Restructuring and Other Costs

6 Months Ended

Jun. 30, 2020

Restructuring and Related Activities [Abstract]

Restructuring and Other Costs [Text Block]

Restructuring Costs

Restructuring costs are generally expensed as incurred. All U.S. government unallowable restructuring costs related to the Raytheon Merger are recorded within Corporate expenses and other unallocated items, as these costs are not included in management’s evaluation of the segments’ performance, and as a result, there are no unallowable restructuring costs at the RIS and RMD segments. During the quarter and six months ended June 30, 2020, we recorded net pre-tax restructuring costs totaling $427 million and $435 million, respectively, for new and ongoing restructuring actions. We recorded charges in the segments as follows:

(dollars in millions)	Quarter Ended June 30, 2020		Six Months Ended June 30, 2020
Pratt & Whitney	$	107	$	107
Collins Aerospace Systems	151		157
Corporate expenses and other unallocated items	169		171
Total	$	427	$	435

Restructuring charges incurred during the quarter and six months ended June 30, 2020 primarily relate to actions initiated during 2020 and 2019, and were recorded as follows:

(dollars in millions)	Quarter Ended June 30, 2020		Six Months Ended June 30, 2020
Cost of sales	$	183	$	188
Selling, general and administrative	244		247
Total	$	427	$	435

2020 Actions. During the quarter ended June 30, 2020, we recorded net pre-tax restructuring costs of $444 million, comprised of $199 million in cost of sales and $245 million in selling, general and administrative expenses. During the six months ended June 30, 2020, we recorded net pre-tax restructuring costs of $446 million, comprised of $200 million in cost of sales and $246 million in selling, general and administrative expenses. The 2020 actions primarily relate to severance and restructuring actions resulting from the Raytheon Merger, severance and restructuring actions at Pratt & Whitney and Collins Aerospace in response to the anticipated impact on our operating results related to the current economic environment primarily caused by the COVID-19 pandemic, and ongoing cost reduction efforts including workforce reductions and the consolidation of field and manufacturing operations.

The following table summarizes the accrual balance and utilization for the 2020 restructuring actions for the quarter and six months ended June 30, 2020:

(dollars in millions)	Severance		Facility Exit and Other Costs		Total
Quarter Ended June 30, 2020
Restructuring accruals at March 31, 2020	$	2	$	—	$	2
Net pre-tax restructuring costs	443		1		444
Utilization, foreign exchange and other costs	(50)		(1)		(51)
Balance at June 30, 2020	$	395	$	—	$	395
Six Months Ended June 30, 2020
Restructuring accruals at December 31, 2019	$	—	$	—	$	—
Net pre-tax restructuring costs	445		1		446
Utilization, foreign exchange and other costs	(50)		(1)		(51)
Balance at June 30, 2020	$	395	$	—	$	395

The following table summarizes expected, incurred and remaining costs for the 2020 restructuring actions by segment:

(dollars in millions)	Expected Costs		Costs Incurred Quarter Ended March 31, 2020		Costs Incurred Quarter Ended June 30, 2020		Remaining Costs at June 30, 2020
Pratt & Whitney	$	131	$	—	$	(130)	$	1
Collins Aerospace Systems	184		(1)		(146)		37
Corporate expenses and other unallocated items	169		(1)		(168)		—
Total	$	484	$	(2)	$	(444)	$	38

We are targeting to complete the majority of the remaining workforce and facility related cost reduction actions during 2020 and 2021.

2019 Actions. During the quarter ended June 30, 2020, we reversed $9 million of net pre-tax restructuring costs for restructuring actions initiated in 2019, all of which was recorded in cost of sales. During the six months ended June 30, 2020, we recorded a reversal of net pre-tax restructuring costs totaling $4 million for restructuring actions initiated in 2019, including a reversal of $7 million in cost of sales, partially offset by expense of $3 million in selling, general and administrative expenses. The 2019 actions relate to ongoing cost reduction efforts, including workforce reductions, consolidation of field and manufacturing operations, and costs to exit legacy programs. The following table summarizes the accrual balances and utilization for the 2019 restructuring actions for the quarter and six months ended June 30, 2020:

(dollars in millions)	Severance		Facility Exit, and Other Costs		Total
Quarter Ended June 30, 2020
Restructuring accruals at March 31, 2020	$	36	$	10	$	46
Net pre-tax restructuring costs	(9)		—		(9)
Utilization, foreign exchange and other costs	(10)		—		(10)
Balance at June 30, 2020	$	17	$	10	$	27
Six Months Ended June 30, 2020
Restructuring accruals at December 31, 2019	$	47	$	11	$	58
Net pre-tax restructuring costs	(6)		2		(4)
Utilization, foreign exchange and other costs	(24)		(3)		(27)
Balance at June 30, 2020	$	17	$	10	$	27

The following table summarizes expected, incurred and remaining costs for the 2019 restructuring actions by segment:

(dollars in millions)	Expected Costs		Costs Incurred in 2019		Costs Incurred Quarter Ended March 31, 2020		Costs Incurred Quarter Ended June 30, 2020		Remaining Costs at June 30, 2020
Pratt & Whitney	$	121	$	(133)	$	—	$	12	$	—
Collins Aerospace Systems	112		(27)		(5)		(3)		77
Corporate expenses and other unallocated items	2		(2)		—		—		—
Total	$	235	$	(162)	$	(5)	$	9	$	77

2018 and Prior Actions. During the quarter and six months ended June 30, 2020, we reversed net pre-tax restructuring costs totaling $8 million and $7 million, respectively, for restructuring actions initiated in 2018 and prior. As of June 30, 2020, we have approximately $48 million of accrual balances remaining related to 2018 and prior actions.