(State of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
Securities registered pursuant to Section 12(b) of the Act: | ||||
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
(CUSIP 75513E 101) | ||||
(CUSIP 75513E AB7) | ||||
(CUSIP 75513E AA9) |
Unaudited consolidated financial statements (and notes thereto) of Raytheon Company as of March 29, 2020 and December 31, 2019 and for the quarterly periods ended March 29, 2020 and March 31, 2019 |
Unaudited pro forma combined financial information of RTC as of March 31, 2020 and for the quarterly period ended March 31, 2020 |
104 | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document |
RAYTHEON TECHNOLOGIES CORPORATION | ||||
Date: | May 7, 2020 | By: | /s/ Anthony F. O’Brien | |
Name: Anthony F. O’Brien | ||||
Title: Executive Vice President and Chief Financial Officer | ||||
Page | |
(In millions, except per share amounts) | Mar 29, 2020 | Dec 31, 2019 | ||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 3,118 | $ | 4,292 | ||||
Receivables, net | 1,784 | 1,364 | ||||||
Contract assets | 6,054 | 6,122 | ||||||
Inventories | 699 | 671 | ||||||
Prepaid expenses and other current assets | 611 | 633 | ||||||
Total current assets | 12,266 | 13,082 | ||||||
Property, plant and equipment, net | 3,366 | 3,353 | ||||||
Operating lease right-of-use assets | 909 | 875 | ||||||
Goodwill | 14,879 | 14,882 | ||||||
Other assets, net | 2,290 | 2,374 | ||||||
Total assets | $ | 33,710 | $ | 34,566 | ||||
Liabilities, Redeemable Noncontrolling Interests and Equity | ||||||||
Current liabilities | ||||||||
Current portion of long-term debt | $ | 999 | $ | 1,499 | ||||
Contract liabilities | 3,085 | 3,267 | ||||||
Accounts payable | 1,489 | 1,796 | ||||||
Accrued employee compensation | 1,062 | 1,813 | ||||||
Other current liabilities | 1,293 | 1,416 | ||||||
Total current liabilities | 7,928 | 9,791 | ||||||
Accrued retiree benefits and other long-term liabilities | 8,521 | 8,553 | ||||||
Long-term debt | 3,262 | 3,261 | ||||||
Operating lease liabilities | 738 | 706 | ||||||
Commitments and contingencies (Note 8) | ||||||||
Redeemable noncontrolling interests | 34 | 32 | ||||||
Equity | ||||||||
Raytheon Company stockholders’ equity | ||||||||
Common stock, par value, $0.01 per share, 1,450 shares authorized, 279 and 278 shares outstanding at March 29, 2020 and December 31, 2019, respectively | 3 | 3 | ||||||
Additional paid-in capital | 19 | — | ||||||
Accumulated other comprehensive loss | (9,063 | ) | (9,260 | ) | ||||
Retained earnings | 22,268 | 21,480 | ||||||
Total Raytheon Company stockholders’ equity | 13,227 | 12,223 | ||||||
Noncontrolling interests in subsidiaries | — | — | ||||||
Total equity | 13,227 | 12,223 | ||||||
Total liabilities, redeemable noncontrolling interests and equity | $ | 33,710 | $ | 34,566 |
Three Months Ended | ||||||||
(In millions, except per share amounts) | Mar 29, 2020 | Mar 31, 2019 | ||||||
Net sales | ||||||||
Products | $ | 6,005 | $ | 5,562 | ||||
Services | 1,160 | 1,167 | ||||||
Total net sales | 7,165 | 6,729 | ||||||
Operating expenses | ||||||||
Cost of sales—products | 4,338 | 4,002 | ||||||
Cost of sales—services | 907 | 875 | ||||||
General and administrative expenses | 728 | 739 | ||||||
Total operating expenses | 5,973 | 5,616 | ||||||
Operating income | 1,192 | 1,113 | ||||||
Non-operating (income) expense, net | ||||||||
Retirement benefits non-service expense | 192 | 181 | ||||||
Interest expense | 43 | 44 | ||||||
Interest income | (11 | ) | (13 | ) | ||||
Other (income) expense, net | 25 | (20 | ) | |||||
Total non-operating (income) expense, net | 249 | 192 | ||||||
Income before taxes | 943 | 921 | ||||||
Federal and foreign income taxes | 153 | 146 | ||||||
Net income | 790 | 775 | ||||||
Less: Net income (loss) attributable to noncontrolling interests in subsidiaries | 2 | (6 | ) | |||||
Net income attributable to Raytheon Company | $ | 788 | $ | 781 |
Three Months Ended | |||||||
(In millions) | Mar 29, 2020 | Mar 31, 2019 | |||||
Net income | $ | 790 | $ | 775 | |||
Other comprehensive income (loss), before tax: | |||||||
Pension and other postretirement benefit plans, net: | |||||||
Amortization of prior service cost | 1 | 1 | |||||
Amortization of net actuarial loss | 303 | 276 | |||||
Pension and other postretirement benefit plans, net | 304 | 277 | |||||
Foreign exchange translation | (45 | ) | 8 | ||||
Cash flow hedges | 2 | (10 | ) | ||||
Unrealized gains (losses) on investments and other, net | — | — | |||||
Other comprehensive income (loss), before tax | 261 | 275 | |||||
Income tax benefit (expense) related to items of other comprehensive income (loss) | (64 | ) | (56 | ) | |||
Other comprehensive income (loss), net of tax | 197 | 219 | |||||
Total comprehensive income (loss) | 987 | 994 | |||||
Less: Comprehensive income (loss) attributable to noncontrolling interests in subsidiaries | 2 | (6 | ) | ||||
Comprehensive income (loss) attributable to Raytheon Company | $ | 985 | $ | 1,000 |
(In millions) | Common stock | Additional paid-in capital | Accumulated other comprehensive income (loss) | Retained earnings | Total Raytheon Company stockholders’ equity | Noncontrolling interests in subsidiaries(1) | Total equity | |||||||||||||||||||||
Balance at December 31, 2019 | $ | 3 | $ | — | $ | (9,260 | ) | $ | 21,480 | $ | 12,223 | $ | — | $ | 12,223 | |||||||||||||
Net income (loss) | 788 | 788 | — | 788 | ||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | 197 | 197 | 197 | |||||||||||||||||||||||||
Dividends declared | — | — | — | — | ||||||||||||||||||||||||
Common stock plans activity | 68 | 68 | 68 | |||||||||||||||||||||||||
Share repurchases | (49 | ) | (49 | ) | (49 | ) | ||||||||||||||||||||||
Balance at March 29, 2020 | $ | 3 | $ | 19 | $ | (9,063 | ) | $ | 22,268 | $ | 13,227 | $ | — | $ | 13,227 | |||||||||||||
Balance at December 31, 2018 | $ | 3 | $ | — | $ | (8,618 | ) | $ | 20,087 | $ | 11,472 | $ | — | $ | 11,472 | |||||||||||||
Net income (loss) | 781 | 781 | — | 781 | ||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | 219 | 219 | 219 | |||||||||||||||||||||||||
Adjustment of redeemable noncontrolling interests to redemption value | 5 | 5 | 5 | |||||||||||||||||||||||||
Dividends declared | 1 | (265 | ) | (264 | ) | (264 | ) | |||||||||||||||||||||
Common stock plans activity | 61 | 61 | 61 | |||||||||||||||||||||||||
Share repurchases | (62 | ) | (504 | ) | (566 | ) | (566 | ) | ||||||||||||||||||||
Balance at March 31, 2019 | $ | 3 | $ | — | $ | (8,399 | ) | $ | 20,104 | $ | 11,708 | $ | — | $ | 11,708 |
(1) | Excludes redeemable noncontrolling interests which are not considered equity. |
Three Months Ended | ||||||||
(In millions) | Mar 29, 2020 | Mar 31, 2019 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | 790 | $ | 775 | ||||
Adjustments to reconcile to net cash provided by (used in) operating activities, net of the effect of acquisitions and divestitures | ||||||||
Depreciation and amortization | 153 | 140 | ||||||
Stock-based compensation | 52 | 59 | ||||||
Deferred income taxes | (50 | ) | (44 | ) | ||||
Changes in assets and liabilities | ||||||||
Receivables, net | (424 | ) | 236 | |||||
Contract assets and contract liabilities | (117 | ) | (731 | ) | ||||
Inventories | (28 | ) | (124 | ) | ||||
Prepaid expenses and other current assets | (48 | ) | (59 | ) | ||||
Income taxes receivable/payable | 183 | 181 | ||||||
Accounts payable | (205 | ) | (484 | ) | ||||
Accrued employee compensation | (757 | ) | (523 | ) | ||||
Accrued retiree benefits | 285 | 219 | ||||||
Other, net | 68 | (56 | ) | |||||
Net cash provided by (used in) operating activities | (98 | ) | (411 | ) | ||||
Cash flows from investing activities | ||||||||
Additions to property, plant and equipment | (239 | ) | (274 | ) | ||||
Additions to capitalized internal-use software | (16 | ) | (10 | ) | ||||
Payments for purchases of acquired companies, net of cash received | — | (8 | ) | |||||
Net cash provided by (used in) investing activities | (255 | ) | (292 | ) | ||||
Cash flows from financing activities | ||||||||
Dividends paid | (263 | ) | (245 | ) | ||||
Repayments of long-term debt | (500 | ) | — | |||||
Repurchases of common stock under share repurchase programs | — | (500 | ) | |||||
Repurchases of common stock to satisfy tax withholding obligations | (49 | ) | (66 | ) | ||||
Other | (9 | ) | (5 | ) | ||||
