Raytheon Technologies Reports Third Quarter 2021 Results; Raises 2021 Adjusted EPS Outlook

• Exceeded expectations on adjusted EPS; Repurchased $1.0 billion of shares

WALTHAM, Mass., Oct. 26, 2021 /PRNewswire/ -- Raytheon Technologies Corporation (NYSE: RTX) reported third quarter 2021 results.

Third quarter 2021

• Sales of $16.2 billion
• GAAP EPS from continuing operations of $0.93, which included $0.33 of acquisition accounting adjustments and net significant and/or non-recurring charges
• Adjusted EPS of $1.26
• Operating cash flow from continuing operations of $1.9 billion; Free cash flow of $1.5 billion
• Company backlog of $156.1 billion; including defense backlog of $65.0 billion
• Achieved approximately $165 million of incremental RTX gross cost synergies
• Repurchased $1.0 billion of RTX shares

Raytheon Technologies updates its 2021 outlook and now anticipates the following:

Outlook for full year 2021

• Sales of ~$64.5 billion, from $64.4 - $65.4 billion
• Adjusted EPS of $4.10 - $4.20, from $3.85 - $4.00
• Free cash flow of ~$5.0 billion, from $4.5 - $5.0 billion

"Our performance this quarter clearly demonstrates our ability to capitalize on the increased demand across our commercial aerospace and defense businesses, and our intense focus on cost reduction and operational execution," said Raytheon Technologies Chairman and Chief Executive Officer Greg Hayes.

"During the quarter, we announced strategic acquisitions that advance our technology focus areas and made significant progress on several key programs, as evidenced by the successful completion of the first flight test of a scramjet-powered Hypersonic Air-breathing Weapon Concept (HAWC) for DARPA and the U.S. Air Force. Our strong performance this year along with the positive trends in our end markets gives us the confidence to again raise our 2021 adjusted EPS outlook."

Raytheon Technologies reported third quarter sales of $16.2 billion. GAAP EPS from continuing operations was $0.93 and included $0.33 of acquisition accounting adjustments and net significant and/or non-recurring charges. This included $0.30 of acquisition accounting adjustments primarily related to intangible amortization, $0.02 related to debt extinguishment and $0.01 of restructuring. Adjusted EPS was $1.26. GAAP and adjusted EPS also included $0.16 of tax benefit from actions taken to optimize the company's legal entity and operating structure in the quarter.

The company recorded net income from continuing operations in the third quarter of $1.4 billion, which included $496 million of acquisition accounting adjustments and net significant and/or nonrecurring charges. Adjusted net income was $1.9 billion. Operating cash flow from continuing operations in the third quarter was $1.9 billion. Capital expenditures were $433 million, resulting in free cash flow of $1.5 billion.

Backlog and Bookings
Backlog at the end of the third quarter was $156.1 billion, of which $91.1 billion was from commercial aerospace and $65.0 billion was from defense.

Notable defense bookings during the quarter included:

• $962 million of classified bookings at Raytheon Intelligence & Space (RIS)
• $570 million for Advanced Medium-Range Air-to-Air Missile (AMRAAM) for the U.S. Air Force, Navy and international customers at Raytheon Missiles & Defense (RMD)
• $543 million for two F-135 sustainment contracts at Pratt & Whitney
• $432 million to provide Guidance Enhanced Missiles (GEM-T) for an international customer at RMD
• $358 million for Evolved Sea Sparrow Missile (ESSM) for the U.S. Navy and international customers at RMD
• $291 million for Stinger missiles for international customers at RMD
• $212 million for F100 engines for an international customer at Pratt & Whitney

Segment Results
The company's reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).

Collins Aerospace had third quarter 2021 adjusted sales of $4,592 million, up 7 percent versus the prior year. The increase in sales was driven by a 38 percent increase in commercial aftermarket which more than offset a 3 percent decline in commercial OE and a 5 percent decline in military. Excluding the impact of the prior year Military GPS and Space ISR divestitures, military was down 1 percent in the quarter. The increase in commercial sales was driven primarily by the recovery of commercial air traffic which has resulted in higher flight hours, aircraft fleet utilization and narrowbody OE volume, which was partially offset by lower 787 OE volume.

Collins Aerospace recorded adjusted operating profit of $480 million in the quarter, up 558 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume and favorable mix. This was partially offset by the impact of the Military GPS and Space ISR divestitures.

