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Analysis of Income Taxes

Advanced level

Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Adjustments to Financial Statements: Removal of Deferred Taxes
Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Income Tax Expense (Benefit)

Raytheon Technologies Corp., income tax expense (benefit), continuing operations

US$ in millions

	12 months ended:	Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	Federal
	State
	United States
	Foreign
	Current
	Federal
	State
	United States
	Foreign
	Future
	Income tax expense

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Raytheon Technologies Corp.’s current decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.
Future	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Raytheon Technologies Corp.’s future increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Income tax expense	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Raytheon Technologies Corp.’s income tax expense decreased from 2017 to 2018 and from 2018 to 2019.

Effective Income Tax Rate (EITR)

Raytheon Technologies Corp., effective income tax rate (EITR) reconciliation

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Statutory U.S. federal income tax rate
	Tax related separation activities
	Tax on international activities
	Tax audit settlements
	Other
	Effective income tax rate, before U.S. tax reform
	U.S. tax reform
	Effective income tax rate

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Item	Description	The company
Effective income tax rate, before U.S. tax reform	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Raytheon Technologies Corp.’s effective income tax rate, before U.S. tax reform decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Components of Deferred Tax Assets and Liabilities

Raytheon Technologies Corp., components of deferred tax assets and liabilities

US$ in millions

		Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015
	Insurance and employee benefits
	Other asset basis differences
	Other liability basis differences
	Tax loss carryforwards
	Tax credit carryforwards
	Future income tax benefits, gross
	Valuation allowances
	Future income tax benefits, net
	Intangible assets
	Other asset basis differences
	Other items, net
	Future income taxes payables
	Future income tax benefits and payables, net

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Item	Description	The company
Future income tax benefits, gross	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Raytheon Technologies Corp.’s future income tax benefits, gross increased from 2017 to 2018 and from 2018 to 2019.
Future income tax benefits, net	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Raytheon Technologies Corp.’s future income tax benefits, net increased from 2017 to 2018 and from 2018 to 2019.
Future income tax benefits and payables, net	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Raytheon Technologies Corp.’s future income tax benefits and payables, net decreased from 2017 to 2018 and from 2018 to 2019.

Deferred Tax Assets and Liabilities, Classification

Raytheon Technologies Corp., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Future income tax benefits
	Future income taxes payables

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Item	Description	The company
Future income tax benefits	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Raytheon Technologies Corp.’s future income tax benefits decreased from 2017 to 2018 and from 2018 to 2019.
Future income taxes payables	Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.	Raytheon Technologies Corp.’s future income taxes payables increased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

Raytheon Technologies Corp., adjustments to financial statements

US$ in millions

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Total Liabilities
	Total liabilities (as reported)
	Less: Noncurrent deferred tax liabilities, net
	Total liabilities (adjusted)
	Adjustment to Shareowners’ Equity
	Shareowners’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Shareowners’ equity (adjusted)
	Adjustment to Net Income Attributable To Common Shareowners
	Net income attributable to common shareowners (as reported)
	Add: Deferred income tax expense (benefit)
	Net income attributable to common shareowners (adjusted)

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Raytheon Technologies Corp., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Raytheon Technologies Corp., adjusted financial ratios

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Raytheon Technologies Corp.’s adjusted net profit margin ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Raytheon Technologies Corp.’s adjusted total asset turnover ratio deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Raytheon Technologies Corp.’s adjusted financial leverage ratio increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Raytheon Technologies Corp.’s adjusted ROE deteriorated from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Raytheon Technologies Corp.’s adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019.

Raytheon Technologies Corp., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to common shareowners
	Net sales
	Profitability Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income attributable to common shareowners
	Net sales
	Profitability Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

¹ Net profit margin = 100 × Net income attributable to common shareowners ÷ Net sales
= 100 × ÷ =

² Adjusted net profit margin = 100 × Adjusted net income attributable to common shareowners ÷ Net sales
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Raytheon Technologies Corp.’s adjusted net profit margin ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Total Asset Turnover

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net sales
	Total assets
	Activity Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Net sales
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =

Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Raytheon Technologies Corp.’s adjusted total asset turnover ratio deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.

Adjusted Financial Leverage

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Shareowners’ equity
	Solvency Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted shareowners’ equity
	Solvency Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

¹ Financial leverage = Total assets ÷ Shareowners’ equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareowners’ equity
= ÷ =

Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Raytheon Technologies Corp.’s adjusted financial leverage ratio increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Adjusted Return on Equity (ROE)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to common shareowners
	Shareowners’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income attributable to common shareowners
	Adjusted shareowners’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

¹ ROE = 100 × Net income attributable to common shareowners ÷ Shareowners’ equity
= 100 × ÷ =

² Adjusted ROE = 100 × Adjusted net income attributable to common shareowners ÷ Adjusted shareowners’ equity
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Raytheon Technologies Corp.’s adjusted ROE deteriorated from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to common shareowners
	Total assets
	Profitability Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income attributable to common shareowners
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

¹ ROA = 100 × Net income attributable to common shareowners ÷ Total assets
= 100 × ÷ =

² Adjusted ROA = 100 × Adjusted net income attributable to common shareowners ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Raytheon Technologies Corp.’s adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019.

	Raytheon Technologies Corp.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

Raytheon Technologies Corp. (NYSE:RTX)

Analysis of Income Taxes

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Adjustments to Financial Statements: Removal of Deferred Taxes

Raytheon Technologies Corp., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Raytheon Technologies Corp., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)