Net cash provided by (used in) financing activities | (821 | ) | (816 | ) | ||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (1,174 | ) | (1,519 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of year | 4,298 | 3,624 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 3,124 | $ | 2,105 |
Three Months Ended | |||||||
(In millions, except per share amounts) | Mar 29, 2020 | Mar 31, 2019 | |||||
Operating income | $ | 198 | $ | 123 | |||
Net income attributable to Raytheon Company | 156 | 97 |
(In millions) | Mar 29, 2020 | Dec 31, 2019 | ||||||
Materials and purchased parts | $ | 76 | $ | 78 | ||||
Work in process | 603 | 574 | ||||||
Finished goods | 20 | 19 | ||||||
Total | $ | 699 | $ | 671 |
(In millions, except percentages) | Mar 29, 2020 | Dec 31, 2019 | $ Change | % Change | |||||||||||
Contract assets | $ | 6,054 | $ | 6,122 | $ | (68 | ) | (1.1 | )% | ||||||
Contract liabilities—current | (3,085 | ) | (3,267 | ) | 182 | (5.6 | )% | ||||||||
Contract liabilities—noncurrent | (136 | ) | (143 | ) | 7 | (4.9 | )% | ||||||||
Net contract assets (liabilities) | $ | 2,833 | $ | 2,712 | $ | 121 | 4.5 | % |
(In millions) | Integrated Defense Systems | Intelligence, Information and Services | Missile Systems | Space and Airborne Systems | Forcepoint | Total | ||||||||||||||||||
Balance at December 31, 2019 | $ | 1,703 | $ | 2,984 | $ | 4,154 | $ | 4,103 | $ | 1,938 | $ | 14,882 | ||||||||||||
Effect of foreign exchange rates and other | (1 | ) | (2 | ) | — | — | — | (3 | ) | |||||||||||||||
Balance at March 29, 2020 | $ | 1,702 | $ | 2,982 | $ | 4,154 | $ | 4,103 | $ | 1,938 | $ | 14,879 |
(In millions) | Mar 29, 2020 | Dec 31, 2019 | ||||||
Asset derivatives | $ | 38 | $ | 29 | ||||
Liability derivatives | 37 | 15 |
(In millions) | Mar 29, 2020 | Dec 31, 2019 | ||||||
Carrying value of long-term debt(1) | $ | 4,261 | $ | 4,760 | ||||
Fair value of long-term debt(2) | 4,761 | 5,337 |
(1) | Carrying value of long-term debt at March 29, 2020 and December 31, 2019 includes current portion of long-term debt carrying value of $999 million and $1,499 million, respectively. |
(2) | Fair value of long-term debt at March 29, 2020 and December 31, 2019 includes current portion of long-term debt fair value of $1,000 million and $1,513 million, respectively. |
(In millions, except percentages) | Mar 29, 2020 | Dec 31, 2019 | ||||||
Total remediation costs—undiscounted | $ | 192 | $ | 188 | ||||
Weighted-average discount rate | 5.1 | % | 5.1 | % | ||||
Total remediation costs—discounted | $ | 132 | $ | 124 | ||||
Recoverable portion | 86 | 81 |
(In millions) | Mar 29, 2020 | Dec 31, 2019 | ||||||
Guarantees | $ | 224 | $ | 219 | ||||
Letters of credit | 3,423 | 3,485 | ||||||
Surety bonds | 71 | 83 |
Three Months Ended | ||||||
(In millions) | Mar 29, 2020 | Mar 31, 2019 | ||||
Beginning balance | 278.4 | 282.1 | ||||
Stock plans activity | 1.3 | 1.1 | ||||
Share repurchases | (0.4 | ) | (3.1 | ) | ||
Ending balance | 279.3 | 280.1 |
Three Months Ended | ||||||||||||
(In millions) | Mar 29, 2020 | Mar 31, 2019 | ||||||||||
$ | Shares | $ | Shares | |||||||||
Shares repurchased under our share repurchase programs | $ | — | — | $ | 500 | 2.8 | ||||||
Shares repurchased to satisfy tax withholding obligations | 49 | 0.4 | 66 | 0.3 | ||||||||
Total share repurchases | $ | 49 | 0.4 | $ | 566 | 3.1 |
Pension and PRB plans, net(1) | Foreign exchange translation | Cash flow hedges(2) | Unrealized gains (losses) on investments and other, net(3) | Total | |||||||||||||||
(In millions) | |||||||||||||||||||
Balance at December 31, 2019 | $ | (9,132 | ) | $ | (124 | ) | $ | 1 | $ | (5 | ) | $ | (9,260 | ) | |||||
Before tax amount | 304 | (45 | ) | 2 | — | 261 | |||||||||||||
Tax (expense) or benefit | (64 | ) | — | — | — | (64 | ) | ||||||||||||
Net of tax amount | 240 | (45 | ) | 2 | — | 197 | |||||||||||||
Balance at March 29, 2020 | $ | (8,892 | ) | $ | (169 | ) | $ | 3 | $ | (5 | ) | $ | (9,063 | ) | |||||
Balance at December 31, 2018 | $ | (8,483 | ) | $ | (131 | ) | $ | (2 | ) | $ | (2 | ) | $ | (8,618 | ) | ||||
Before tax amount | 277 | 8 | (10 | ) | — | 275 | |||||||||||||
Tax (expense) or benefit | (58 | ) | — | 2 | — | (56 | ) | ||||||||||||
Net of tax amount | 219 | 8 | (8 | ) | — | 219 | |||||||||||||
Balance at March 31, 2019 | $ | (8,264 | ) | $ | (123 | ) | $ | (10 | ) | $ | (2 | ) | $ | (8,399 | ) |
(1) | Pension and PRB plans, net is shown net of cumulative tax benefits of $2,364 million and $2,428 million at March 29, 2020 and December 31, 2019, respectively. |
(2) | Cash flow hedges are shown net of cumulative tax of zero at both March 29, 2020 and December 31, 2019. |
(3) | Unrealized gains (losses) on investments and other, net are shown net of cumulative tax expense of $1 million at both March 29, 2020 and December 31, 2019. |
(In millions) | Mar 29, 2020 | Dec 31, 2019 | ||||||
Marketable securities held in trusts | $ | 703 | $ | 753 |
Three Months Ended | ||||||||
(In millions) | Mar 29, 2020 | Mar 31, 2019 | ||||||
Operating expense | ||||||||
Service cost | $ | 125 | $ | 105 | ||||
Non-operating expense | ||||||||
Interest cost | 227 | 261 | ||||||
Expected return on plan assets | (340 | ) | (359 | ) | ||||
Amortization of prior service cost | 1 | 1 | ||||||
Amortization of net actuarial loss | 300 | 273 | ||||||
Total pension non-service expense | 188 | 176 | ||||||
Net periodic pension expense (income) | $ | 313 | $ | 281 |
(In millions) | Mar 29, 2020 | Dec 31, 2019 | ||||||
Long-term pension liabilities | $ | 7,674 | $ | 7,687 | ||||
Long-term PRB liabilities | 369 | 369 | ||||||
Total long-term pension and PRB liabilities | $ | 8,043 | $ | 8,056 |
Three Months Ended | |||||||
(In millions) | Mar 29, 2020 | Mar 31, 2019 | |||||
Required pension contributions | $ | 30 | $ | 64 | |||
PRB contributions | 4 | 4 | |||||
Total | $ | 34 | $ | 68 |
Three Months Ended | |||||||
Total Net Sales (in millions) | Mar 29, 2020 | Mar 31, 2019 | |||||
Integrated Defense Systems | $ | 1,722 | $ | 1,550 | |||
Intelligence, Information and Services | 1,731 | 1,777 | |||||
Missile Systems | 2,151 | 2,006 | |||||
Space and Airborne Systems | 1,894 | 1,653 | |||||
Forcepoint | 148 | 158 | |||||
Eliminations | (481 | ) | (414 | ) | |||
Total business segment sales | 7,165 | 6,730 | |||||
Acquisition Accounting Adjustments | — | (1 | ) | ||||
Total | $ | 7,165 | $ | 6,729 |
Three Months Ended | ||||||||
Intersegment Sales (in millions) | Mar 29, 2020 | Mar 31, 2019 | ||||||
Integrated Defense Systems | $ | 21 | $ | 21 | ||||
Intelligence, Information and Services | 185 | 168 | ||||||
Missile Systems | 68 | 43 | ||||||
Space and Airborne Systems | 201 | 173 | ||||||
Forcepoint | 6 | 9 | ||||||
Total | $ | 481 | $ | 414 |
Three Months Ended | ||||||||
Operating Income (in millions) | Mar 29, 2020 | Mar 31, 2019 | ||||||
Integrated Defense Systems | $ | 337 | $ | 258 | ||||
Intelligence, Information and Services | 142 | 187 | ||||||
Missile Systems | 239 | 190 | ||||||
Space and Airborne Systems | 244 | 212 | ||||||
Forcepoint | (16 | ) | (9 | ) | ||||
Eliminations | (50 | ) | (47 | ) | ||||
Total business segment operating income | 896 | 791 | ||||||
Acquisition Accounting Adjustments | (21 | ) | (28 | ) | ||||
FAS/CAS Operating Adjustment | 370 | 366 | ||||||
Corporate(1) | (53 | ) | (16 | ) | ||||
Total | $ | 1,192 | $ | 1,113 |
(1) | In the fourth quarter of 2019, we were selected by the U.S. Army for the Lower Tier Air and Missile Defense Sensor (LTAMDS). The net expenses related to the LTAMDS project of $26 million in the first quarter of 2020 are included in Corporate operating income as they are not included in management’s evaluation of business segment results. No amounts were recorded in the first quarter of 2019. |
Three Months Ended | ||||||||
Intersegment Operating Income (in millions) | Mar 29, 2020 | Mar 31, 2019 | ||||||
Integrated Defense Systems | $ | 2 | $ | 2 | ||||
Intelligence, Information and Services | 18 | 17 | ||||||
Missile Systems | 6 | 4 | ||||||
Space and Airborne Systems | 20 | 17 | ||||||
Forcepoint | 4 | 7 | ||||||
Total | $ | 50 | $ | 47 |
Three Months Ended | ||||||||
(In millions) | Mar 29, 2020 | Mar 31, 2019 | ||||||
FAS/CAS Pension Operating Adjustment | $ | 366 | $ | 362 | ||||
FAS/CAS PRB Operating Adjustment | 4 | 4 | ||||||
FAS/CAS Operating Adjustment | $ | 370 | $ | 366 |
Total Assets (in millions) | Mar 29, 2020 | Dec 31, 2019 | ||||||
Integrated Defense Systems(1) | $ | 5,045 | $ | 5,103 | ||||
Intelligence, Information and Services(1) | 4,387 | 4,291 | ||||||
Missile Systems(1) | 8,525 | 8,408 | ||||||
Space and Airborne Systems(1) | 7,245 | 6,979 | ||||||
Forcepoint(1) | 2,364 | 2,424 | ||||||
