million in total for F-135 sustainment services.
Raytheon Intelligence & Space
Quarter Ended March 31,
(dollars in millions) 2021 2020 Change
Net Sales $ 3,765 - NM
Operating Profit 388 - NM
Operating Profit Margins 10.3 % - NM
Bookings $ 3,726 - NM
NM = Not meaningful
The increase in net sales of $3,765 million in the quarter ended March 31, 2021
compared to the quarter ended March 31, 2020 was due to the Raytheon Merger on
April 3, 2020 .
The increase in operating profit of $388 million and the related increase in
operating profit margins in the quarter ended March 31, 2021 compared to the
quarter ended March 31, 2020 was due to the Raytheon Merger.
Backlog and Bookings- Backlog was $19,225 million at March 31, 2021 and
$19,166 million at December 31, 2020 . In the quarter ended March 31, 2021 , RIS
booked $1,427 million on a number of classified contracts, $227 million on a
missile warning and defense contract, $199 million on an international tactical
airborne radar sustainment contract and $185 million on an international
training contract with the U.K. Royal Navy .
46
--------------------------------------------------------------------------------Table of ContentsRaytheon Missiles & Defense Quarter Ended March 31, (dollars in millions) 2021 2020 Change Net Sales $ 3,793 - NM Operating Profit 496 - NM Operating Profit Margins 13.1 % - NM Bookings $ 2,532 - NM NM = Not meaningful The increase in net sales of$3,793 million in the quarter endedMarch 31, 2021 compared to the quarter endedMarch 31, 2020 was due to theRaytheon Merger onApril 3, 2020 . The increase in operating profit of$496 million and the related increase in operating profit margins in the quarter endedMarch 31, 2021 compared to the quarter endedMarch 31, 2020 , was due to theRaytheon Merger. Backlog and Bookings- Backlog was$27,710 million atMarch 31, 2021 and$29,103 million atDecember 31, 2020 . In the quarter endedMarch 31, 2021 , RMD booked$518 million forAdvanced Medium-Range Air -to-Air Missile (AMRAAM) for theU.S. Air Force andNavy and international customers and$247 million to provide Patriot engineering services support for theU.S. Army and international customers. Eliminations and other Eliminations and other reflects the elimination of sales, other income and operating profit transacted between segments, as well as the operating results of certain smaller non-reportable business segments, includingForcepoint, LLC , which was acquired as part of theRaytheon Merger and subsequently disposed of onJanuary 8, 2021 , as further discussed in "Note 2: Acquisitions, Dispositions,Goodwill and Intangible Assets" within Item 1 of this Form 10-Q. Net Sales Operating Profit Quarter Ended March 31, Quarter Ended March 31, (dollars in millions) 2021 2020 2021 2020 Inter segment eliminations$ (715) $ (436) $ (25) $ (13) Other non-reportable segments 8 5 (6) (12) Eliminations and other$ (707) $ (431) $ (31) $ (25) Other non-reportable segments sales and operating profit for the quarter endedMarch 31, 2021 was relatively consistent with the quarter endedMarch 31, 2020 . Corporate expenses and other unallocated items 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 theRaytheon Merger, net costs associated with corporate research and development, including theLower Tier Air and Missile Defense Sensor (LTAMDS) program which was acquired as part of theRaytheon Merger, and certain reserves. See Restructuring Costs, above, for a more detailed discussion of our restructuring costs. Quarter Ended March 31, (dollars in millions) 2021 2020 Corporate expenses and other unallocated items$ (81)
Included in the change in Corporate expenses and other unallocated items of$49 million in the quarter endedMarch 31, 2021 compared to the quarter endedMarch 31, 2020 was$58 million of net expenses related to the LTAMDS project acquired as part of theRaytheon Merger, partially offset by other unallocated items with no individual or common significant driver. FAS/CAS operating adjustment The segment results of RIS and RMD include pension and PRB expense as determined underU.S. government CAS, which we generally recover through the pricing of our products and services to theU.S. government. The difference between our CAS expense and the FAS service cost attributable to these segments underU.S. GAAP is the FAS/CAS operating adjustment. The FAS/CAS operating adjustment results in consolidated pension expense in operating profit equal to the service cost component of FAS expense underU.S. GAAP. The segment results ofCollins Aerospace andPratt & Whitney generally include FAS service cost. 47 -------------------------------------------------------------------------------- Table of Contents The components of the FAS/CAS operating adjustment were as follows: Quarter Ended March 31, (dollars in millions) 2021 2020 FAS service cost (expense) $ (101) $ - CAS expense 524 - FAS/CAS operating adjustment $ 423 $ - The change in our FAS/CAS operating adjustment of$423 million in the quarter endedMarch 31, 2021 compared to the quarter endedMarch 31, 2020 was due to theRaytheon Merger onApril 3, 2020 . In response to the economic environment resulting from the COVID-19 pandemic,Congress passed the American Rescue Plan Act of 2021 (ARPA) inMarch 2021 , which included pension funding relief provisions. These provisions extend and expand upon existing pension funding relief, most notably by increasing the liability interest rates used to determine the required cash contributions for ourU.S. qualified pension plans. As a result, we expect required cash contributions to ourU.S. qualified pension plans to be reduced beginning in 2022. The ARPA pension funding relief provisions are expected to result in decreases to CAS expense, and the related recovery under our contracts, for ourU.S. qualified pension plans beginning in 2022 as the interest rates used to determine pension funding requirements for these plans are also used in determining CAS expense. 