Exhibit 99.2

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
 
Overview

Effective as of 12:01 a.m. on April 3, 2020, United Technologies Corporation (since renamed Raytheon Technologies Corporation, as described below) (“UTC”) completed the previously announced separation into three independent companies through the distribution of all outstanding shares of common stock of Carrier Global Corporation (“Carrier”) and Otis Worldwide Corporation (“Otis”) to UTC shareowners through separate spin-off transactions (the “Separation and the Distributions”).

Additionally, pursuant to the agreement dated as of June 9, 2019, and amended as of March 9, 2020, UTC and Raytheon Company (“Raytheon”) completed their previously announced merger of equals (the “Merger”) effective as of 8:30 a.m. on April 3, 2020, with the combined company renamed Raytheon Technologies Corporation. Upon completion of the Merger, each share of Raytheon common stock that was issued and outstanding immediately prior to the completion of the Merger (other than excluded shares) was converted into the right to receive 2.3348 fully paid and nonassessable shares of UTC common stock, and, if applicable, cash in lieu of fractional shares, less any applicable withholding taxes. Immediately after the Merger, former holders of Raytheon common stock own approximately 43% and pre-Merger holders of UTC common stock own approximately 57% of the common stock of UTC.
 
Beginning in the second quarter of 2020, the financial results of Carrier and Otis for periods prior to April 3, 2020 will be reflected as discontinued operations in UTC’s consolidated financial statements.

In contemplation of the Separation and the Distributions, in the first quarter of 2020 Carrier and Otis issued $9.25 billion and $5.3 billion, respectively, of unsecured, unsubordinated notes in multiple series and distributed the net proceeds to UTC. Additionally, Carrier and Otis entered into term loan credit agreements providing for unsecured, unsubordinated 3-year term loan credit facilities in the amount of $1.75 billion and $1 billion, respectively, that were fully utilized in the first quarter of 2020 and those net proceeds were distributed to UTC. UTC utilized the cash provided by the Otis and Carrier financings, described above, to paydown approximately $17 billion of existing UTC debt in the first quarter of 2020. The above is collectively referred to as the “Financing Transactions.”

In conjunction with the Separation and the Distributions, separation and distribution, tax matters and other agreements (together, the “separation agreements”) were entered into among UTC, Carrier and Otis. Through these separation agreements UTC recognized certain assets and liabilities that may be due to or from Otis and Carrier, respectively, subsequent to the spin-off.

Additionally, for the year ended December 31, 2019, UTC incurred $1.3 billion of costs in connection with the Separation and the Distributions and the Merger (“transaction costs”) and Raytheon incurred $68 million for the Merger. These costs are one-time in nature and have been excluded from the unaudited pro forma combined statement of operations.

The Separation and the Distributions, the Financing Transactions, the assets and liabilities resulting from the separation agreements, and the transaction costs, described above, are collectively referred to as the “Separation, Distributions and Related Transactions” below.

Unaudited Pro Forma Combined Financial Information
 
The accompanying unaudited pro forma combined financial information was prepared in accordance with Article 11 of SEC Regulation S-X and gives effect to the following transactions:
 

 •
The Separation, Distributions and Related Transactions; and
 

 •
UTC’s merger with Raytheon with acquisition accounting applied to Raytheon as the accounting acquiree.
 
The historical consolidated financial information in the unaudited pro forma combined financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the Separation, Distributions and Related Transactions as well as the Merger, (2) factually supportable and (3) with respect to the unaudited pro forma combined statements of operations, expected to have a continuing impact on the combined results of UTC.
 
The unaudited pro forma combined financial information does not give effect to any cost savings, operating synergies or revenue synergies that may result from the Separation and the Distributions or the Merger or the costs to achieve any synergies.
 
The unaudited pro forma combined financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company’s financial position or results of operations would have been had the transactions been completed as of the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company.
 
The unaudited pro forma combined financial information contains estimated adjustments, based upon available information and certain assumptions that we believe are reasonable under the circumstances. The assumptions underlying the pro forma adjustments are described in greater detail in the accompanying notes to the unaudited pro forma combined financial information. In many cases related to the Merger, these assumptions are based on preliminary information and estimates.
 