Corporate | 6,144 | 7,361 | ||||||
Total | $ | 33,710 | $ | 34,566 |
Three Months Ended March 29, 2020 | ||||||||||||||||||||||||||||
Disaggregation of Total Net Sales (in millions) | Integrated Defense Systems | Intelligence, Information and Services | Missile Systems | Space and Airborne Systems | Forcepoint | Other | Total | |||||||||||||||||||||
United States | ||||||||||||||||||||||||||||
Sales to the U.S. government(1) | ||||||||||||||||||||||||||||
Fixed-price contracts | $ | 236 | $ | 213 | $ | 857 | $ | 654 | $ | 43 | $ | — | $ | 2,003 | ||||||||||||||
Cost-type contracts | 457 | 1,111 | 726 | 723 | 2 | — | 3,019 | |||||||||||||||||||||
Direct commercial sales and other U.S. sales | ||||||||||||||||||||||||||||
Fixed-price contracts | 1 | 30 | 3 | 21 | 37 | — | 92 | |||||||||||||||||||||
Cost-type contracts | — | 9 | — | 1 | 1 | — | 11 | |||||||||||||||||||||
Asia/Pacific | ||||||||||||||||||||||||||||
Foreign military sales through the U.S. government | ||||||||||||||||||||||||||||
Fixed-price contracts | 45 | 30 | 83 | 39 | — | — | 197 | |||||||||||||||||||||
Cost-type contracts | 17 | 10 | 29 | 9 | — | — | 65 | |||||||||||||||||||||
Direct commercial sales and other foreign sales(1) | ||||||||||||||||||||||||||||
Fixed-price contracts | 144 | 42 | 52 | 62 | 13 | — | 313 | |||||||||||||||||||||
Cost-type contracts | 17 | — | 1 | — | — | — | 18 | |||||||||||||||||||||
Middle East and North Africa | ||||||||||||||||||||||||||||
Foreign military sales through the U.S. government | ||||||||||||||||||||||||||||
Fixed-price contracts | 158 | 4 | 113 | 92 | — | — | 367 | |||||||||||||||||||||
Cost-type contracts | 77 | 8 | 6 | 21 | — | — | 112 | |||||||||||||||||||||
Direct commercial sales and other foreign sales(1) | ||||||||||||||||||||||||||||
Fixed-price contracts | 320 | 14 | 77 | 5 | 9 | — | 425 | |||||||||||||||||||||
Cost-type contracts | — | — | 29 | — | — | — | 29 | |||||||||||||||||||||
All other (principally Europe) | ||||||||||||||||||||||||||||
Foreign military sales through the U.S. government | ||||||||||||||||||||||||||||
Fixed-price contracts | 168 | — | 49 | 24 | — | — | 241 | |||||||||||||||||||||
Cost-type contracts | 18 | — | 28 | 2 | — | — | 48 | |||||||||||||||||||||
Direct commercial sales and other foreign sales(1) | ||||||||||||||||||||||||||||
Fixed-price contracts | 40 | 57 | 29 | 40 | 37 | — | 203 | |||||||||||||||||||||
Cost-type contracts | 3 | 18 | 1 | — | — | — | 22 | |||||||||||||||||||||
Total net sales | 1,701 | 1,546 | 2,083 | 1,693 | 142 | — | 7,165 | |||||||||||||||||||||
Intersegment sales | 21 | 185 | 68 | 201 | 6 | (481 | ) | — | ||||||||||||||||||||
Acquisition Accounting Adjustments | — | — | — | — | — | — | — | |||||||||||||||||||||
Reconciliation to business segment sales | $ | 1,722 | $ | 1,731 | $ | 2,151 | $ | 1,894 | $ | 148 | $ | (481 | ) | $ | 7,165 |
(1) | Excludes foreign military sales through the U.S. government. |
Three Months Ended March 29, 2020 | ||||||||||||||||||||||||
Total Net Sales by Geographic Area (in millions) | Integrated Defense Systems | Intelligence, Information and Services | Missile Systems | Space and Airborne Systems | Forcepoint | Total | ||||||||||||||||||
United States | $ | 694 | $ | 1,363 | $ | 1,586 | $ | 1,399 | $ | 83 | $ | 5,125 | ||||||||||||
Asia/Pacific | 223 | 82 | 165 | 110 | 13 | 593 | ||||||||||||||||||
Middle East and North Africa | 555 | 26 | 225 | 118 | 9 | 933 | ||||||||||||||||||
All other (principally Europe) | 229 | 75 | 107 | 66 | 37 | 514 | ||||||||||||||||||
Total net sales | $ | 1,701 | $ | 1,546 | $ | 2,083 | $ | 1,693 | $ | 142 | $ | 7,165 |
Three Months Ended March 29, 2020 | ||||||||||||||||||||||||
Total Net Sales by Major Customer (in millions) | Integrated Defense Systems | Intelligence, Information and Services | Missile Systems | Space and Airborne Systems | Forcepoint | Total | ||||||||||||||||||
Sales to the U.S. government(1) | $ | 693 | $ | 1,324 | $ | 1,583 | $ | 1,377 | $ | 45 | $ | 5,022 | ||||||||||||
U.S. direct commercial sales and other U.S. sales | 1 | 39 | 3 | 22 | 38 | 103 | ||||||||||||||||||
Foreign military sales through the U.S. government | 483 | 52 | 308 | 187 | — | 1,030 | ||||||||||||||||||
Foreign direct commercial sales and other foreign sales(1) | 524 | 131 | 189 | 107 | 59 | 1,010 | ||||||||||||||||||
Total net sales | $ | 1,701 | $ | 1,546 | $ | 2,083 | $ | 1,693 | $ | 142 | $ | 7,165 |
(1) | Excludes foreign military sales through the U.S. government. |
Three Months Ended March 29, 2020 | ||||||||||||||||||||||||
Total Net Sales by Contract-Type (in millions) | Integrated Defense Systems | Intelligence, Information and Services | Missile Systems | Space and Airborne Systems | Forcepoint | Total | ||||||||||||||||||
Fixed-price contracts | $ | 1,112 | $ | 390 | $ | 1,263 | $ | 937 | $ | 139 | $ | 3,841 | ||||||||||||
Cost-type contracts | 589 | 1,156 | 820 | 756 | 3 | 3,324 | ||||||||||||||||||
Total net sales | $ | 1,701 | $ | 1,546 | $ | 2,083 | $ | 1,693 | $ | 142 | $ | 7,165 |
Three Months Ended March 31, 2019 | ||||||||||||||||||||||||||||
Disaggregation of Total Net Sales (in millions) | Integrated Defense Systems | Intelligence, Information and Services | Missile Systems | Space and Airborne Systems | Forcepoint | Other | Total | |||||||||||||||||||||
United States | ||||||||||||||||||||||||||||
Sales to the U.S. government(1) | ||||||||||||||||||||||||||||
Fixed-price contracts | $ | 221 | $ | 224 | $ | 708 | $ | 548 | $ | 37 | $ | — | $ | 1,738 | ||||||||||||||
Cost-type contracts | 424 | 1,152 | 699 | 659 | 4 | — | 2,938 | |||||||||||||||||||||
Direct commercial sales and other U.S. sales | ||||||||||||||||||||||||||||
Fixed-price contracts | 1 | 33 | 9 | 26 | 44 | — | 113 | |||||||||||||||||||||
Cost-type contracts | — | 4 | — | 1 | — | — | 5 | |||||||||||||||||||||
Asia/Pacific | ||||||||||||||||||||||||||||
Foreign military sales through the U.S. government | ||||||||||||||||||||||||||||
Fixed-price contracts | 40 | 73 | 124 | 30 | — | — | 267 | |||||||||||||||||||||
Cost-type contracts | 18 | 11 | 16 | 9 | — | — | 54 | |||||||||||||||||||||
Direct commercial sales and other foreign sales(1) | ||||||||||||||||||||||||||||
Fixed-price contracts | 168 | 41 | 32 | 48 | 16 | — | 305 | |||||||||||||||||||||
Cost-type contracts | 17 | — | — | — | — | — | 17 | |||||||||||||||||||||
Middle East and North Africa | ||||||||||||||||||||||||||||
Foreign military sales through the U.S. government | ||||||||||||||||||||||||||||
Fixed-price contracts | 269 | 3 | 115 | 74 | — | — | 461 | |||||||||||||||||||||
Cost-type contracts | 48 | 5 | 5 | 19 | — | — | 77 | |||||||||||||||||||||
Direct commercial sales and other foreign sales(1) | ||||||||||||||||||||||||||||
Fixed-price contracts | 195 | 7 | 145 | 18 | 8 | — | 373 | |||||||||||||||||||||
Cost-type contracts | — | — | 19 | — | — | — | 19 | |||||||||||||||||||||
All other (principally Europe) | ||||||||||||||||||||||||||||
Foreign military sales through the U.S. government | ||||||||||||||||||||||||||||
Fixed-price contracts | 81 | 1 | 34 | 17 | — | — | 133 | |||||||||||||||||||||
Cost-type contracts | 10 | — | 15 | 2 | — | — | 27 | |||||||||||||||||||||
Direct commercial sales and other foreign sales(1) | ||||||||||||||||||||||||||||
Fixed-price contracts | 34 | 49 | 42 | 29 | 39 | — | 193 | |||||||||||||||||||||
Cost-type contracts | 3 | 6 | — | — | — | — | 9 | |||||||||||||||||||||
Total net sales | 1,529 | 1,609 | 1,963 | 1,480 | 148 | — | 6,729 | |||||||||||||||||||||
Intersegment sales | 21 | 168 | 43 | 173 | 9 | (414 | ) | — | ||||||||||||||||||||
Acquisition Accounting Adjustments | — | — | — | — | 1 | (1 | ) | — | ||||||||||||||||||||
Reconciliation to business segment sales | $ | 1,550 | $ | 1,777 | $ | 2,006 | $ | 1,653 | $ | 158 | $ | (415 | ) | $ | 6,729 |
(1) | Excludes foreign military sales through the U.S. government. |
Three Months Ended March 31, 2019 | ||||||||||||||||||||||||
Total Net Sales by Geographic Area (in millions) | Integrated Defense Systems | Intelligence, Information and Services | Missile Systems | Space and Airborne Systems | Forcepoint | Total | ||||||||||||||||||
United States | $ | 646 | $ | 1,413 | $ | 1,416 | $ | 1,234 | $ | 85 | $ | 4,794 | ||||||||||||
Asia/Pacific | 243 | 125 | 172 | 87 | 16 | 643 | ||||||||||||||||||
Middle East and North Africa | 512 | 15 | 284 | 111 | 8 | 930 | ||||||||||||||||||
All other (principally Europe) | 128 | 56 | 91 | 48 | 39 | 362 | ||||||||||||||||||
Total net sales | $ | 1,529 | $ | 1,609 | $ | 1,963 | $ | 1,480 | $ | 148 | $ | 6,729 |