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 and the amortization of customer contractual obligations related to loss making or below market contracts acquired. These adjustments are not considered part of management's evaluation of segment results. The components of Acquisition accounting adjustments were as follows: Quarter Ended March 31, (dollars in millions) 2021 2020 Amortization of acquired intangibles $
(587)
(19) (7)
Amortization of customer contractual obligations related to acquired loss-making and below-market contracts
90 76
Acquisition accounting adjustments $
(516)
Acquisition accounting adjustments related to acquisitions in each segment were
as follows:
Quarter Ended March 31,
(dollars in millions) 2021 2020
Collins Aerospace Systems $ (149) $ (198)
Pratt & Whitney (22) (73)
Raytheon Intelligence & Space (139) -
Raytheon Missiles & Defense (206) -
Total segment (516) (271)
Eliminations and other - -
Acquisition accounting adjustments $ (516) $ (271)
The change in the Acquisition accounting adjustments of $245 million for the
quarter ended March 31, 2021 compared to the quarter ended March 31, 2020 , is
primarily driven by $345 million related to the Raytheon Merger, principally
driven by the amortization of intangibles. Included in Acquisitions accounting
adjustments in the quarter ended March 31, 2021 was $47 million of amortization
of customer contractual obligations due to the accelerated liquidation of a
below-market contract reserve at Collins Aerospace driven by the termination of
a customer contract.
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LIQUIDITY AND FINANCIAL CONDITION
(dollars in millions) March 31, 2021 December 31, 2020
Cash and cash equivalents $ 8,579 $ 8,802
Total debt 31,538 31,823
Total equity 73,308 73,852
Total capitalization (total debt plus total equity) 104,846 105,675
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
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. We had $6.84 billion available under our various credit
facilities at March 31, 2021 .
Although our business has been and will continue to be impacted by COVID-19, as
discussed above in Business Overview, we currently believe we have sufficient
liquidity to withstand the potential impacts.
At March 31, 2021 , we had cash and cash equivalents of $8.6 billion , of which
approximately 48% 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. We did not repatriate cash
in the quarter ended March 31, 2021 .
Historically, our strong credit ratings and financial position have enabled us
to issue long-term debt at favorable interest rates.
As of March 31, 2021 , 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 $160 million of commercial paper borrowings as of March 31,
2021 . The maximum amount of short-term commercial paper borrowings outstanding
at any point in time during the quarter ended March 31, 2021 was $660 million .
We use our 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 outstanding have original maturities of not more than 90 days from the
date of issuance.
As of March 31, 2021 , 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 that became available upon completion of the
Raytheon Merger on April 3, 2020 , and a $2.0 billion revolving credit agreement
that we entered into in May 2020 and there were no borrowings outstanding under
these agreements.
We have an existing universal shelf registration statement, which we filed with
the Securities and Exchange Commission (SEC) on September 27, 2019 , 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 has offered a voluntary supply chain finance (SCF) program with a
global financial institution which enables our suppliers, at their sole
discretion, to sell their receivables from the Company to the financial
institution at a rate that leverages our credit rating, which might be
beneficial to them. Our suppliers' participation in the SCF program 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
program. In addition, we provide no guarantees or otherwise pay for any of the
costs of the program incurred by those suppliers that choose to participate, and
have no direct financial relationship with the financial institution, as it
relates to the program. As such, amounts due to suppliers that have elected to
participate in the SCF program are included in Accounts payable on our Condensed
Consolidated Balance Sheet and all payment activity related to amounts due to
suppliers that elected to participate in the SCF program are reflected in cash
flows from operating activities in our Condensed Consolidated Statement of Cash
Flows. As of March 31, 2021 , and December 31, 2020 , the amount due to suppliers
participating in the SCF program and included in Accounts payable was
approximately $377 million and $394 million , respectively. The SCF program does
not impact our overall liquidity.
We believe our 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.
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