RTX CorporationRTX

Strategic execution · Strategic transformation and turnaround risks

In order to operate more effectively and efficiently, from time to time we undertake strategic and other operational initiatives. For example, we are undergoing significant, multi-year digital transformation initiatives to improve our business, modernize operations, and reduce costs. Under these initiatives, we are leveraging digital capabilities throughout the way in which we conduct our business and provide our products and services to customers.

Innovation and product development · Time to market and commercialization risks

Delays and/or suspension of production could result in increased development costs or deflect resources from other projects. If we fail in our development projects or if our new products or technologies fail to achieve customer acceptance or competitors develop more capable technologies or offerings, we may be unsuccessful in obtaining new contracts or winning all or a portion of next generation programs.

Strategic execution · Merger acquisition and divestiture risks

In pursuing our business strategies, we continually review, evaluate, and consider potential investments, acquisitions, divestitures, joint ventures, and other teaming and collaborative arrangements. We undertake to identify opportunities that will complement our existing products and services or customer base, as well as expand our offerings and business opportunities into new areas.

Market position and competition · Patent expiration and generic competition

In particular, Pratt & Whitney's Geared Turbofan (GTF) family of engines incorporates advanced technologies. The level of orders received for the GTF family of engines, coupled with a requirement to achieve mature production levels in a very short time frame, have required significant growth in our manufacturing and supply chain capacity.

Innovation and product development · Product development and randd investment risks

We invest substantial amounts in research and development efforts to pursue advancements in a wide range of technologies, products, and services aimed at meeting the ever-evolving product, program, and service needs of our customers. Our ability to realize the anticipated benefits of our investments depends on a variety of factors, including the competitiveness of our offerings' performance relative to our peers; meeting development, production, certification, and regulatory approval schedules; receiving regulatory approvals; execution of internal and external performance plans.

Market position and competition · Market cyclicality and demand volatility

At times, our aerospace businesses also enter into FFP or cost-share development contracts with customers, which may require us to bear cost overruns related to unforeseen technical and design challenges that arise during the development and early production stages of a program.

Economic and market conditions · Inflation and deflation pressures

In addition, the inflationary environment has increased material and component prices, labor rates, and supplier costs, and negatively impacted costs. We may incur unexpected costs for various reasons, including technical and manufacturing challenges, schedule delays, the timeliness and availability of materials, components, or labor, the inaccuracy of initial contract cost estimates, internal and subcontractor performance or product quality issues, inability to achieve expected cost reduction, digital transformation, manufacturing, operating, and other strategic initiatives, inflation.

Geopolitical and trade · Regulatory and policy uncertainty

Our international sales and operations are also subject to risks associated with local government laws, regulations, and policies, including with respect to investments, taxation, exchange controls, capital controls, employment regulations, repatriation of earnings, and tariffs. Differing legal systems, customs, and contract laws and regulations pose additional risk.

Geopolitical and trade · Government funding and budget changes

Changes in U.S. government defense spending for various reasons, including as a result of potential changes in policy or budgetary positions or priorities, could negatively impact our results of operations, financial condition, and liquidity. Our programs and contracts are subject to U.S. government policies, budget decisions, and appropriation processes, which are driven by numerous factors including U.S. domestic and broader geopolitical events, macroeconomic conditions, and the ability of the U.S. government to enact relevant legislation, such as appropriations bills.

Natural and catastrophic events · Climate change and environmental impact

Our business may be impacted by climate change and governmental and industry actions taken in response, which present short, medium, and long-term risks to our business and financial condition. Current and emerging environmental and climate-related laws, regulations, or other policies, including regulations on greenhouse gas emissions, carbon pricing, energy taxes, product efficiency standards, and mandatory disclosure obligations, could increase our operational and compliance expenditures.

International and currency · Foreign exchange and currency exposure

Foreign currency exchange rate fluctuations (including their impact on supplier prices) may negatively affect demand for our products and our operating profit and margins. The majority of our commercial aerospace sales are in U.S. Dollars, while the majority of our non-U.S. operating costs are incurred in the applicable local currency.

Market and investment · Market volatility and economic cycles

Our commercial aerospace businesses constitute a substantial portion of our financial results, and the performance of those businesses is directly tied to economic conditions in the commercial aerospace industry, which is cyclical in nature. Capital spending and demand for aircraft engines, aerospace products, and component aftermarket parts and services is limited to commercial airlines, lessors, other aircraft operators, and aircraft manufacturers that are influenced by a wide variety of factors.

Capital structure and performance · Debt management and refinancing

We have outstanding debt and other financial obligations, and we depend, in part, upon the issuance of debt to fund our business requirements. The increased indebtedness of RTX in connection with the $10 billion accelerated share repurchase (ASR) transactions that began in October 2023 and completed in September 2024 may have various negative impacts on our business.

Credit and liquidity · Access to capital and financing

If we require additional funding in order to fund outstanding financing commitments or meet other business requirements, a number of factors could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for debt, any of which may adversely affect our ability to fund our business requirements.

Market and investment · Interest rate and yield curve risk

It exposes us to interest rate and credit market risk at the time of refinancing outstanding debt, as well as these same risks on our commercial paper obligations, which are issued at variable rates.

Supply chain and procurement · Raw material availability and cost volatility

Global supply chain disruptions have impacted our ability to procure raw materials, including certain rare earth elements, microelectronics, and certain commodities. These disruptions have been driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages.

Human capital and workforce · Talent acquisition and retention

Due to the specialized nature of our business, our future performance is highly dependent upon the continued services of our key technical personnel and executive officers, and the hiring, development, and retention of qualified technical, engineering, manufacturing, marketing, sales, and management personnel for our operations. We have experienced, and continue to experience, challenges hiring highly qualified personnel including engineers, skilled laborers, and security clearance holders.

Cybersecurity and data protection · Data breaches and cyber attacks

Our business may be impacted by disruptions to our own or third-party IT infrastructure, and the products and services that we provide our customers are also at risk of being adversely affected by cyber-attacks. Like other companies, we regularly experience cyber-based attacks. Cybersecurity threats are continuously evolving and may have an impact on our customers, suppliers, subcontractors, and other third parties with whom we do business.

Cybersecurity and data protection · Insider threats and access controls

We are also exposed to the risk of insider threat attacks. Any such attacks could disrupt our systems or those of third parties (including mission and safety critical systems), impact business operations, result in unauthorized release of confidential, proprietary, or otherwise protected information, and corrupt our data or that of third parties.

Technology infrastructure · Legacy systems and technical debt

In addition, as a result of the rapid pace of technological change, we and our customers, suppliers, subcontractors, and other third parties with whom we conduct business continue to rely on legacy systems and software, which can be more vulnerable to cyber threats and attacks.