Three Months Ended March 31, 2019 | ||||||||||||||||||||||||
Total Net Sales by Major Customer (in millions) | Integrated Defense Systems | Intelligence, Information and Services | Missile Systems | Space and Airborne Systems | Forcepoint | Total | ||||||||||||||||||
Sales to the U.S. government(1) | $ | 645 | $ | 1,376 | $ | 1,407 | $ | 1,207 | $ | 41 | $ | 4,676 | ||||||||||||
U.S. direct commercial sales and other U.S. sales | 1 | 37 | 9 | 27 | 44 | 118 | ||||||||||||||||||
Foreign military sales through the U.S. government | 466 | 93 | 309 | 151 | — | 1,019 | ||||||||||||||||||
Foreign direct commercial sales and other foreign sales(1) | 417 | 103 | 238 | 95 | 63 | 916 | ||||||||||||||||||
Total net sales | $ | 1,529 | $ | 1,609 | $ | 1,963 | $ | 1,480 | $ | 148 | $ | 6,729 |
(1) | Excludes foreign military sales through the U.S. government. |
Three Months Ended March 31, 2019 | ||||||||||||||||||||||||
Total Net Sales by Contract-Type (in millions) | Integrated Defense Systems | Intelligence, Information and Services | Missile Systems | Space and Airborne Systems | Forcepoint | Total | ||||||||||||||||||
Fixed-price contracts | $ | 1,009 | $ | 431 | $ | 1,209 | $ | 790 | $ | 144 | $ | 3,583 | ||||||||||||
Cost-type contracts | 520 | 1,178 | 754 | 690 | 4 | 3,146 | ||||||||||||||||||
Total net sales | $ | 1,529 | $ | 1,609 | $ | 1,963 | $ | 1,480 | $ | 148 | $ | 6,729 |
• | The Separation, Distributions and Related Transactions; and |
• | UTC’s merger with Raytheon with acquisition accounting applied to Raytheon as the accounting acquiree. |
• | The unaudited pro forma condensed combined balance sheet as of March 31, 2020 was prepared based on: |
(1) | the historical unaudited condensed consolidated balance sheet of UTC as of March 31, 2020; and |
(2) | the historical unaudited consolidated balance sheet of Raytheon as of March 29, 2020. |
• | The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2020 was prepared based on: |
(1) | the historical unaudited condensed consolidated statement of operations of UTC for the three months ended March 31, 2020; and |
(2) | the historical unaudited consolidated statement of operations of Raytheon for the three months ended March 29, 2020. |
• | UTC’s unaudited condensed consolidated financial statements and related notes as of and for the quarter ended March 31, 2020, included in RTC’s Quarterly Report on Form 10-Q filed with the SEC on May 7, 2020; |
• | Raytheon’s unaudited consolidated financial statements and related notes as of and for the quarter ended March 29, 2020 included in Exhibit 99.1 within this Current Report on Form 8-K; |
• | The Company’s Current Report on Form 8-K filed with the SEC on April 8, 2020. The unaudited pro forma combined statement of operations for the year ended December 31, 2019 contained in that Current Report on Form 8-K was not materially impacted by subsequent revisions to assumptions used to estimate the preliminary fair value of net assets acquired; and |
• | UTC’s Form S-4 Registration Statement (as amended) filed with the SEC on September 4, 2019 and declared effective on September 9, 2019. |
Historical United Technologies Corporation | Separation, Distributions and Related Transactions (Note 3) | Pro Forma United Technologies Corporation Post Separation | Historical Raytheon Company After Reclassifications (Note 4) | Pro Forma Merger Adjustments (Notes 5 and 6) | Pro Forma Combined Company | ||||||||||||||||||||
Assets: | |||||||||||||||||||||||||
Cash and cash equivalents | $ | 8,001 | $ | (2,756 | ) | $ | 5,245 | $ | 3,118 | $ | — | $ | 8,363 | ||||||||||||
Accounts receivable, net | 13,104 | (4,198 | ) | 8,906 | 1,784 | (43 | ) | (a) | 10,647 | ||||||||||||||||
Contract assets, current | 4,549 | 108 | 4,657 | 6,054 | — | 10,711 | |||||||||||||||||||
Inventory, net | 11,506 | (2,127 | ) | 9,379 | 699 | — | 10,078 | ||||||||||||||||||
Other assets, current | 1,715 | 1,095 | 2,810 | 611 | 245 | (b) | 3,666 | ||||||||||||||||||
Total Current Assets | 38,875 | (7,878 | ) | 30,997 | 12,266 | 202 | 43,465 | ||||||||||||||||||
Customer financing assets | 3,496 | — | 3,496 | — | — | 3,496 | |||||||||||||||||||
Future income tax benefits | 1,444 | (680 | ) | 764 | 529 | (519 | ) | (c) | 774 | ||||||||||||||||
Fixed assets, net | 12,484 | (2,326 | ) | 10,158 | 3,615 | 1,135 | (d) | 14,908 | |||||||||||||||||
Operating lease right-of-use assets | 2,624 | (1,400 | ) | 1,224 | 909 | 43 | (d) | 2,176 | |||||||||||||||||
Goodwill | 47,481 | (11,207 | ) | 36,274 | 14,879 | 5,889 | (e) | 57,042 | |||||||||||||||||
Intangible assets, net | 25,600 | (1,476 | ) | 24,124 | 261 | 18,969 | (f) | 43,354 | |||||||||||||||||
Other assets | 7,568 | (6,256 | ) | 1,312 | 1,251 | (43 | ) | (g) | 2,520 | ||||||||||||||||
Total Assets | $ | 139,572 | $ | (31,223 | ) | $ | 108,349 | $ | 33,710 | $ | 25,676 | $ | 167,735 | ||||||||||||
Liabilities and Equity: | |||||||||||||||||||||||||
Short-term borrowings | $ | 1,725 | $ | (67 | ) | $ | 1,658 | $ | — | $ | — | $ | 1,658 | ||||||||||||
Accounts payable | 10,976 | (2,878 | ) | 8,098 | 1,489 | (43 | ) | (h) | 9,544 | ||||||||||||||||
Accrued liabilities | 11,055 | (848 | ) | 10,207 | 2,409 | 365 | (i) | 12,981 | |||||||||||||||||
Contract liabilities, current | 6,384 | 2,503 | 8,887 | 2,884 | (43 | ) | (j) | 11,728 | |||||||||||||||||
Long-term debt currently due | 1,362 | (218 | ) | 1,144 | 999 | — | 2,143 | ||||||||||||||||||
Total Current Liabilities | 31,502 | (1,508 | ) | 29,994 | 7,781 | 279 | 38,054 | ||||||||||||||||||
Long-term debt | 43,232 | (17,283 | ) | 25,949 | 3,262 | 439 | (k) | 29,650 | |||||||||||||||||
Future pension and postretirement benefit obligations | 3,225 | 1,355 | 4,580 | 8,043 | 2,607 | (l) | 15,230 | ||||||||||||||||||
Operating lease liabilities | 2,126 | (1,087 | ) | 1,039 | 738 | — | 1,777 | ||||||||||||||||||
Contract liabilities, long-term | 5,554 | (5,554 | ) | — | — | — | — | ||||||||||||||||||
Other long-term liabilities | 11,903 | (5,001 | ) | 6,902 | 625 | 2,512 | (c)(m) | 10,039 | |||||||||||||||||
Total Liabilities | $ | 97,542 | $ | (29,078 | ) | $ | 68,464 | $ | 20,449 | $ | 5,837 | $ | 94,750 | ||||||||||||
Commitments and contingent liabilities | |||||||||||||||||||||||||
Redeemable noncontrolling interest | $ | 95 | $ | (95 | ) | $ | — | $ | 34 | $ | — | $ | 34 | ||||||||||||
Shareowners’ Equity: | |||||||||||||||||||||||||
Capital Stock: | |||||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | |||||||||||||||||||
Common stock | 23,099 | 2,425 | 25,524 | 22 | 10,886 | (n) | 36,432 | ||||||||||||||||||
Treasury Stock | (32,665 | ) | — | (32,665 | ) | — | 22,268 | (n) | (10,397 | ) | |||||||||||||||
Retained earnings | 60,826 | (4,668 | ) | 56,158 | 22,268 | (22,378 | ) | (n) | 56,048 | ||||||||||||||||
Unearned ESOP shares | (61 | ) | — | (61 | ) | — | — | (61 | ) | ||||||||||||||||
Total Accumulated other comprehensive loss | (11,788 | ) | 1,059 | (10,729 | ) | (9,063 | ) | 9,063 | (n) | (10,729 | ) | ||||||||||||||
Total Shareowners’ Equity | 39,411 | (1,184 | ) | 38,227 | 13,227 | 19,839 | 71,293 | ||||||||||||||||||
Noncontrolling interest | 2,524 | (866 | ) | 1,658 | — | — | 1,658 | ||||||||||||||||||
Total Equity | $ | 41,935 | $ | (2,050 | ) | $ | 39,885 | $ | 13,227 | $ | 19,839 | $ | 72,951 | ||||||||||||
Total Liabilities and Equity | $ | 139,572 | $ | (31,223 | ) | $ | 108,349 | $ | 33,710 | $ | 25,676 | $ | 167,735 |
Historical United Technologies Corporation | Separation, Distributions and Related Transactions (Note 3) | Pro Forma United Technologies Corporation Post Separation | Historical Raytheon Company After Reclassifications (Note 4) | Pro Forma Merger Adjustments (Notes 5 and 7) | Pro Forma Combined Company | ||||||||||||||||||||
Net Sales: | |||||||||||||||||||||||||
Product sales | $ | 12,432 | $ | (4,266 | ) | $ | 8,166 | $ | 6,005 | $ | (74 | ) | (o) | $ | 14,097 | ||||||||||
Service sales | 5,778 | (2,584 | ) | 3,194 | 1,160 | — | 4,354 | ||||||||||||||||||
18,210 | (6,850 | ) | 11,360 | 7,165 | (74 | ) | 18,451 | ||||||||||||||||||
Costs and Expenses: | |||||||||||||||||||||||||
Cost of products sold | 9,781 | (3,148 | ) | 6,633 | 4,338 | 277 | (p) | 11,248 | |||||||||||||||||
Cost of services sold | 3,627 | (1,686 | ) | 1,941 | 907 | (1 | ) | (p) | 2,847 | ||||||||||||||||
Research and development | 671 | (136 | ) | 535 | 161 | 1 | (q) | 697 | |||||||||||||||||
Selling, general, and administrative | 2,248 | (1,319 | ) | 929 | 556 | (47 | ) | (r) | 1,438 | ||||||||||||||||
