RTX sets aside over $1bn to resolve disputes with DOJ and SEC

RTX has reserved a total of $1.24bn to resolve legal disputes with the US Department of Justice (DOJ), Securities and Exchange Commission (SEC), and Department of State (DOS), the company said in its second quarter 2024 report. ""In total, RTX recorded an aggregate charge of $918 million in the quarter, bringing the total associated reserve for these matters to $1.24 billion,"" the company read in its report. The Wall Street Journal reported the investigations related to its business practices including a bribery probe, which followed allegations of corrupt exchanges with a Qatar ruling royal family member. RTX said: ""The company expects to enter into a deferred prosecution agreement with the DOJ and to be subject to an administrative order with the SEC to resolve the previously disclosed criminal and civil government investigations into improper payments made by Raytheon Company and its joint venture, Thales-Raytheon Systems (TRS), in connection with certain Middle East contracts since 2012."" It added: ""Based upon the current status of discussions, we believe that the finalization of our respective agreements with the DOJ, SEC and DOS will occur during the second half of 2024 and therefore, expect approximately $1bn of related payments to be made within the same timeframe with the balance to be paid over the next several years."" In its second quarter, RTX's reported net income was down 92% over the second quarter of last year, reporting $111 million, or an earnings per share (EPS) of eight cents per share. Sales were up 8% to $19.7bn. Its adjusted net income was flat - compared to second quarter 2023 - at $1.9bn, or an EPS of $1.41. Its adjusted sales were up 8% to $19.8bn. It reported an operating cash flow of $2.7bn, up from $719 million last year, as well as a free cash flow of $2.2bn in the quarter, up from $193 million last year. Its aerospace manufacturer subsidiary Pratt & Whitney reported sales were up 19% to $6.8bn and its operating profit was up more than double from $230 million to $542 million. ""The increase in commercial sales was primarily due to higher volume and favourable mix within aftermarket as well as higher GTF OE volume and favourable mix,"" the company said. In addition, Collins Aerospace's reported sales were up 10% to $7bn with an operating profit of $1.1bn, up 24%. The company said the increase in commercial sale was driven ""primarily by an increase in commercial air traffic, including in higher flight hours, and increased volume across all OEM sales channels."" RTX's backlog at the end of the quarter was valued at $206bn, including $129bn from commercial. In its outlook for the full year, it updated its adjusted sales to $78.75-$79.5bn, up from $78-79bn. Its adjusted EPS was revised to $5.35-$5.45, up from $5.25-$5.40. Following the reserves for legal disputes, its free cash flow is down from approximately $5.7bn to around $4.7bn for the full year.