Pratt & Whitney had third quarter 2021 adjusted sales of $4,725 million, up 25 percent versus the prior year. The increase in sales was driven by a 56 percent increase in commercial aftermarket, a 22 percent increase in commercial OE and a 2 percent increase in military. The increase in commercial sales was primarily due to higher shop visits and related spare part sales and commercial engine deliveries principally driven by the recovery in commercial air traffic. The increase in military sales was primarily driven by growth in F-135 sustainment.

Pratt & Whitney recorded adjusted operating profit of $189 million in the quarter. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume, that was partially offset by higher commercial OE volume and higher SG&A and E&D expense.

RIS had third quarter 2021 adjusted sales of $3,740 million, in-line versus the prior year.

RIS recorded adjusted operating profit of $391 million, up 12 percent versus the prior year. The increase in adjusted operating profit was primarily driven by productivity across various programs.

RMD had third quarter 2021 adjusted sales of $3,902 million, up 7 percent versus prior year. The increase in sales was primarily driven by growth on an international National Advanced Surface to Air Missile System (NASAMS) program and on the Advanced Medium-Range Air-to-Air Missile (AMRAAM) program.

RMD recorded adjusted operating profit of $490 million, up 14 percent versus the prior year. The increase in adjusted operating profit was driven by higher sales volume.

Raytheon Technologies updates its 2021 outlook and now anticipates the following:

Outlook for full year 2021

• Sales of ~$64.5 billion, from $64.4 - $65.4 billion
• Adjusted EPS of $4.10 - $4.20, from $3.85 - $4.00
• Free cash flow of ~$5.0 billion, from $4.5 - $5.0 billion

About Raytheon Technologies
Raytheon Technologies Corporation is an aerospace and defense company that provides advanced systems and services for commercial, military and government customers worldwide. With four industry-leading businesses ― Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence & Space and Raytheon Missiles & Defense ― the company delivers solutions that push the boundaries in avionics, cybersecurity, directed energy, electric propulsion, hypersonics, and quantum physics. The company, formed in 2020 through the combination of Raytheon Company and the United Technologies Corporation aerospace businesses, is headquartered in Waltham, Massachusetts.

Conference Call on the Third Quarter 2021 Financial Results
Raytheon Technologies' financial results conference call will be held on Tuesday, October 26, 2021 at 8:30 a.m. ET. The dial-in number for the conference call will be (866) 219-7829 in the U.S. or (478) 205-0667 outside of the U.S. The passcode is 9088513. The conference call will also be audiocast on the Internet at www.rtx.com. Individuals may listen to the call and download charts that will be used during the call. These charts will be available for download prior to the call.

Use and Definitions of Non-GAAP Financial Measures
Raytheon Technologies Corporation ("RTC") reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP").

We supplement the reporting of our financial information determined under GAAP with certain non-GAAP financial information. The non-GAAP information presented provides investors with additional useful information, but should not be considered in isolation or as substitutes for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Adjusted net sales, organic sales, adjusted operating profit (loss), adjusted net income and adjusted earnings per share ("EPS") are non-GAAP financial measures. Adjusted net sales represents consolidated net sales (a GAAP measure), excluding significant items of a non-recurring and/or nonoperational nature (hereinafter referred to as "other significant items"). Organic sales represents consolidated net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and other significant items. Adjusted operating profit (loss) represents operating profit (loss) (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and other significant items. Adjusted net income represents net income from continuing operations (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and other significant items. Adjusted EPS represents diluted earnings per share from continuing operations (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and other significant items. For the Business segments, when applicable, adjustments of net sales similarly reflect continuing operations excluding other significant items, organic sales similarly excludes the impact of foreign currency, acquisitions and divestitures, and other significant items, and adjustments of operating profit (loss) and operating profit margins (also referred to as return on sales (ROS)) similarly reflect continuing operations, excluding restructuring, acquisition accounting adjustments and other significant items.

Free cash flow is a non-GAAP financial measure that represents cash flow from operations (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing RTC's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of RTC's common stock and distribution of earnings to shareowners.

A reconciliation of the non-GAAP measures to the corresponding amounts prepared in accordance with GAAP appears in the tables in this Appendix. The tables provide additional information as to the items and amounts that have been excluded from the adjusted measures.

When we provide our expectation for adjusted EPS and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures (expected diluted EPS from continuing operations and expected cash flow from operations, respectively) generally is not available without unreasonable effort due to potentially high variability, complexity and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures, and other structural changes or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results.