16,327 | (6,289 | ) | 10,038 | 5,962 | 230 | 16,230 | |||||||||||||||||||
Other income (expense), net | (76 | ) | 94 | 18 | — | — | 18 | ||||||||||||||||||
Operating profit | 1,807 | (467 | ) | 1,340 | 1,203 | (304 | ) | 2,239 | |||||||||||||||||
Non-service pension (benefit) cost | (188 | ) | 20 | (168 | ) | 192 | (300 | ) | (s) | (276 | ) | ||||||||||||||
Debt extinguishment costs | 660 | (660 | ) | — | — | — | — | ||||||||||||||||||
Interest expense (income), net | 380 | (173 | ) | 207 | 57 | (5 | ) | (t) | 259 | ||||||||||||||||
Income (loss) from operations before income taxes | $ | 955 | $ | 346 | $ | 1,301 | $ | 954 | $ | 1 | $ | 2,256 | |||||||||||||
Income tax expense (income) | 941 | (662 | ) | 279 | 164 | (3 | ) | (u) | 440 | ||||||||||||||||
Net income (loss) | $ | 14 | $ | 1,008 | $ | 1,022 | $ | 790 | $ | 4 | $ | 1,816 | |||||||||||||
Less: Noncontrolling interest in subsidiaries’ earnings from operations | 97 | (43 | ) | 54 | 2 | — | 56 | ||||||||||||||||||
Net income (loss) attributable to UTC common shareowners | $ | (83 | ) | $ | 1,051 | $ | 968 | $ | 788 | $ | 4 | $ | 1,760 | ||||||||||||
Pro forma earnings per share of common stock: | |||||||||||||||||||||||||
Basic | $ | (0.10 | ) | $ | 1.17 | ||||||||||||||||||||
Diluted | $ | (0.10 | ) | $ | 1.16 | ||||||||||||||||||||
Pro forma weighted average common shares outstanding | |||||||||||||||||||||||||
Basic | 858.4 | (v) | 1,506.7 | ||||||||||||||||||||||
Diluted | 858.4 | (w) | 1,517.6 |
(Dollars, in millions) | Otis Distribution | Carrier Distribution | Related Transactions | Separation, Distributions and Related Transactions | ||||||||||||
Assets: | ||||||||||||||||
Current Assets | ||||||||||||||||
Cash and cash equivalents | $ | 1,207 | $ | 768 | $ | 781 | (vii) | $ | 2,756 | |||||||
Accounts receivable, net | 2,888 | 2,674 | (1,364 | ) | (iv) | 4,198 | ||||||||||
Contract assets, current | 518 | 651 | (1,277 | ) | (iv) | (108 | ) | |||||||||
Inventories and contracts in progress, net | 571 | 1,556 | — | 2,127 | ||||||||||||
Other assets, current | 290 | 279 | (1,664 | ) | (iv) | (1,095 | ) | |||||||||
Total Current Assets | 5,474 | 5,928 | (3,524 | ) | 7,878 | |||||||||||
Customer financing assets | — | — | — | — | ||||||||||||
Future income tax benefits | 359 | 321 | — | 680 | ||||||||||||
Fixed assets, net | 688 | 1,638 | — | 2,326 | ||||||||||||
Operating lease right-of-use assets | 535 | 865 | — | 1,400 | ||||||||||||
Goodwill | 1,608 | 9,599 | — | 11,207 | ||||||||||||
Intangible assets, net | 462 | 1,014 | — | 1,476 | ||||||||||||
Other assets | 289 | 2,440 | 3,527 | (i) (iii) (iv) | 6,256 | |||||||||||
Total Assets | $ | 9,415 | $ | 21,805 | $ | 3 | $ | 31,223 | ||||||||
Liabilities and Equity (Deficit): | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Short-term borrowings | $ | 67 | $ | — | $ | — | $ | 67 | ||||||||
Accounts payable | 1,102 | 1,776 | — | 2,878 | ||||||||||||
Accrued liabilities | 1,582 | 1,935 | (2,669 | ) | (ii) (iv) (v) | 848 | ||||||||||
Contract liabilities, current | 2,541 | 510 | (5,554 | ) | (iv) | (2,503 | ) | |||||||||
Long-term debt currently due | — | 218 | — | 218 | ||||||||||||
Total Current Liabilities | 5,292 | 4,439 | (8,223 | ) | 1,508 | |||||||||||
Long-term debt | 6,254 | 11,029 | — | 17,283 | ||||||||||||
Future pension and postretirement benefit obligations | 579 | 456 | (2,390 | ) | (vi) | (1,355 | ) | |||||||||
Operating lease liabilities | 379 | 708 | — | 1,087 | ||||||||||||
Contract liabilities, non-current | — | — | 5,554 | (iv) | 5,554 | |||||||||||
Other long-term liabilities | 706 | 1,456 | 2,839 | (iv)(vi) | 5,001 | |||||||||||
Total Liabilities | $ | 13,210 | $ | 18,088 | $ | (2,220 | ) | $ | 29,078 | |||||||
Commitments and contingent liabilities | ||||||||||||||||
Redeemable noncontrolling interest | $ | 95 | $ | — | $ | — | $ | 95 | ||||||||
Shareowners’ Equity: | ||||||||||||||||
Capital Stock: | — | — | — | — | ||||||||||||
Common stock | (2,509 | ) | — | 84 | (2,425 | ) | ||||||||||
Treasury Stock | — | — | — | — | ||||||||||||
Retained earnings | — | 4,370 | 298 | 4,668 | ||||||||||||
Unearned ESOP shares | — | — | — | — | ||||||||||||
Total Accumulated other comprehensive loss | (1,918 | ) | (982 | ) | 1,841 | (vi) | (1,059 | ) | ||||||||
Total Shareowners’ Equity | (4,427 | ) | 3,388 | 2,223 | 1,184 | |||||||||||
Noncontrolling interest | 537 | 329 | — | 866 | ||||||||||||
Total Equity | $ | (3,890 | ) | $ | 3,717 | $ | 2,223 | $ | 2,050 | |||||||
Total Liabilities and Equity | $ | 9,415 | $ | 21,805 | $ | 3 | $ | 31,223 |
i. | Pursuant to the tax matters agreement entered into among UTC, Carrier and Otis, Carrier and Otis will be required to make payments to RTC, primarily representing the respective remaining net tax liabilities retained by RTC attributable to U.S. income tax on previously undistributed earnings of Carrier’s and Otis’ international subsidiaries resulting from the passage of the Tax Cuts and Jobs Act of 2017. Accordingly, UTC has a future receivable for amounts paid by UTC on behalf of Otis and Carrier, which is expected to be approximately $720 million that is recorded within Other assets. |
ii. | Pursuant to the tax matters agreement, certain tax liabilities which are attributable to separation activities and transferred to Carrier and Otis at separation will be paid by Carrier and Otis to UTC. Carrier and Otis will be reimbursed by RTC for such amounts paid. Accordingly, a payable in the amount of $151 million has been recorded by UTC within Accrued liabilities. |
iii. | Pursuant to the tax matters agreement, Otis and Carrier are responsible for unrecognized tax benefits retained by RTC to the extent a reserve relates exclusively to the Otis business or Carrier business, respectively. Accordingly, UTC has a $58 million receivable recorded in Other assets for amounts due from Otis and Carrier related to these unrecognized tax benefits. |
iv. | As noted above, in connection with the Separation and the Distributions and the Merger, RTC determined that the duration of its contracts and programs, the average duration of which exceeds one year, represents its operating cycle, and accordingly accounts receivable of $1.4 billion, contract assets of $1.3 billion, and other current assets of $1.7 billion were reclassified from Other assets to Accounts receivable, Contract assets, current, and Other assets, current, respectively. Additionally, $2.3 billion of accrued liabilities were reclassified from Other long-term liabilities to Accrued liabilities and $5.6 billion of contract liabilities were reclassified from Contract liabilities, long-term to Contract liabilities, current, respectively. |
v. | Reflects an adjustment for directly-attributable costs related to the Separation and the Distributions of $229 million, which were not yet incurred, and therefore accrued by UTC as of March 31, 2020. Such costs primarily represent costs to separate IT systems and professional services related to the separation. |
vi. | In the second quarter of 2020, the Company recognized a curtailment to its domestic defined benefit pension plan due to the Separation and the Distributions, which resulted in an increase to Future pension and postretirement benefit obligations of $2.4 billion, with a related increase in accumulated other comprehensive loss of $1.8 billion and decrease in deferred tax liabilities recorded within Other long-term liabilities of $550 million. The curtailment loss of approximately $19 million recorded by the Company in the second quarter of 2020 has been excluded from the unaudited condensed combined pro forma statement of operations. |
vii. | In connection with the Separation and the Distributions and the Merger, on April 1, 2020 and April 2, 2020, UTC distributed a total additional $781 million of cash to Carrier and Otis, representing excess cash required by UTC in order to achieve the net indebtedness required by the terms of the Merger Agreement as well as initial working capital needs of Carrier and Otis. |
(Dollars, in millions) | Otis Distribution | Carrier Distribution | Related Transactions | Separation, Distributions and Related Transactions | ||||||||||||
Net Sales: | ||||||||||||||||
Product sales | $ | 1,123 | $ | 3,143 | $ | — | $ | 4,266 | ||||||||
Service sales | 1,843 | 741 | — | 2,584 | ||||||||||||
2,966 | 3,884 | — | 6,850 | |||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of products sold | 913 | 2,235 | — | 3,148 | ||||||||||||
Cost of services sold | 1,157 | 529 | — | 1,686 | ||||||||||||
