RTX delivers strong commercial aftermarket growth; announces $10 billion accelerated share repurchase program; updates 2023 outlook

ARLINGTON, Va., Oct. 24, 2023 /PRNewswire/ -- RTX (NYSE: RTX) reported third quarter 2023 results.

Third quarter 2023

• Reported sales of $13.5 billion, down 21 percent versus prior year, reflecting the impact of the previously disclosed Pratt powder metal matter
• Adjusted sales* of $19.0 billion, up 12 percent versus prior year
• GAAP EPS from continuing operations was a loss of $0.68, which reflects $1.53 charge from the Pratt powder metal matter and $0.40 of acquisition accounting adjustments and other net significant and/or non-recurring charges
• Adjusted EPS* of $1.25, up 3 percent versus prior year
• Operating cash flow from continuing operations of $3.3 billion; Free cash flow* of $2.8 billion
• Company backlog of $190 billion; including $115 billion of commercial and $75 billion of defense
• Repurchased $1.4 billion of RTX shares

Updates outlook for full year 2023

• Reported sales of approximately $68.5 billion, up from $67.5 - $68.5 billion
• Adjusted sales* of approximately $74.0 billion, up from $73.0 - $74.0 billion
• Adjusted EPS* of $4.98 - $5.02 from $4.95 - $5.05
• Free cash flow* of approximately $4.8 billion, up from approximately $4.3 billion
• Share repurchase spending of approximately $12.8 billion of RTX shares, up from $3.0 billion

"We have made significant progress on our assessment of the Pratt & Whitney powder metal manufacturing matter and expect the financial impact to be in line with the previously disclosed charge," said RTX Chairman and CEO Greg Hayes. "We are now focused on executing on our fleet management plans and are working relentlessly to mitigate further disruption to our customers. We do not expect any significant future incremental impact as a result of these fleet management plans."

"The historic demand across our commercial aerospace and defense businesses drove 12 percent organic sales* growth during the third quarter and led to another record backlog of $190 billion. We are on track to deliver on our updated financial commitments for 2023 including our increased sales and free cash flow* outlook, as well as the tightened range for adjusted EPS* of $4.98 to $5.02 per share."

"Our industry leading franchises in Collins Aerospace, Pratt & Whitney, and Raytheon, position RTX to deliver significant long-term value for our shareowners. Today, RTX shares are an attractive investment opportunity and we are immediately proceeding with a $10 billion accelerated share repurchase program and increasing our capital return commitment through 2025 to $36 - $37 billion."

The company also announced today that it has entered into a definitive agreement to sell its Cybersecurity, Intelligence and Services business within its Raytheon segment. The sale price is approximately $1.3 billion and is subject to regulatory approvals and other customary closing conditions. 

Accelerated Share Repurchase Program

• The RTX board of directors has approved a $10 billion accelerated share repurchase program commencing almost immediately
• This will result in an increase to RTX's post-merger shareowner capital return commitment to $36 - $37 billion through 2025, up from the prior range of $33 - $35 billion
• The program will be funded through a combination of short and long-term debt, with deleveraging to begin in 2024 in part supported by proceeds from the previously announced dispositions including Collins' actuation and flight control business in July, as well as Raytheon's Cybersecurity, Intelligence and Services business

Third quarter 2023
RTX reported third quarter sales of $13.5 billion, down 21 percent over the prior year, which included a $5.4 billion charge related to the previously disclosed Pratt powder metal matter. On an adjusted basis, sales* were $19.0 billion, up 12 percent over the prior year. GAAP EPS from continuing operations was a loss of $0.68, down versus the prior year, and included a $1.53 charge related to the Pratt powder metal matter, $0.28 of acquisition accounting adjustments, $0.05 of restructuring, and $0.07 related to other net significant and/or non-recurring charges. Adjusted EPS* of $1.25 was up 3 percent versus the prior year.

The company recorded a net loss from continuing operations attributable to common shareowners in the third quarter of $984 million, down versus the prior year which included the after-tax impact of $2.2 billion related to the previously disclosed Pratt powder metal matter, $406 million of acquisition accounting adjustments, $80 million of restructuring charges, and $96 million of other net significant and/or non-recurring charges. Adjusted net income* was $1.8 billion, up 2 percent versus prior year. Operating cash flow from continuing operations in the third quarter was $3.3 billion. Capital expenditures were $564 million, resulting in free cash flow* of $2.8 billion.

Summary Financial Results – Continuing Operations Attributable to Common Shareowners

Backlog and Bookings
Backlog at the end of the third quarter was $190 billion, of which $115 billion was from commercial aerospace and $75 billion was from defense.

Notable defense bookings during the quarter included:

• $1.9 billion of classified bookings at Raytheon
• $1.1 billion for F135 sustainment at Pratt & Whitney
• $616 million for F135 production at Pratt & Whitney
• $412 million for Next Gen Short Range Interceptor development at Raytheon
• $383 million for HAWK and Patriot sustainment at Raytheon
• $368 million for TOW production at Raytheon
• $297 million for Ukraine NASAMS production at Raytheon
• $277 million for Excalibur production at Raytheon

Segment Results
Beginning in Q3 2023, we are operating in three business segments: Collins Aerospace, Pratt & Whitney, and Raytheon. Segment information included below is reflective of the new structure and prior period information has been recast to conform to our current period presentation.

Collins Aerospace

Collins Aerospace had third quarter 2023 reported sales of $6,629 million, up 16 percent versus the prior year. The increase in sales was driven by a 30 percent increase in commercial aftermarket and a 27 percent increase in commercial OE, which was partially offset by a 1 percent decrease in military. The increase in commercial sales was driven primarily by strong demand across commercial aerospace end markets, which resulted in higher flight hours and higher OE production rates. The decrease in military sales was driven primarily due to the timing of deliveries.

Collins Aerospace recorded operating profit of $903 million, up 22 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket and OE volume, partially offset by higher production costs, unfavorable military mix, and higher SG&A. Q3 2023 operating profit included a $57 million charge related to a litigation matter and $83 million related to restructuring and other significant and/or non-recurring items. On an adjusted basis, operating profit* of $1,043 million was up 38 percent versus the prior year.

Pratt & Whitney

NM = Not Meaningful

Pratt & Whitney had third quarter 2023 reported sales of $926 million, down 83 percent versus the prior year. Q3 2023 sales included the impact of a charge related to the powder metal matter of $5,401 million. The remaining change was driven by a 25 percent increase in commercial OE, a 21 percent increase in commercial aftermarket, and a 7 percent increase in military sales. The increase in commercial sales was primarily due to higher volume and content, and favorable mix across commercial aftermarket, as well as favorable OE volume and mix in Large Commercial Engines. The increase in military sales was driven by higher F135 development and sustainment volume. Adjusted sales* of $6,327 million, were up 18 percent versus the prior year.

Pratt & Whitney recorded an operating loss of $2,482 million, down $2,798 million versus the prior year. Q3 2023 operating loss included the impact of a charge related to the powder metal matter of $2,888 million. Excluding the impact of the powder metal matter and other significant and/or non-recurring items, Pratt & Whitney recorded adjusted operating profit* of $413 million in the third quarter of 2023, up 30 percent versus the prior year. The increase in adjusted operating profit* was primarily driven by drop through on higher commercial aftermarket sales which was partially offset by higher commercial OE volume, higher production costs, unfavorable military mix, and higher R&D expenses.

Raytheon

Raytheon had third quarter 2023 reported sales of $6,472 million, up 3 percent versus prior year. The increase in sales was primarily driven by higher volume in Naval Power, including AIM-9X, and Advanced Technology classified programs.

Raytheon recorded operating profit of $560 million, down 18 percent versus the prior year. The decrease in operating profit was driven by higher volume on lower margin programs and lower net program efficiencies, including additional headwind on certain fixed price development programs. Raytheon recorded adjusted operating profit* of $570 million, down 18 percent versus the prior year.

About RTX
RTX is the world's largest aerospace and defense company. With more than 180,000 global employees, we push the limits of technology and science to redefine how we connect and protect our world. Through industry-leading businesses – Collins Aerospace, Pratt & Whitney, and Raytheon – we are advancing aviation, engineering integrated defense systems for operational success, and developing next-generation technology solutions and manufacturing to help global customers address their most critical challenges. The company, with 2022 sales of $67 billion, is headquartered in Arlington, Virginia.

Conference Call on the Third Quarter 2023 Financial Results
RTX's financial results conference call will be held on Tuesday, October 24, 2023 at 8:30 a.m. ET. The conference call will be webcast live on the company's website at www.rtx.com and will be available for replay following the call. The corresponding presentation slides will be available for downloading prior to the call.

Use and Definitions of Non-GAAP Financial Measures
Use and Definitions of Non-GAAP Financial Measures

RTX Corporation ("RTX" or "the Company") 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) and margin, segment operating profit (loss) and margin, adjusted segment operating profit (loss) and margin, adjusted net income, adjusted earnings per share ("EPS"), and free cash flow are non-GAAP financial measures. Adjusted net sales represents consolidated net sales (a GAAP measure), excluding significant nonoperational items and/or significant operational items that may occur at irregular intervals (hereinafter referred to as "net significant and/or non-recurring items"). Organic sales represents the change in consolidated net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and net significant and/or non-recurring items. Adjusted operating profit (loss) represents operating profit (loss) (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and net significant and/or non-recurring items. Adjusted operating profit margin represents adjusted operating profit (loss) as a percentage of adjusted net sales.

Segment operating profit (loss) represents operating profit (loss) (a GAAP measure) excluding Acquisition Accounting Adjustments, the FAS/CAS operating adjustment, Corporate expenses and other unallocated items, and Eliminations and other. Segment operating profit margin represents segment operating profit (loss) as a percentage of segment sales (net sales, excluding Eliminations and other). Adjusted segment operating profit (loss) represents segment operating profit (loss) excluding restructuring costs, and net significant and/or non-recurring items. Adjusted segment operating profit margin represents adjusted segment operating profit (loss) as a percentage of adjusted segment sales (adjusted net sales excluding Eliminations and other). Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions, the amortization of customer contractual obligations related to loss making or below market contracts acquired, and goodwill impairment.

Adjusted net income represents net income from continuing operations (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and net significant and/or non-recurring items. Adjusted EPS represents diluted earnings per share from continuing operations (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and net significant and/or non-recurring items. For the business segments, when applicable, adjustments of net sales similarly reflect continuing operations (a GAAP measure) excluding net significant and/or non-recurring items. Organic sales for the business segments similarly excludes the impact of foreign currency translation, acquisitions and divestitures, and net significant and/or non-recurring 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 net significant and/or non-recurring 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 RTX's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of RTX'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 net sales, organic sales, adjusted operating profit (loss) and margin, adjusted segment operating profit margin, 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, as described above, 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 RTX Corporation ("RTX") management's current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid and are not statements of historical fact. 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," "goals," "objectives," "confident," "on track," "designed to" 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 (including the accelerated share repurchase program), tax payments and rates, research and development spending, cost savings, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, the Pratt powder metal matter and related matters and activities, anticipated benefits to RTX of its segment realignment, dispositions of Raytheon's Cybersecurity, Intelligence and Services business and Collins' actuation and flight control business, the merger (the "merger") between United Technologies Corporation ("UTC") and Raytheon Company ("Raytheon") or the spin-offs by UTC of Otis Worldwide Corporation and Carrier Global Corporation into separate independent companies (the "separation transactions") in 2020, targets and commitments (including for share repurchases or otherwise), 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 of1995. Such risks, uncertainties and other factors include, without limitation: (1) the effect of changes in economic, capital market and political conditions in the U.S. and globally, such as from the global sanctions and export controls with respect to Russia, and any changes therein, including related to financial market conditions, bank failures and other banking industry disruptions, fluctuations in commodity prices or supply (including energy supply), inflation, interest rates and foreign currency exchange rates, disruptions in global supply chain and labor markets, and geopolitical risks; (2) risks associated with U.S. government sales, including changes or shifts in defense spending due to budgetary constraints, spending cuts resulting from sequestration, a continuing resolution, a government shutdown, the debt ceiling or measures taken to avoid default, or otherwise, and uncertain funding of programs; (3) challenges in the development, production, delivery, support, and performance of RTX advanced technologies and new products and services and the realization of the anticipated benefits (including our expected returns under customer contracts), as well as the challenges of operating in RTX's highly- competitive industries; (4) risks relating to RTX's reliance on U.S. and non-U.S. suppliers and commodity markets, including the effect of sanctions, delays and disruptions in the delivery of materials and services to RTX or its suppliers and price increases; (5) risks relating to RTX international operations from, among other things, changes in trade policies and implementation of sanctions, foreign currency fluctuations, economic conditions, political factors, sales methods, and U.S. or local government regulations; (6) the condition of the aerospace industry; (7) the ability of RTX to attract, train and retain qualified personnel and maintain its culture and high ethical standards, and the ability of our personnel to continue to operate our facilities and businesses around the world; (8) risks relating to the coronavirus disease 2019 (COVID-19) pandemic and the impact on global air travel and RTX's business, supply chain, operations and the industries in which it operates; (9) the scope, nature, timing and challenges of managing acquisitions, investments, divestitures and other transactions, including the realization of synergies and opportunities for growth and innovation, the assumption of liabilities and other risks and incurrence of related costs and expenses, and risks related to completion of announced divestitures;; (10) compliance with legal, environmental, regulatory and other requirements, 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, such as the Foreign Corrupt Practices Act, industrial cooperation agreement obligations, and procurement and other regulations in the U.S. and other countries in which RTX and its businesses operate; (11) the outcome of pending, threatened and future legal proceedings, investigations and other contingencies, including those related to U.S. government audits and disputes; (12) factors that could impact RTX's ability to engage in desirable capital-raising or strategic transactions, including its credit rating, capital structure, levels of indebtedness, capital expenditures and research and development spending, and capital deployment strategy including with respect to share repurchases, and the availability of credit, credit market conditions including the cost of debt, and other factors; (13) uncertainties associated with the timing and scope of future repurchases by RTX of its common stock, including the ability to enter into, consummate, or complete the accelerated share repurchase ("ASR"), the purchase price of the shares acquired pursuant to the ASR agreement, and the timing and duration of the ASR program or declarations of cash dividends, which 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; (14) risks relating to realizing expected benefits from, incurring costs for, and successfully managing, the Company's segment realignment effective July 1, 2023, the merger, and other RTX strategic initiatives such as cost reduction, restructuring, digital transformation and other operational initiatives; (15) risks of additional tax exposures due to new tax legislation or other developments, in the U.S. and other countries in which RTX and its businesses operate; (16) risks relating to addressing the identified rare condition in powder metal used to manufacture certain Pratt & Whitney engine parts requiring accelerated removals and inspections of a significant portion of the PW1100G-JM Geared Turbofan (GTF) fleet, including, without limitation, the number and expected timing of shop visits, inspection results and scope of work to be performed, turnaround time, availability of new parts, available capacity at overhaul facilities, outcomes of negotiations with impacted customers, and risks related to other engine models that may be impacted by the powder metal matter, and in each case the timing and costs relating thereto, as well as other issues that could impact RTX product performance, including quality, reliability or durability; (17) risks relating to a RTX product safety failure or other failure affecting RTX's or its customers' or suppliers' products or systems; (18) risks relating to cyber-attacks on RTX's information technology infrastructure, products, suppliers, customers and partners, threats to RTX facilities and personnel, as well as other events outside of RTX's control such as public health crises, damaging weather or other acts of nature; (19) the effect of changes in accounting estimates for our programs on our financial results; (20) the effect of changes in pension and other postretirement plan estimates and assumptions and contributions; (21) risks relating to an impairment of goodwill and other intangible assets; (22) the effects of climate change and changing climate-related regulations, customer and market demands, products and technologies; and (23) 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. For additional information on identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see the reports of RTX, UTC and Raytheon on Forms S-4, 10-K, 10-Q and 8-K filed with or furnished to the Securities and Exchange Commission from time to time. Any forward-looking statement speaks only as of the date on which it is made, and RTX assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law. 

 

 

 

 

 

 

 

*Adjusted net sales, organic sales, adjusted operating profit (loss) and margin, adjusted segment operating profit (loss) and margin, adjusted net income, adjusted earnings per share ("EPS") and free cash flow are non-GAAP financial measures. When we provide our expectation for adjusted EPS and free cash flow on a forward-looking basis, a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures (expected diluted EPS from continuing operations and expected cash flow from operations) is not available without unreasonable effort due to the unavailability of items for exclusion from the GAAP measure (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). We are unable to address the probable significance of this information, the variability of which may have a significant impact on future GAAP results. See "Use and Definitions of Non-GAAP Financial Measures" below for information regarding non-GAAP financial measures.

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