Cautionary Statement Regarding Forward-Looking Statements
This press release contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide Raytheon Technologies Corporation's ("RTC") management's current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "outlook," "confident," "on track" and other words of similar meaning. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax payments and rates, research and development spending, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, other anticipated benefits to RTC of United Technologies Corporation's ("UTC") Rockwell Collins acquisition, the merger between UTC and Raytheon Company ("Raytheon," and such merger, the "merger") or the spin-offs by UTC of Otis Worldwide Corporation and Carrier Global Corporation into separate independent companies (the "separation transactions"), including estimated synergies and customer cost savings resulting from the merger and the anticipated benefits and costs of the separation transactions and other statements that are not solely historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation: (1) the effect of economic conditions in the industries and markets in which RTC operates in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, and the impact of pandemic health issues (including the impact of the coronavirus disease 2019 (COVID-19) pandemic on global air travel and commercial and business activities which have not yet fully recovered to pre-pandemic levels, and that the timing and extent of such recovery may be impacted by factors including the efficacy, acceptance and distribution of vaccines, coronavirus variants and additional outbreaks) and actions taken in response to pandemic health issues (including the impact on supply generally and the impact of vaccine mandates on supply chain and operations), aviation safety concerns, weather conditions and natural disasters, the financial condition of our customers and suppliers, and the risks associated with U.S. government sales (including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration or the allocation of funds to governmental responses to COVID-19, a government shutdown, or otherwise, and uncertain funding of programs); (2) challenges in the development, production, delivery, support, performance, safety, regulatory compliance, and realization of the anticipated benefits (including our expected returns under customer contracts) of advanced technologies and new products and services; (3) the scope, nature, impact or timing of acquisition and divestiture activity, including among other things the integration of UTC's and Raytheon Company's businesses and the integration of RTC with other businesses acquired before and after the merger, and realization of synergies and opportunities for growth and innovation and incurrence of related costs and expenses; (4) RTC's levels of indebtedness, capital spending and research and development spending; (5) future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure; (6) the timing and scope of future repurchases by RTC of its common stock, which are subject to a number of uncertainties and may be discontinued, accelerated, suspended or delayed at any time due to various factors, including market conditions and the level of other investing activities and uses of cash; (7) delays and disruption in delivery of materials and services from suppliers; (8) company and customer- directed cost reduction efforts and restructuring costs and savings and other consequences thereof (including the potential termination of U.S. government contracts and performance under undefinitized contract actions and the potential inability to recover termination costs); (9) new business and investment opportunities; (10) the ability to realize the intended benefits of organizational changes; (11) the anticipated benefits of diversification and balance of operations across product lines, regions and industries; (12) the outcome of legal proceedings, investigations and other contingencies; (13) pension plan assumptions and future contributions; (14) the impact of the negotiation of collective bargaining agreements and labor disputes; (15) the effect of changes in political conditions in the U.S. and other countries in which RTC and its businesses operate, including the effect of  changes in U.S. trade policies on general market conditions, global trade policies and currency exchange rates in the near term and beyond; (16) changes in Department of Defense policies or priorities; (17) the effect of changes in tax due to new tax legislation or other developments (including the recent Organisation for Economic Co-operation and Development Inclusive Framework agreement and changes that may be enacted by the current U.S. Congress), environmental, regulatory and other laws and regulations (including, among other things, export and import requirements such as the International Traffic in Arms Regulations and the Export Administration Regulations, anti-bribery and anticorruption requirements, including the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations) in the U.S. and other countries in which RTC and its businesses operate; (18) the possibility that the anticipated benefits from the combination of UTC's and Raytheon's businesses (including ongoing integration activities from historic UTC and Raytheon acquisitions prior to the merger) cannot be realized in full or may take longer to realize than expected, or the possibility that costs or difficulties related to the integration of UTC's businesses with Raytheon's will be greater than expected or may not result in the achievement of estimated synergies within the contemplated time frame or at all; (19) the ability of RTC to retain and hire key personnel and the ability of our personnel to continue to operate our facilities and businesses around the world; and (20) the intended qualification of (i) the merger as a tax-free reorganization and (ii) the separation transactions and other internal restructurings as tax-free to UTC and former UTC shareowners, in each case, for U.S. federal income tax purposes.

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