Research and development | 38 | 98 | — | 136 | ||||||||||||
Selling, general, and administrative | 419 | 629 | 271 | (ii) | 1,319 | |||||||||||
2,527 | 3,491 | 271 | 6,289 | |||||||||||||
Other income (expense), net | (65 | ) | (29 | ) | — | (94 | ) | |||||||||
Operating profit | 374 | 364 | (271 | ) | 467 | |||||||||||
Non-service pension (benefit) cost | (3 | ) | (17 | ) | — | (20 | ) | |||||||||
Debt extinguishment costs | — | — | 660 | (ii) | 660 | |||||||||||
Interest expense (income), net | 5 | 37 | 131 | (i)(ii) | 173 | |||||||||||
Income (loss) from operations before income taxes | $ | 372 | $ | 344 | $ | (1,062 | ) | $ | (346 | ) | ||||||
Income tax expense (income) | 111 | 99 | 452 | (i)(ii) | 662 | |||||||||||
Net income (loss) | $ | 261 | $ | 245 | $ | (1,514 | ) | $ | (1,008 | ) | ||||||
Less: Noncontrolling interest in subsidiaries’ earnings | 37 | 6 | — | 43 | ||||||||||||
Net income (loss) attributable to UTC common shareowners | $ | 224 | $ | 239 | $ | (1,514 | ) | $ | (1,051 | ) |
i. | Reflects a reduction in interest expense of $125 million as result of UTC’s paydown of debt to meet its targeted indebtedness, in connection with the Merger Agreement, calculated using a weighted average interest rate of 3.7%, based on the indebtedness of UTC during the year ended December 31, 2019 that is assumed to have been extinguished as of January 1, 2019, as well as a related reduction in tax benefit of $23 million. A 1/8% change in the estimated interest rate would increase or decrease the interest expense of UTC by $4.8 million. |
ii. | Reflects the elimination of non-recurring transaction costs incurred by UTC of $937 million, primarily related to debt extinguishment costs incurred in connection with the Financing Transactions as well as accounting, tax and other professional services costs pertaining to the separation and the establishment of Otis and Carrier as stand-alone public companies, facility relocation costs, costs to separate information systems and costs of retention bonuses. Additionally, net tax charges related to separation activities of $475 million were incurred during the three months ended March 31, 2020. |
(Dollars, in millions) | Before Reclassifications | Reclassifications | Notes | After Reclassifications | ||||||||
Assets: | ||||||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | $ | 3,118 | $ | 3,118 | ||||||||
Accounts receivable, net | 1,784 | 1,784 | ||||||||||
Contract assets, current | 6,054 | 6,054 | ||||||||||
Inventories and contracts in progress, net | 699 | 699 | ||||||||||
Other assets, current | 611 | 611 | ||||||||||
Total Current Assets | 12,266 | 12,266 | ||||||||||
Customer financing assets | — | — | ||||||||||
Future income tax benefits | — | 529 | (i) | 529 | ||||||||
Fixed assets, net | 3,366 | 249 | (ii) | 3,615 | ||||||||
Operating lease right-of-use assets | 909 | 909 | ||||||||||
Goodwill | 14,879 | 14,879 | ||||||||||
Intangible assets, net | — | 261 | (iii) | 261 | ||||||||
Other assets | 2,290 | (1,039 | ) | (i)(ii) (iii) | 1,251 | |||||||
Total Assets | $ | 33,710 | $ | 33,710 | ||||||||
Liabilities and Equity: | ||||||||||||
Short-term borrowings | $ | — | $ | — | ||||||||
Accounts payable | 1,489 | 1,489 | ||||||||||
Accrued liabilities | — | 2,409 | (iv)(v) (vii) (viii) | 2,409 | ||||||||
Accrued employee compensation | 1,062 | (1,062 | ) | (vii) | — | |||||||
Contract liabilities, current | 3,085 | (201 | ) | (viii) | 2,884 | |||||||
Long-term debt currently due | 999 | 999 | ||||||||||
Other current liabilities | 1,293 | (1,293 | ) | (iv) | — | |||||||
Total Current Liabilities | 7,928 | 7,781 | ||||||||||
Long-term debt | 3,262 | 3,262 | ||||||||||
Future pension and postretirement benefit obligations | — | 8,043 | (vi) | 8,043 | ||||||||
Other long-term liabilities | — | 625 | (v) (vi) | 625 | ||||||||
Accrued retiree benefits and other long-term liabilities | 8,521 | (8,521 | ) | (vi) | — | |||||||
Operating lease liabilities | 738 | 738 | ||||||||||
Total Liabilities | $ | 20,449 | $ | 20,449 | ||||||||
Commitments and contingent liabilities | ||||||||||||
Redeemable noncontrolling interest | $ | 34 | $ | 34 | ||||||||
Shareowners’ Equity: | ||||||||||||
Common Stock | 3 | 19 | (ix) | 22 | ||||||||
Treasury Stock | — | — | ||||||||||
Retained earnings | 22,268 | 22,268 | ||||||||||
Unearned ESOP shares | — | — | ||||||||||
Additional Paid-in Capital | 19 | (19 | ) | (ix) | — | |||||||
Total Accumulated other comprehensive loss | (9,063 | ) | (9,063 | ) | ||||||||
Total Shareowners’ Equity | 13,227 | 13,227 | ||||||||||
Noncontrolling interest | — | — | ||||||||||
Total Equity | $ | 13,227 | $ | 13,227 | ||||||||
Total Liabilities and Equity | $ | 33,710 | $ | 33,710 |
i. | Represents the reclassification of $529 million of non-current deferred income tax benefits from Other assets to Future income tax benefits. |
ii. | Represents the reclassification of $249 million of computer software developed for internal use from Other assets to Fixed assets, net. |
iii. | Represents the reclassification of $261 million of intangible assets from Other assets to Intangible assets, net. |
iv. | Represents the reclassification of Other current liabilities to Accrued liabilities. |
v. | Represents the reclassification of $106 million of long-term environmental remediation costs and $41 million of asset retirement obligations from Accrued liabilities to Other long-term liabilities. |
vi. | Represents the reclassifications of $8 billion from Accrued retiree benefits and other long-term liabilities to Future pension and postretirement benefit obligations and $478 million from Accrued retiree benefits and other long-term liabilities to Other long-term liabilities. |
vii. | Represents the reclassification of Accrued employee compensation to Accrued liabilities. |
viii. | Represents the reclassification of loss reserves from Contract liabilities, current to Accrued liabilities. |
ix. | Represents the reclassification of Additional paid-in capital to Common stock. |
(Dollars, in millions) | Before Reclassifications | Reclassifications | Notes | After Reclassifications | ||||||||
Net Sales: | ||||||||||||
Product sales | $ | 6,005 | $ | 6,005 | ||||||||
Service sales | 1,160 | 1,160 | ||||||||||
7,165 | 7,165 | |||||||||||
Costs and expenses: | ||||||||||||
Cost of products sold | 4,338 | 4,338 | ||||||||||
Cost of services sold | 907 | 907 | ||||||||||
Research and development | — | 161 | (i) | 161 | ||||||||
Selling, general, and administrative | 728 | (172 | ) | (i) (iv) | 556 | |||||||
5,973 | 5,962 | |||||||||||
Other income, net | — | — | ||||||||||
Operating Profit | 1,192 | 1,203 | ||||||||||
Non-service pension (benefit) cost | 192 | 192 | ||||||||||
Interest expense (income), net | — | 57 | (ii) (iii) | 57 | ||||||||
Interest expense | 43 | (43 | ) | (iii) | — | |||||||
Interest income | (11 | ) | 11 | (iii) | — | |||||||
Other (income) expense, net | 25 | (25 | ) | (ii) | — | |||||||
Income (loss) before income taxes | $ | 943 | $ | 954 | ||||||||
Income tax expense (income) | 153 | 11 | (iv) | 164 | ||||||||
Net income | $ | 790 | $ | 790 | ||||||||
Less: Noncontrolling interest in subsidiaries’ earnings (loss) | 2 | 2 | ||||||||||
Net income (loss) attributable to Raytheon common stockholders | $ | 788 | $ | 788 |
i. | Represents the reclassification of $161 million of research and development costs from Selling, general, and administrative expenses to Research and development expenses. |
ii. | Represents the reclassification of Other (income) expense, net, which primarily relates to mark-to-market of marketable securities held in trusts associated with certain nonqualified deferred compensation and employee benefit plans, to Interest expense (income), net. |
iii. | Represents the reclassification of Interest expense and Interest income to Interest expense (income), net. |
iv. | Represents the reclassification of $11 million of state income taxes from Selling, general, and administrative expenses to Income tax expense (income). |
(Dollars, in millions) | Amount | |||
Fair value of RTC common stock issued for Raytheon outstanding common stock and vested equity awards | $ | 33,063 | ||
Fair value attributable to pre-merger service for replacement equity awards | 113 | |||
Total estimated merger consideration | $ | 33,176 |
(Dollars and shares in millions, except per share amounts) | Amount | ||
Number of Raytheon ordinary shares outstanding as of April 3, 2020 | 277.3 | ||
Number of Raytheon stock awards vested as a result of the Merger (i) | 0.4 | ||
