8-KOther Events

RTX Corp 8-K Report, Corporate Update (Jan 6, 2016)

Filed January 6, 2016For Securities:RTX

Summary

This 8-K filing from RTX Corp (formerly United Technologies Corporation - UTC) announces significant amendments to research and development support arrangements between its subsidiary, Pratt & Whitney Canada Corp. (PWC), and Canadian federal and provincial government agencies. The core impact for investors is the recognition of a substantial pre-tax charge of approximately $870 million in the fourth quarter of 2015. This charge arises from PWC agreeing to make a series of four annual payments totaling approximately $965 million, commencing in January 2016, to fully settle and terminate contingent royalty obligations tied to future engine deliveries and company sales.

Key Highlights

  • 1Pratt & Whitney Canada Corp. (PWC) amended R&D support arrangements with Canadian government agencies on December 30, 2015.
  • 2UTC's Pratt & Whitney business recorded a pre-tax charge of approximately $870 million in Q4 2015 due to these amendments.
  • 3PWC will make four annual payments starting January 2016 to settle all contingent royalty obligations.
  • 4The total aggregate amount for these four payments is approximately $965 million.
  • 5PWC committed to maintaining assembly, test, and manufacturing operations in Canada.
  • 6PWC will invest approximately $8 million annually for 14 years in innovation and R&D initiatives in Canada, totaling around $112 million over the period.
  • 7The total financial commitment under these amendments (payments + R&D investment) is approximately $1.08 billion.

Frequently Asked Questions

RTX Corp (via its Pratt & Whitney business) recorded a pre-tax charge of approximately $870 million in the fourth quarter of 2015 related to these amendments.

PWC agreed to these amendments to fully settle and terminate its contractual obligations to pay royalties contingent upon future engine deliveries and company sales. This involves making four annual payments starting in January 2016, totaling approximately $965 million.

Yes, PWC has agreed to maintain its commitments for assembly, test, and manufacturing operations in Canada. Additionally, PWC will invest approximately $8 million per year for fourteen years in innovation and R&D initiatives through collaborations with post-secondary institutions and industry associations in Canada.

The total financial commitment includes the $965 million in settlement payments and the aggregate R&D investment of approximately $112 million over 14 years (14 years x $8 million/year), bringing the total to approximately $1.08 billion.