The unaudited pro forma combined financial information is presented to illustrate the estimated effects of the Separation, Distributions and Related Transactions as well as the Merger, based on the historical financial position and results of operations of UTC and Raytheon as follows:
 

 •
The unaudited pro forma combined balance sheet as of December 31, 2019 was prepared based on:
 

 (1)
the historical audited consolidated balance sheet of UTC as of December 31, 2019; and
 

 (2)
the historical audited consolidated balance sheet of Raytheon as of December 31, 2019.
 

 •
The unaudited pro forma combined statement of operations for the year ended December 31, 2019 was prepared based on:
 

 (1)
the historical audited consolidated statement of operations of UTC for the year ended December 31, 2019; and
 

 (2)
the historical audited consolidated statement of operations of Raytheon for the year ended December 31, 2019.
 

 •
The unaudited pro forma combined statement of operations for the year ended December 31, 2018 was prepared based on the historical audited consolidated statement of operations of UTC for the year ended December 31, 2018.
 

 •
The unaudited pro forma combined statement of operations for the year ended December 31, 2017 was prepared based on the historical audited consolidated statement of operations of UTC for the year ended December 31, 2017.
 
The unaudited pro forma combined statements of operations assume the Separation, Distributions and Related Transactions and the Merger occurred on January 1, 2019. The unaudited pro forma combined balance sheet as of December 31, 2019 assumes the Separation, Distributions and Related Transactions and the Merger occurred on that date.
 
This historical financial information included in the unaudited pro forma combined financial information was derived from and should be read in conjunction with the accompanying notes, as well as the following historical consolidated financial statements and related notes of UTC and Raytheon:
 

 •
UTC’s consolidated financial statements and the notes thereto contained in its Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 6, 2020;
 

 •
Raytheon’s consolidated financial statements and notes thereto contained in its Annual Report on Form 10-K for the year ended December 31, 2019; and
 

 •
UTC’s Form S-4 Registration Statement (as amended) filed with the SEC on September 4, 2019 and declared effective on September 9, 2019.
 
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of December 31, 2019
(Dollars, in millions)
 
   
Historical United
Technologies
Corporation
    
Separation,
Distributions and
Related
Transactions
(Note 3)
    
Pro Forma
United
Technologies
Corporation Post
Separation
    
Historical
Raytheon
Company After
Reclassifications
(Note 4)
    
Pro Forma
Merger
Adjustments
(Notes 5
and 6)
      
Pro Forma
Combined
Company
  
Assets:
                                      
Cash and cash equivalents
  
$
7,378
    
$
(2,241
)
  
$
5,137
    
$
4,292
    
$
-
      
$
9,429
  
Accounts receivable, net
    
13,524
      
(4,210
)
    
9,314
      
1,364
      
(43
)
(a)
    
10,635
  
Contract assets, current
    
4,184
      
160
      
4,344
      
6,122
      
-
        
10,466
  
Inventory, net
    
10,950
      
(1,877
)
    
9,073
      
671
      
-
        
9,744
  
Other assets, current
    
1,461
      
1,098
      
2,559
      
633
      
243
  
(b)
    
3,435
  
Total Current Assets
    
37,497
      
(7,070
)
    
30,427
      
13,082
      
200
        
43,709
  
Customer financing assets
    
3,477
      
-
      
3,477
      
-
      
-
        
3,477
  
Future income tax benefits
    
1,611
      
(1,128
)
    
483
      
534
      
(238
)
(c)
    
779
  
Fixed assets, net
    
12,755
      
(2,433
)
    
10,322
      
3,605
      
1,045
  
(d)
    
14,972
  
Operating lease right-of-use assets
    
2,599
      
(1,347
)
    
1,252
      
875
      
43
  
(d)
    
2,170
  
Goodwill
    
48,063
      
(11,454
)
    
36,609
      
14,882
      
4,803
  
(e)
    
56,294
  
Intangible assets, net
    
26,046
      
(1,573
)
    
24,473
      
283
      
18,957
  
(f)
    