Total outstanding shares of Raytheon common stock and equity awards entitled to merger consideration | 277.7 | ||
Exchange ratio (ii) | 2.3348 | ||
Shares of RTC common stock issued for Raytheon outstanding common stock and vested equity awards | 648.3 | ||
Price per share of RTC common stock (iii) | 51.00 | ||
Fair value of RTC common stock issued for Raytheon outstanding common stock and vested equity awards | 33,063 |
(i) | Represents Raytheon stock awards that vested as a result of the Merger, which is considered a “change in control” for purposes of the Raytheon 2010 Stock Plan. Certain Raytheon restricted stock awards and Raytheon RSU awards, issued under the Raytheon 2010 Stock Plan vested on an accelerated basis as a result of the Merger. Such vested awards were converted into the right to receive RTC common stock determined as the product of (1) the number of vested awards, and (2) the exchange ratio. |
(ii) | The exchange ratio is equal to 2.3348 in accordance with the Merger Agreement. |
(iii) | The price per share of RTC common stock is based on the RTC opening stock price as of April 3, 2020. |
(Dollars and shares in millions, except per share amounts) | Amount | ||
Number of Raytheon stock awards outstanding (i) | 2.7 | ||
Exchange ratio (ii) | 2.3348 | ||
RTC equity awards issued for Raytheon outstanding stock awards | 6.2 | ||
Price per share of RTC common stock (iii) | 51.00 | ||
Fair value of RTC equity awards issued for Raytheon outstanding stock awards | 317 | ||
Less: Estimated fair value allocated to post acquisition compensation expense | (205 | ) | |
Fair value of awards included in purchase accounting | 113 |
(i) | Represents Raytheon stock awards that were replaced with RTC stock awards upon completion of the Merger. Raytheon stock awards include awards issued under the Raytheon 2010 Stock Plan and Raytheon 2019 Stock Plan, inclusive of Raytheon restricted stock awards, Raytheon RSU awards, and Raytheon PSU awards. |
(ii) | The exchange ratio is equal to 2.3348 in accordance with the terms of the Merger Agreement. |
(iii) | The price per share of RTC common stock is based on the RTC opening stock price as of April 3, 2020. |
(Dollars, in millions) | Amount | |||
Current assets, including cash acquired | $ | 12,468 | ||
Fixed assets | 4,750 | |||
Goodwill | 20,768 | |||
Intangible assets | 19,230 | |||
Other assets | 2,170 | |||
Total Assets | $ | 59,386 | ||
Future pension and postretirement benefit obligations | 10,650 | |||
Long-term debt, including current portion | 4,700 | |||
Other liabilities assumed | 10,826 | |||
Total Liabilities | $ | 26,176 | ||
Redeemable noncontrolling interest | 34 | |||
Total consideration transferred | $ | 33,176 |
a) | Accounts receivable, net: Represents the elimination of accounts receivable of $43 million owed to UTC from Raytheon. |
b) | Other assets, current: Represents elimination of deferred sales commissions of $22 million, an increase of $211 million for the fair value of Raytheon’s assets that were sold on May 1, 2020 in order to obtain certain regulatory approvals required to complete the Merger and an increase of $56 million for the elimination of deferred state income taxes which under historical Raytheon policy reduced future recoverable amounts. |
c) | Future income tax benefits: Deferred income taxes are included in Future income tax benefits and Other long-term liabilities in the unaudited pro forma condensed combined balance sheet as of March 31, 2020. Deferred tax adjustments include a $519 million decrease in Future income tax benefits and a $2.5 billion increase in Other long-term liabilities. These are as a result of the estimated tax impact for the pro forma adjustments. Pro forma adjustments were tax effected at the applicable blended statutory tax rates, generally 23% in 2020. This estimate is preliminary and subject to change based upon final determination of fair values and tax rates. Additionally, the amounts recorded for deferred taxes relating to undistributed earnings may change now that the Separation and the Distributions have been completed. |
d) | Fixed assets, net: Represents the adjustment in carrying value of Raytheon’s fixed assets from its recorded net book value to its preliminary estimated fair value. The estimated fair value is expected to be depreciated over the estimated useful lives of the assets, generally on a straight-line basis. The fixed assets acquired primarily consist of the following: |
(Dollars, in millions) | Estimated Useful Life | Raytheon Historical Carrying Amount Before Reclassification | Fair Value Adjustment | Estimated Fair Value | |||||||||
Land | $ | 81 | $ | 518 | $ | 599 | |||||||
Buildings and improvements | 20 years | 1,119 | 431 | 1,550 | |||||||||
Machinery, tools and equipment | 6 years | 1,218 | 186 | 1,404 | |||||||||
Other, including assets under construction | 948 | — | 948 | ||||||||||
Total Fixed Assets | $ | 3,366 | $ | 1,135 | $ | 4,501 | |||||||
Right of use assets | 909 | 43 | 952 | ||||||||||
Total | $ | 4,275 | $ | 1,178 | $ | 5,453 |
e) | Goodwill: Represents a net increase in goodwill of $5.9 billion, comprised of the elimination of Raytheon’s historical goodwill balance of $14.9 billion, offset by $20.8 billion of goodwill resulting from the Merger. Goodwill resulting from the Merger represents the excess of estimated merger consideration over the preliminary fair value of the underlying tangible and identifiable intangible assets acquired and liabilities assumed. The estimated goodwill to be recognized is attributable primarily to expected synergies, expanded market opportunities, and other benefits that RTC believes will result from combining its operations with the operations of Raytheon. The goodwill created in the Merger is not deductible for tax purposes and is subject to material revision as the purchase price allocation is completed. |
f) | Intangible assets, net: Represents adjustments to record the preliminary estimated fair value of intangibles of approximately $19.2 billion, which represents an increase of $19 billion over Raytheon’s net book value of intangible assets prior to the Merger. The estimated fair values of identifiable intangible assets are preliminary and are determined based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). The final fair value determinations for identifiable intangible assets may differ from this preliminary determination, and such differences could be material. The intangible assets acquired primarily consist of the following: |
(Dollars, in millions) | Estimated Useful Life | Amortization method | Estimated Fair Value | ||||
Amortized: | |||||||
Customer relationships and other | 25 years | Pattern of economic benefit | $ | 12,900 | |||
Developed technology and royalty agreements | 6-8 years | Pattern of economic benefit | 890 | ||||
Unamortized: | |||||||
Trademarks and other | 5,440 | ||||||
Total | $ | 19,230 |
Remaining | |||||||||||||||||||
(Dollars, in millions) | April 1, 2020 – December 31, 2020 | 2021 | 2022 | 2023 | 2024 | 2025 and thereafter | |||||||||||||
Amortization expense | $ | 1,122 | $ | 920 | $ | 1,025 | $ | 1,111 | $ | 971 | $ | 6,780 |
g) | Other assets: Represents the elimination of deferred sales commissions of $29 million and a $14 million decrease of the pension and postretirement benefit assets based upon the application of purchase accounting. |
h) | Accounts payable: Represents the elimination of accounts payable of $43 million owed to UTC by Raytheon. |
i) | Accrued liabilities: Represents adjustment for directly attributable transaction costs related to the Merger not yet accrued by UTC and Raytheon of approximately $110 million and $80 million, respectively, a $153 million increase related to the recognition of onerous contracts at fair value, a $28 million accrual for change in control payments due to certain Raytheon personnel shortly after the Merger and a $6 million decrease of pension and postretirement liabilities based upon the application of purchase accounting. |
j) | Contract liabilities, current: Reflects a decrease in deferred revenue of $43 million as a result of fair value purchase accounting. |
k) | Long-term debt: Reflects an increase of $439 million in Raytheon indebtedness to fair value in connection with preliminary purchase price allocation. |
l) | Future pension and postretirement benefit obligations: Represents an increase of the pension and postretirement benefit obligation based upon the application of purchase accounting. |
m) | Other long-term liabilities: Reflects a $2.5 billion increase as a result of the estimated deferred tax impact of pro forma adjustments and a $5 million decrease in deferred revenue as a result of fair value purchase accounting. |
n) | Total Shareowners’ Equity: Represents the elimination of Raytheon common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive loss, as well as the following adjustments to reflect the capital structure of the Company. |
(Dollars, in millions) | Common Stock | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | ||||||||
Fair value of RTC common stock issued for Raytheon common stock and equity awards (i) | $ | 10,908 | $ | — | $ | — | $ | — | ||||
Issuance of RTC treasury shares for Raytheon common stock and equity awards (i) | — | 22,268 | — | — | ||||||||
Elimination of Raytheon historical shareholders’ equity (i) | (22 | ) | — | (22,268 | ) | — | ||||||
Adjustments related to pensions and postretirement benefits (ii) | — | — | — | (8,892 | ) | |||||||
Recognition of Merger-related transaction costs (iii) | — | — | (110 | ) | — | |||||||
Elimination of cash flow hedge and treasury rate lock losses (iv) | — | — | — | (2 | ) | |||||||
Elimination of foreign currency translation adjustment (v) | — | — | — | (169 | ) | |||||||
Total | $ | 10,886 | $ | 22,268 | $ | (22,378 | ) | $ | (9,063 | ) |
(i) | Represents an adjustment to increase the common stock and additional paid-in capital of the Company for 248 million of additional shares issued and the use of 400 million treasury shares for the total of the 648 million shares issued as consideration for the Merger, and to eliminate the par value of the Raytheon common stock acquired. |
(ii) | Represents an adjustment to eliminate unamortized prior service costs and actuarial losses, as a result of fair value purchase accounting. |
(iii) | Represents recognition of approximately $110 million of anticipated transaction costs that are directly attributable to the Merger but that were not incurred by UTC as of March 31, 2020. |
(iv) | Represents elimination of accumulated other comprehensive losses associated with Raytheon cash flow hedges and treasury rate locks in connection with purchase accounting. |
(v) | Represents adjustment to eliminate foreign currency translation associated with the translation of non-USD denominated entities to USD, which was recorded by Raytheon, as a result of fair value purchase accounting. |
o) | Product sales: Represents a decrease for the elimination of $69 million in revenues earned by UTC on sales to Raytheon that would be considered intercompany transactions and will be eliminated in the consolidated financial statements of the Company following completion of the Merger, as well as a $5 million decrease related to the preliminary fair value of Raytheon’s deferred revenue in purchase accounting. The pro forma adjustment related to the reduction in deferred revenue reflects the difference between prepayments related to extended arrangements and the preliminary fair value of the assumed performance obligations as they are satisfied, assuming the Merger was completed on January 1, 2019. |
p) | Cost of products and services sold: Represents adjustments to cost of products and services sold comprised of the following: |
1. Cost of products sold: | Three Months Ended | ||
(Dollars, in millions) | 3/31/2020 | ||
Amortization of acquired intangible assets (i) | $ | 354 | |
Depreciation of fixed assets step-up (ii) | 10 | ||
Adjustment to pension service cost (iii) | (8 | ) | |
Elimination of costs related to intercompany sales from UTC to Raytheon (iv) | (69 | ) | |
Amortization of onerous contracts (v) | (10 | ) | |
Total pro forma adjustment to cost of products sold | $ | 277 | |
2. Cost of services sold: | Three Months Ended | ||
(Dollars, in millions) | 3/31/2020 | ||
Depreciation of fixed assets step-up (ii) | $ | 1 | |
Adjustment to pension service cost (iii) | (2 | ) | |
Total pro forma adjustment to cost of services sold | $ | (1 | ) |
(i) | Represents net impact of removal of historical amortization expense and amortization expense recognized due to the identification of definite-lived intangible assets in purchase accounting. |
(ii) | Represents adjustment to depreciation expense due to the recognition of Raytheon’s fixed assets at their preliminary fair values in purchase accounting, depreciated over their estimated remaining useful lives, determined in accordance with UTC policy. |
(iii) | Represents the impact of the pension and postretirement service cost expense as determined under UTC’s plan assumptions. |
(iv) | Represents elimination of cost of sales relating to transactions between UTC and Raytheon that would be considered intercompany transactions and will be eliminated in the consolidated financial statements of the Company following the Merger. |
(v) | Represents amortization of onerous contracts recorded at their preliminary fair values in purchase accounting. |
q) | Research and development expenses: Reflects an increase of $1 million in depreciation expense due to the recognition of Raytheon’s fixed assets at their preliminary fair values in purchase accounting. |
r) | Selling, general and administrative expenses: Represents adjustments to selling, general and administrative expenses comprised of the following: |
Three Months Ended | |||
(Dollars, in millions) | 3/31/2020 | ||
Depreciation of fixed assets step-up (i) | $ | — | |
Adjustment to pension service cost (ii) | (1 | ) | |
Elimination of deferred commissions amortization (iii) | (7 | ) | |
Elimination of transaction costs (iv) | (39 | ) | |
Total pro forma adjustment to selling, general, and administrative expenses | $ | (47 | ) |
(i) | Represents adjustment to depreciation expense due to the recognition of Raytheon’s fixed assets at their preliminary fair values in purchase accounting, depreciated over their estimated remaining useful lives, determined in accordance with UTC policy. |
(ii) | Represents the impact of the pension and postretirement service cost expense as determined under UTC’s plan assumptions. |
(iii) | Represents elimination of amortization recognized on deferred commissions that are eliminated in purchase accounting. |
(iv) | Represents the elimination of non-recurring transaction costs incurred related to the Merger. |
s) | Non-service pension (benefit) cost: Reflects an adjustment to Non-service pension (benefit) cost for the elimination of prior service cost and actuarial loss amortization, which was recorded by Raytheon, as a result of the application of purchase accounting. |
t) | Interest expense (income), net: reflects the amortization of the incremental fair value of assumed debt recognized in connection with purchase accounting. |
u) | Income tax expense (income): reflects the tax effect of pro forma adjustments. The pro forma adjustments were tax effected at the applicable blended statutory tax rate, generally 23%. RTC’s effective tax rate may be materially different after conclusion of final acquisition accounting, removal of one-time items reflected in historical amounts, analysis of the post-closing geographical mix of income, and other factors. Adjustments to tax assets and liabilities will occur in conjunction with the finalization of the purchase accounting, and these items could be material. |
v) | Basic weighted average number of shares outstanding: Reflects the pro forma issuance of 648 million shares of RTC common stock issued in exchange for Raytheon outstanding common stock and equity awards that vested immediately upon closing of the Merger in accordance with the Merger Agreement. |
w) | Diluted weighted average number of shares outstanding: Reflects 7.4 million dilutive UTC shares as of March 31, 2020 that were excluded from the pre-Merger UTC calculation of diluted EPS due to UTC’s net loss recorded for the three months ended March 31, 2020, as well as the pro forma issuance of 3.5 million shares of RTC common stock issued in exchange for Raytheon outstanding common stock and equity awards that vested immediately upon closing of the Merger and the issuance of shares of common stock under replacement equity awards issued in accordance with the Merger Agreement. In connection with the Merger, unvested awards held by certain Raytheon employees were converted to RTC restricted stock awards, such that the total value of equity awards held by Raytheon employees post-Merger is substantially economically equivalent to the value of such awards prior to the Merger. |