Raytheon Technologies Reports 2021 Results, Announces 2022 Outlook

WALTHAM, Mass., Jan. 25, 2022 /PRNewswire/ -- Raytheon Technologies Corporation (NYSE: RTX) reported fourth quarter 2021 results and announced its 2022 outlook.

Fourth quarter 2021

• Sales of $17.0 billion
• GAAP EPS from continuing operations of $0.46, which included $0.62 of acquisition accounting adjustments and net significant and/or non-recurring charges
• Adjusted EPS of $1.08
• Operating cash flow from continuing operations of $3.2 billion; Free cash flow of $2.2 billion
• Completed the acquisitions of FlightAware and SEAKR Engineering, and the disposition of RIS' Global Training and Services business
• Achieved approximately $190 million of incremental RTX gross cost synergies
• Company backlog of $156 billion; including defense backlog of $63 billion
• Repurchased $327 million of RTX shares

Full year 2021

• Sales of $64.4 billion
• GAAP EPS of $2.58
• Adjusted EPS of $4.27
• Operating cash flow from continuing operations of $7.1 billion; Free cash flow of $5.0 billion
• Achieved approximately $760 million of incremental RTX gross cost synergies
• Repurchased $2.3 billion of RTX shares

Outlook for full year 2022

• Sales of $68.5 - $69.5 billion
• Adjusted EPS of $4.60 - $4.80
• Free cash flow of approximately $6.0 billion. Assumes the legislation requiring R&D capitalization for tax purposes is deferred beyond 2022.
• Share repurchase of at least $2.5 billion of RTX shares

"We closed the year on a strong note with full year adjusted EPS and free cash flow significantly exceeding the outlook we set a year ago," said Raytheon Technologies Chairman and CEO Greg Hayes. "We also exceeded our cost synergy target for the year, delivered margin expansion across our businesses and returned $5.3 billion of capital to shareowners including the repurchase of $2.3 billion of RTX shares, demonstrating strong execution against our strategy and operational initiatives in 2021."

"Raytheon Technologies is entering 2022 with continued momentum and resilience. The long-term outlook for our commercial aerospace and defense markets remains strong. Our focused A&D portfolio and intense focus on program execution position us well to deliver sales, earnings and free cash flow growth, as well as margin expansion across all businesses in 2022."

Fourth Quarter 2021
Raytheon Technologies reported fourth quarter sales of $17.0 billion. GAAP EPS from continuing operations was $0.46 and included $0.62 of acquisition accounting adjustments and net significant and/or non-recurring charges. This includes $0.15 of net divestiture activity related to the disposition of Raytheon Intelligence & Space's Global Training and Services business, that was offset by $0.33 of debt extinguishment costs, $0.30 of acquisition accounting adjustments primarily related to intangible amortization, $0.11 of accruals related to previously disclosed legal matters, $0.02 of restructuring and $0.01 of other items. Adjusted EPS was $1.08.

The company recorded net income from continuing operations in the fourth quarter of $685 million, which included $929 million of acquisition accounting adjustments and net significant and/or nonrecurring charges. Adjusted net income was $1.6 billion. Operating cash flow from continuing operations in the fourth quarter was $3.2 billion. Capital expenditures were $1.0 billion, resulting in free cash flow of $2.2 billion.

Full Year 2021
Raytheon Technologies reported full year sales of $64.4 billion. GAAP EPS from continuing operations was $2.58 and included $1.69 of acquisition accounting adjustments and net significant and/or non-recurring charges. Adjusted EPS was $4.27. 

The company recorded net income from continuing operations for the year of $3.9 billion, which included $2.5 billion of acquisition accounting adjustments and net significant and/or nonrecurring charges. Adjusted net income was $6.4 billion. Operating cash flow from continuing operations for the year was $7.1 billion. Capital expenditures were $2.1 billion, resulting in full year free cash flow of $5.0 billion.

Backlog and Bookings
Backlog at the end of the fourth quarter was $156 billion, of which $93 billion was from commercial aerospace and $63 billion was from defense.

Notable defense bookings during the quarter included:

• $1.3 billion of classified bookings at Raytheon Intelligence & Space (RIS)
• $729 million for two Standard Missile-2 (SM-2) production contracts for the U.S. Navy and international customers at Raytheon Missiles & Defense (RMD)
• $672 million of Electro-Optical Infrared (EO/IR) products and services contracts, including the Electro-Optical Distributed Aperture System (EODAS) for the F-35 at RIS
• $592 million for an F135 sustainment contract at Pratt & Whitney
• $435 million for an F119 sustainment contract at Pratt & Whitney
• $269 million for Evolved Seasparrow Missile (ESSM) for the U.S. Navy and international customers at RMD
• $255 million for F-135 production contracts at Pratt & Whitney
• $227 million for the Next Generation Jammer (NGJ) Mid-Band for the U.S. Navy at RIS

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

Collins Aerospace had fourth quarter 2021 adjusted sales of $4,942 million, up 13 percent versus the prior year. The increase in sales was driven by a 47 percent increase in commercial aftermarket and a 4 percent increase in commercial OE, which more than offset a 3 percent decline in military. 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 and F-35 volume.

Collins Aerospace recorded adjusted operating profit of $469 million in the quarter, up 427 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket volume that was partially offset by higher E&D and SG&A expense.

Pratt & Whitney had fourth quarter 2021 adjusted sales of $5,115 million, up 14 percent versus the prior year. The increase in sales was driven by a 32 percent increase in commercial OE and a 28 percent increase in commercial aftermarket, which more than offset a 6 percent decrease 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 decrease in military sales was driven by lower spares sales on legacy programs.

Pratt & Whitney recorded adjusted operating profit of $162 million in the quarter, up 54 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume, that was offset by higher SG&A and E&D expense and lower military volume on legacy programs. 

RIS had fourth quarter 2021 adjusted sales of $3,870 million, down 2 percent versus the prior year. The decrease in sales was primarily driven by fewer workdays in the quarter as well as the divestiture of the Global Training and Services business at the beginning of December. Excluding the impact of acquisitions and divestitures, sales were down 1 percent.

RIS recorded adjusted operating profit of $400 million, up 11 percent versus the prior year. The increase in adjusted operating profit was primarily driven by productivity across various programs.

RMD had fourth quarter 2021 adjusted sales of $3,859 million, down 10 percent versus prior year. The decrease in sales was primarily driven by four fewer workdays in the quarter as well as lower material receipts and expected declines on several international production contracts.

RMD recorded adjusted operating profit of $486 million, down 16 percent versus the prior year. The decrease in adjusted operating profit was driven by lower net program efficiencies and lower sales volume.

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 Fourth Quarter 2021 Financial Results
Raytheon Technologies' financial results conference call will be held on Tuesday, January 25, 2022 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 5177315. 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. Acquisition accounting adjustments include the amortization of acquired intangible assets related to acquisitions, the amortization of the property, plant and equipment fair value adjustment acquired through acquisitions and the amortization of customer contractual obligations related to loss making or below market contracts acquired.

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 ("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," "goals," "objectives," "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, cost savings, other measures of financial performance, potential future plans, strategies or transactions, credit ratings and net indebtedness, other anticipated benefits to RTC of the United Technologies Corporation ("UTC") acquisition of Rockwell Collins in 2018, the merger (the "merger") between 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"), 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 changes in global economic, capital market and political conditions in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, inflation, interest rates and foreign currency exchange rates, and geopolitical risks; (2) the effect of and risks relating to coronavirus disease 2019 (COVID-19) pandemic on RTC's business, supply chain, operations and the industries in which it operates, including the decrease in global air travel and disruption to business and other commercial activities, the impact on the demand for RTC's products and services, the disruption to global supply and distribution capabilities which have impacted supplies required for RTC's performance, the financial condition of RTC's customers and suppliers, challenges relating to employee health, safety, and availability and workplace and facility operations, and the timing and extent of the recovery from COVID-19 and the impact on such recovery from new COVID-19 variants and outbreaks, vaccine-related issues and other future developments; (3) 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 continuing resolution, a government shutdown, or otherwise, and uncertain funding of programs; (4) challenges in the development, production, delivery, support, and performance of RTC 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 RTC's highly-competitive industries; (5) risks relating to RTC international operations from, among other things, changes in trade policies, foreign currency fluctuations, economic conditions, political factors, sales methods, and U.S. or local government regulations; (6) the condition of the aerospace industry; (7) risks relating to RTC's reliance on U.S. and non-U.S. suppliers and commodity markets, including delays and disruptions in the delivery of materials and services to RTC or its suppliers and price increases; (8) 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; (9) 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 RTC and its businesses operate; (10) the outcome of pending, threatened and future legal proceedings, investigations and other contingencies, including those related to U.S. government audits and disputes; (11) factors that could impact RTC's ability to engage in desirable capital-raising or strategic transactions, including its capital structure, levels of indebtedness, capital expenditures and research and development spending, and the availability of credit, credit market conditions and other factors; (12) uncertainties associated with the timing and scope of future repurchases by RTC of its common stock 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; (13) the risks relating to realizing expected benefits from RTC strategic initiatives such as cost reduction, restructuring, digital transformation and other operational initiatives; (14) the risks relating to the integration of legacy businesses of UTC and RTC as well as the merger, and the realization of the anticipated benefits of those transactions; (15) risks of additional tax exposures due to new tax legislation or other developments, in the U.S. and other countries in which RTC and its businesses operate; (16) the ability of RTC 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; (17) risks relating to a RTC product safety failure or other failure affecting RTC's or its customers' or suppliers' products or systems; (18) risks relating to cyber-attacks on RTC's information technology infrastructure, products, suppliers, customers and partners, threats to RTC facilities and personnel, as well as other events outside of RTC'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.

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