43,713
  
Other assets
    
7,668
      
(6,278
)
    
1,390
      
1,305
      
(57
)
(g)
    
2,638
  
Total Assets
  
$
139,716
    
$
(31,283
)
  
$
108,433
    
$
34,566
    
$
24,753
      
$
167,752
  
Liabilities and Equity:
                                                  
Short-term borrowings
  
$
2,364
    
$
(2,364
)
  
$
-
    
$
-
    
$
-
      
$
-
  
Accounts payable
    
10,809
      
(3,032
)
    
7,777
      
1,796
      
(43
)
(h)
    
9,530
  
Accrued liabilities
    
11,737
      
(452
)
    
11,285
      
3,357
      
439
  
(i)
    
15,081
  
Contract liabilities, current
    
6,180
      
2,993
      
9,173
      
2,998
      
(44
)
(j)
    
12,127
  
Long-term debt currently due
    
3,496
      
(3,126
)
    
370
      
1,499
      
-
        
1,869
  
Total Current Liabilities
    
34,586
      
(5,981
)
    
28,605
      
9,650
      
352
        
38,607
  
Long-term debt
    
37,788
      
(11,927
)
    
25,861
      
3,261
      
149
  
(k)
    
29,271
  
Future pension and postretirement benefit obligations
    
3,502
      
(1,016
)
    
2,486
      
8,056
      
(249
)
(l)
    
10,293
  
Operating lease liabilities
    
2,144
      
(1,051
)
    
1,093
      
706
      
-
        
1,799
  
Contract liabilities, long-term
    
5,732
      
(5,732
)
    
-
      
-
      
-
        
-
  
Other long-term liabilities
    
11,638
      
(4,149
)
    
7,489
      
638
      
4,178
  
(c)(m)
    
12,305
  
Total Liabilities
  
$
95,390
    
$
(29,856
)
  
$
 65,534
    
$
22,311
    
$
4,430
      
$
92,275
  
Commitments and contingent liabilities
                                                  
Redeemable noncontrolling interest
  
$
95
    
$
(95
)
  
$
-
    
$
32
    
$
-
      
$
32
  
Shareowners’ Equity:
                                                  
Capital Stock:
                                                  
Preferred stock
    
-
      
-
      
-
      
-
      
-
        
-
  
Common stock
    
23,019
      
2,532
      
25,551
      
3
      
10,425
  
(n)
    
35,979
  
Treasury Stock
    
(32,626
)
    
-
      
(32,626
)
    
-
      
22,268
  
(n)
    
(10,358
)
Retained earnings
    
61,594
      
(5,713
 )
   
55,881
      
21,480
      
(21,630
)
(n)
    
55,731
  
Unearned ESOP shares
    
(64
)
            
(64
)
    
-
      
-
        
(64
)
Total Accumulated other comprehensive loss
    
(10,149
)
    
2,713
      
(7,436
)
    
(9,260
)
    
9,260
  
(n)
    
(7,436
)
Total Shareowners’ Equity
    
41,774
      
(468
)
    
41,306
      
12,223
      
20,323
        
73,852
  
Noncontrolling interest
    
2,457
      
(864
)
    
1,593
      
-
      
-
        
1,593
  
Total Equity
  
$
44,231
    
$
(1,332
)
  
$
42,899
    
$
12,223
    
$
20,323
      
$
75,445
  
Total Liabilities and Equity
  
$
139,716
    
$
(31,283
)
  
$
108,433
    
$
34,566
    
$
24,753
      
$
167,752
  
 
See accompanying “Notes to Unaudited Pro Forma Combined Financial Information.”

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 2019
(Dollars and shares, in millions, except per share amounts)
 
   
Historical United
Technologies
Corporation
    
Separation,
Distributions and
Related
Transactions
(Note 3)
    
Pro Forma
United
Technologies
Corporation Post
Separation
    
Historical
Raytheon
Company After
Reclassifications
(Note 4)
    
Pro Forma
Merger
Adjustments
(Notes 5
and 7)
      
Pro Forma
Combined Company
  
Net Sales:
                                      
Product sales
  
$
54,004
    
$
(21,005
)
  
$
32,999
    
$
24,435
    
$
(288
)
(o)
  
$
57,146
  
Service sales
    
23,042
      
(10,692
)
    
12,350
      
4,741
      
-
        
17,091
  
     
77,046
      
(31,697
)
    
45,349
      
29,176
      
(288
)
      
74,237
  
Costs and Expenses:
                                                  
Cost of products sold
    
42,444
      
(15,531
)
    
26,913
      
17,747
      
1,092
  
(p)
    
45,752
  
Cost of services sold
    
14,621
      
(6,934
)
    
7,687
      
3,666
      
1
  
(p)
    
11,354
  
Research and development
    
3,015
      
(564
)
    
2,451
      
732
      
3
  
(q)
    
3,186
  
Selling, general, and administrative
    
8,521
      
(4,814
)
    
3,707
      
2,225
      
(179
)
(r)
    
5,753
  
     
68,601
      
(27,843
)
    
40,758
      
24,370
      
917
        
66,045
  
Other income (expense), net
    
521
      
(206
)
    
315
      
38
      
-
        
353
  
Operating profit
    
8,966
      
(4,060
)
    
4,906
      
4,844
      
(1,205
)
      
8,545
  
Non-service pension (benefit) cost
    
(888
)
    
47
      
(841
)
    
688
      
(1,059
)
(s)
    
(1,212
)
Interest expense (income), net
    
1,611
      
(664
)
    
947
      
138
      
(6
)
(t)
    
1,079
  
Income (loss) from operations before income taxes
  
$
8,243
    
$
(3,443
)
  
$
4,800
    
$
4,018
    
$
(140
)
    
$
8,678
  
Income tax expense (income)
    
2,295
      
(1,722
)
    
573
      
690
      
(45
)
(u)
    
1,218
  
Net income (loss)
  
$
5,948
    
$
(1,721
)
  
$
4,227
    
$
3,328
    
$
(95
)
    
$
7,460
  
Less: Noncontrolling interest in subsidiaries’ earnings from operations
    
411
      
(190
)
    
221
      
(14
)
    
-
        
207
  
Net income (loss) attributable to UTC common shareowners
  
$
5,537
    
$
(1,531
)
  
$
4,006
    
$
3,342
    
$
(95
)
    
$
7,253
  
Pro forma earnings per share of common stock:
                                                  
Basic
  
$
6.48
                                  
 
$
4.82
  
Diluted
  
$
6.41
                                  
 
$
4.78
  
Pro forma weighted average common shares outstanding
                                        
       
Basic
    
854.8
                                  
(v)
    
1,503.6
  
Diluted
    
863.9
                                  
(w)
    
1,515.8
  
 
See accompanying “Notes to Unaudited Pro Forma Combined Financial Information.”

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 2018
(Dollars and shares, in millions, except per share amounts)
 
   
Historical United
Technologies
Corporation
    
Otis
Distribution
    
Carrier
Distribution
    
Pro Forma United
Technologies
Corporation Post
Separation
  
Net Sales:
                        
Product sales
  
$
45,434
    
$
(5,636
)
  
$
(15,657
)
  
$
24,141
  
Service sales
    
21,067
      
(7,268
)
    
(3,240
)
    
10,559
  
     
66,501
      
(12,904
)
    
(18,897
)
    
34,700
  
Costs and Expenses:
                                
Cost of products sold
    
36,754
      
(4,624
)
    
(11,047
)
    
21,083
  
Cost of services sold
    
13,231
      
(4,568
)
    
(2,282
)
    
6,381
  
Research and development
    
2,462
      
(185
)
    
(400
)
    
1,877
  
Selling, general, and administrative
    
7,066
      
(1,636
)
    
(2,566
)
    
2,864
  
     
59,513
      
(11,013
)
    
(16,295
)
    
32,205
  
Other income (expense), net
    
1,565
      
(26
)
    
(1,157
)
    
382
  
Operating profit
    
8,553
      
(1,917
)
    
(3,759
)
    
2,877
  
Non-service pension (benefit) cost
    
(765
)
    
10
      
96
      
(659
)
Interest expense (income), net
    
1,038
      
8
      
(14
)
    
1,032
  
Income (loss) from operations before income taxes
  
$
8,280
    
$
(1,935
)
  
$
(3,841
)
  
$
2,504
  
Income tax expense (income)
    
2,626
      
(528
)
    
(951
)
    
1,147
  
Net income (loss)
  
$
5,654
    
$
(1,407
)
  
$
(2,890
)
  
$
1,357
  
Less: Noncontrolling interest in subsidiaries’ earnings from operations
    
385
      
(161
)
    
(34
)
    
190
  
Net income (loss) attributable to UTC common shareowners
  
$
5,269
    
$
(1,246
)
  
$
(2,856
)
  
$
1,167
  
Pro forma earnings per share of common stock:
                                
Basic
  
$
6.58
                    
$
1.46
  
Diluted
  
$
6.50
                    
$
1.44
  
Pro forma weighted average common shares outstanding
                                
Basic
    
800.4
                      
800.4
  
Diluted
    
810.1
                      
810.1
  
 
See accompanying “Notes to Unaudited Pro Forma Combined Financial Information.”

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 2017
(Dollars and shares in millions, except per share amounts)
 
   
Historical United
Technologies
Corporation
    
Otis
Distribution
    
Carrier
Distribution
    
Pro Forma United
Technologies
Corporation Post
Separation
  
Net Sales:
                        
Product sales
  
$
41,361
    
$
(5,498
)
  
$
(14,743
)
  
$
21,120
  
Service sales
    
18,476
      
(6,842
)
    
(3,039
)
    
8,595
  
     
59,837
      
(12,340
)
    
(17,782
)
    
29,715
  
Costs and Expenses:
                                
Cost of products sold
    
31,224
      
(4,392
)
    
(10,448
)
    
16,384
  
Cost of services sold
    
12,977
      
(4,220
)
    
(2,155
)
    
6,602
  
Research and development
    
2,427
      
(187
)
    
(364
)
    
1,876
  
Selling, general, and administrative
    
6,429
      
(1,584
)
    
(2,457
)
    
2,388
  
     
53,057
      
(10,383
)
    
(15,424
)
    
27,250
  
Other income (expense), net
    
1,358
      
(37
)
    
(793
)
    
528
  
Operating profit
    
8,138
      
(1,994
)
    
(3,151
)
    
2,993
  
Non-service pension (benefit) cost
    
(534
)
    
(7
)
    
86
      
(455
)
Interest expense (income), net
    
909
      
11
      
2
      
922
  
Income (loss) from operations before income taxes
  
$
7,763
    
$
(1,998
)
  
$
(3,239
)
  
$
2,526
  
Income tax expense (income)
    
2,843
      
(685
)
    
(1,134
)
    
1,024
  
Net income (loss)
  
$
4,920
    
$
(1,313
)
  
$
(2,105
)
  
$
1,502
  
Less: Noncontrolling interest in subsidiaries’ earnings from operations
    
368
      
(173
)
    
(40
)
    
155
  
Net income (loss) attributable to UTC common shareowners
  
$
4,552
    
$
(1,140
)
  
$
(2,065
)
  
$
1,347
  
Pro forma earnings per share of common stock:
                                
Basic
  
$
5.76
                    
$
1.71
  
Diluted
  
$
5.70
                    
$
1.69
  
Pro forma weighted average common shares outstanding
                                
Basic
    
790.0
                      
790.0
  
Diluted
    
799.1
                      
799.1
  
 
See accompanying “Notes to Unaudited Pro Forma Combined Financial Information.”

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
 
Note 1: Basis of presentation
 
Beginning in the second quarter of 2020, the Separation and the Distributions qualify as discontinued operations to UTC and are, therefore, presented in the unaudited pro forma combined financial information in accordance with the guidance in ASC 205, Financial Statement Presentation. As such, the unaudited pro forma combined financial statements of operations do not allocate any general corporate overhead expenses of UTC to Otis and Carrier, including corporate overhead that had previously been reflected in the Carrier and Otis segment results as a part of UTC. Additionally, certain assets and liabilities that were a part of the historical operations of Carrier and Otis but were reported within the Corporate segment of UTC have been included in the pro forma combined balance sheets of Otis and Carrier below as those balances will not be a part of the continuing operations of UTC. Based on this and other estimates and assumptions, the unaudited pro forma combined financial information does not reflect what the results of operations would have been on a standalone basis and are not necessarily indicative of the future operations of UTC. Refer to Note 3 for further details on the Separation and the Distributions of Otis and Carrier.
 
The unaudited pro forma combined financial information also reflects the Merger under the acquisition method of accounting in accordance with ASC 805, Business Combinations. UTC management has determined that UTC is the acquiror for financial accounting purposes. In identifying UTC as the accounting acquirer, the companies considered the structure of the transaction and other actions contemplated by the merger agreement, relative outstanding share ownership and market values, the composition of the combined company’s board of directors, the relative size of UTC and Raytheon, and the designation of certain senior management positions of the combined company. Under the acquisition method of accounting, the preliminary purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values, with any excess purchase price allocated to goodwill. To prepare the unaudited pro forma combined financial information, UTC adjusted Raytheon’s assets and liabilities to their estimated fair values based on preliminary valuations. As of the date of this filing, UTC has not completed the detailed valuations necessary to finalize the required estimated fair values and estimated useful lives of Raytheon’s assets to be acquired and liabilities to be assumed and the related allocation of the purchase price. Accordingly, the final acquisition accounting adjustments may be materially different from the unaudited pro forma adjustments.
 
In order to complete the Merger, both UTC and Raytheon are required by regulatory authorities to dispose of certain businesses, none of which were determined to be material to the operations of the combined company and, accordingly, the anticipated disposals are not reflected in the unaudited pro forma combined statement of operations. The unaudited pro forma combined balance sheet reflects the Raytheon business at fair value less cost to sell.
 
The unaudited pro forma combined financial information has been compiled in a manner consistent with the accounting policies adopted by UTC. Certain financial information of Raytheon as presented in its historical consolidated financial statements has been reclassified to conform to the historical presentation in UTC’s consolidated financial statements for the purposes of preparing the unaudited pro forma combined financial information. Upon completion of the Merger, more detailed review of Raytheon’s accounting policies could result in additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the consolidated financial statements.
 
The historical operations of UTC for the year ended December 31, 2018 include UTC’s acquisition of Rockwell Collins on November 26, 2018 and its results of operations since that date.
 
Note 2: Accounting policies
 
The unaudited pro forma combined financial information reflects adjustments to conform Raytheon’s results to UTC’s accounting policies. Refer to Note 4 for detail of adjustments made.  Additionally, in connection with the Separation and the Distributions, UTC determined that the duration of its contracts or programs, which is generally longer than one year, would represent its operating cycle and accordingly contract-related assets and liabilities are presented as current in the combined balance sheet. Refer to Note 3 for details of the adjustment made.
 
Note 3: The Separation, Distributions and Related Transactions
 
The following presents the adjustments to Historical United Technologies Corporation’s balance sheet for the year ended December 31, 2019 to remove Otis and Carrier on a discontinued operations basis and adjust for pro forma impacts of the Related Transactions:
 
(Dollars, in millions)
  
Otis
Distribution
    
Carrier
Distribution
    
Related
Transactions
      
Separation,
Distributions
and Related
Transactions
  
Assets:
                          
Current Assets
                          
Cash and cash equivalents
  
$
1,446
    
$
995
    
$
(200
)
(i)
  
$
2,241
  
Accounts receivable, net
    
2,861
      
2,726
      
(1,377
)
(v)
    
4,210
  
Contract assets, current
    
556
      
622
      
(1,338
)
(v)
    
(160
)
Inventories and contracts in progress, net
    
545
      
1,332
      
-
        
1,877
  
Other assets, current
    
210
      
228
      
(1,536
)
(v)
    
(1,098
)
Total Current Assets
    
5,618
      
5,903
      
(4,451
)
      
7,070
  
Customer financing assets
    
-
      
-
      
-
        
-
  
Future income tax benefits
    
342
      
356
      
430
  
(vii)
    
1,128
  
Fixed assets, net
    
747
      
1,686
      
-
        
2,433
  
Operating lease right-of-use assets
    
529
      
818
      
-
        
1,347
  
Goodwill
    
1,647
      
9,807
      
-
        
11,454
  
Intangible assets, net
    
490
      
1,083
      
-
        
1,573
  
Other assets
    
263
      
2,521
      
3,494
  
(ii)
(iv)
(v)
    
6,278
  
Total Assets
    
9,636
      
22,174
      
(527
)
      
31,283
  
Liabilities and Equity (Deficit):
                                  
Current Liabilities
                                  
Short-term borrowings
    
34
      
274
      
2,056
  
(i)
    
2,364
  
Accounts payable
    
1,331
      
1,701
      
-
        
3,032
  
Accrued liabilities
    
1,807
      
1,961
      
(3,316
)
(iii)
(v)
(vi)
    
452
  
Contract liabilities, current
    
2,270
      
469
      
(5,732
)
(v)
    
(2,993
)
Long-term debt currently due
    
-
      
-
      
3,126
  
(i)
    
3,126
  
Total Current Liabilities
    
5,442
      
4,405
      
(3,866
)
      
5,981
  
Long-term debt
    
5
      
89
      
11,833
  
(i)
    
11,927
  
Future pension and postretirement benefit obligations
    
560
      
456
      
-
        
1,016
  
Operating lease liabilities
    
383
      
668
      
-
        
1,051
  
Contract liabilities, non-current
    
-
      
-
      
5,732
  
(v)
    
5,732
  
Other long-term liabilities
    
613
      
1,375
      
2,161
  
(v)
(vii)
    
4,149
  
Total Liabilities
    
7,003
      
6,993
      
15,860
        
29,856
  
Commitments and contingent liabilities
                                  
Redeemable noncontrolling interest
    
95
      
-
      
-
        
95
  
Shareowners’ Equity:
                              
-
  
Capital Stock:
    
-
      
-
      
-
        
-
  
Common stock
    
3,871
      
-
      
(6,403
)
      
(2,532
)
Treasury Stock
    
-
      
-
      
-
        
-
  
Retained earnings
    
-
      
15,697
      
(9,984
)
      
5,713
  
Unearned ESOP shares
    
-
      
-
      
-
        
-
  
Total Accumulated other comprehensive loss
    
(1,864
)
    
(849
)
    
-
        
(2,713
)
Total Shareowners’ Equity
    
2,007
      
14,848
      
(16,387
)
      
468
  
Noncontrolling interest
    
531
      
333
      
-
        
864
  
Total Equity
    
2,538
      
15,181
      
(16,387
)
      
1,332
  
Total Liabilities and Equity
    
9,636
      
22,174
      
(527
)
      
31,283
  


i.
Reflects the net proceeds of $17.2 billion distributed by Carrier and Otis to UTC from the additional debt incurred by Carrier and Otis, which proceeds UTC used to extinguish approximately $17.0 billion of historical UTC debt in the first quarter of 2020 in order to achieve the applicable net indebtedness required by the merger agreement between UTC and Raytheon.
 

 ii.
Pursuant to the tax matters agreement entered into among UTC, Carrier and Otis, Carrier and Otis will be required to make payments to UTC representing the respective remaining net tax liabilities retained by UTC attributable to U.S. income tax on previously undistributed earnings of Carrier’s and Otis’ international subsidiaries resulting from the passage of the Tax Cuts and Jobs Act of 2017. Accordingly, UTC has a future receivable for amounts paid by UTC on behalf of Otis and Carrier, which is expected to be approximately $699 million that is recorded within Other assets.


iii.
Pursuant to the tax matters agreement, certain tax liabilities which are attributable to separation activities and transferred to Otis at separation will be paid by Otis subsequent to the separation from UTC. Otis will be reimbursed by UTC for such amounts paid. Accordingly, a payable in the amount of $137 million has been recorded by UTC within Accrued liabilities.
 

 iv.
Pursuant to the tax matters agreement, Otis and Carrier are responsible for unrecognized tax benefits retained by UTC to the extent a reserve relates exclusively to the Otis business or Carrier business, respectively. Accordingly, UTC has a $58 million receivable recorded in Other assets for amounts due from Otis and Carrier related to these unrecognized tax benefits.
 

 v.
As noted above, in connection with the Separation and the Distributions UTC determined that the duration of its contracts and programs, the average duration of which exceeds one year, represents its operating cycle, and accordingly accounts receivable of $1.4 billion, contract assets of $1.3 billion, and other current assets of $1.5 billion were reclassified from Other assets to Accounts receivable, Contract assets, current, and Other assets, current, respectively. Additionally, $2.1 billion of accrued liabilities and $5.7 billion of contract liabilities were reclassified from Other long-term liabilities to Accrued liabilities and Contract liabilities, long-term to Contract liabilities, current, respectively.
 

 vi.
Reflects an adjustment for directly-attributable costs related to the Separation and the Distributions of $1.1 billion, which were not yet incurred, and therefore accrued by UTC as of December 31, 2019. Such costs primarily represent tax expenses incurred in connection with separation activities, costs to separate IT systems and professional services related to the separation.
 

 vii.
Reflects an adjustment to deferred tax assets of $430 million and a reduction of future income taxes payable of $90 million for deferred tax assets that are not expected to be utilized by UTC as a result of the Separation and the Distributions.

The following presents the unaudited pro forma combined statement of operations for the year ended December 31, 2019 reflecting the Separation and the Distributions, as well as the impact of the Related Transactions:
 
(Dollars, in millions)
  
Otis
Distribution
    
Carrier
Distribution
    
Related
Transactions
      
Separation,
Distributions
and Related
Transactions
  
Net Sales:
                          
Product sales
  
$
5,669
    
$
15,336
      
-
      
$
21,005
  
Service sales
    
7,444
      
3,248
      
-
        
10,692
  
     
13,113
      
18,584
      
-
        
31,697
  
Costs and expenses:
                                  
Cost of products sold
    
4,656
      
10,875
      
-
        
15,531
  
Cost of services sold
    
4,635
      
2,299
      
-
        
6,934
  
Research and development
    
163
      
401
      
-
        
564
  
Selling, general, and administrative
    
1,674
      
2,573
      
567
  
(ii)
    
4,814
  
     
11,128
      
16,148
      
567
        
27,843
  
Other income (expense), net
    
(13
)
    
246
      
(27
)
(ii)
    
206
  
Operating profit
    
1,972
      
2,682
      
(594
)
      
4,060
  
Non-service pension (benefit) cost
    
16
      
(63
)
    
-
        
(47
)
Interest expense (income), net
    
(5
)
    
25
      
644
  
(i)
    
664
  
Income (loss) from operations before income taxes
    
1,961
      
2,720
      
(1,238
)
      
3,443
  
Income tax expense (income)
    
522
      
672
      
528
  
(i)
(ii)
    
1,722
  
Net income (loss)
    
1,439
      
2,048
      
(1,766
)
      
1,721
  
Less: Noncontrolling interest in subsidiaries’ earnings
    
151
      
39
      
-
        
190
  
Net income (loss) attributable to UTC common shareowners
    
1,288
      
2,009
      
(1,766
)
      
1,531
  


i.
Reflects a reduction in interest expense as result of UTC’s paydown of debt to meet its targeted indebtedness, in connection with the merger agreement, calculated using a weighted average interest rate of 3.7%, based on the indebtedness of UTC during the year ended December 31, 2019 that is assumed to have been extinguished as of January 1, 2019, as well as a related reduction in tax benefit of $126 million. A 1/8% change in the estimated interest rate would increase or decrease the interest expense of UTC by $21.8 million.
 

 ii.
Reflects the elimination of non-recurring transaction costs incurred by UTC of $594 million, primarily related to accounting, tax and other professional services costs pertaining to the separation and the establishment of Otis and Carrier as stand-alone public companies, facility relocation costs, costs to separate information systems and costs of retention bonuses. