The financial information presented is on a continuing operations basis. The historical results of Otis and Carrier are presented as discontinued operations and, as such, have been
excluded from continuing operations. Additionally, the financial information includes the results of Raytheon Company from April 3, 2020, (date of merger) through December 31, 2020.
24 RAYTHEON TECHNOLOGIES 2020 ANNUAL REPORT
Reconciliation of Segment Results (GAAP) to Adjusted Segment Results (Non-GAAP)
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, adjusted operating profit, adjusted earnings per share (“EPS”) and adjusted net income from continuing operations attributable to common shareowners are non-GAAP financial measures. Adjusted net sales
represents consolidated net sales (a GAAP measure), excluding significant items of a non-recurring and/or non-operational nature (hereinafter referred to as “other significant items”).
Adjusted operating profit represents operating profit (loss) from continuing operations (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and other significant items. Adjusted EPS represents diluted earnings per common share from continuing operations (a
GAAP measure), excluding restructuring costs, acquisition accounting adjustments and other significant items. Adjusted net income from continuing operations attributable to common shareowners represents net income (loss) from continuing operations attributable to common shareowners (a GAAP measure), excluding restructuring costs, acquisition accounting adjustments and other significant items. For the business segments, when applicable, adjustments of net sales and operating profit (loss) similarly reflect continuing operations, excluding restructuring, and other significant items. Management believes that the non-GAAP measures just mentioned are useful in providing period-to-period comparisons of the results of RTC’s ongoing operational performance.
Free cash flow is a non-GAAP financial measure that represents cash flow from operating activities of continuing 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 above. The tables above provide additional information as to the items and amounts that have been excluded from the adjusted measures.
2020 (DOLLARS IN MILLIONS)
Collins Aerospace
Systems Pratt &
Whitney
Adjustments to segment net sales:
Favorable impact of a contract termination – (22) – –
Significant unfavorable contract adjustments – 447 – –
Charge resulting from customer contract matters 136 – – –
2020 Adjusted Segment Net Sales $ 19,424 $ 17,224 $ 10,841 $ 11,660
2020 Segment Operating Profit (Loss) $ 1,466 $ (564) $ 1,014 $ 890
Adjustments to segment operating profit:
Restructuring costs 360 180 – –
Significant unfavorable contract adjustments 183 680 – –
Charges related to customer bankruptcies and collectability risk 125 262 – –
Foreign government wage subsidies (72) (153) – –
Fixed asset impairment 3 – – –
Gain on sale of business (595) – – –
Charges related to a commercial financing arrangement – 43 – –
Favorable impact of a contract termination – (22) – –
Middle East contract adjustment – – – 516
2020 Adjusted Segment Operating Profit $ 1,470 $ 426 $ 1,014 $ 1,406
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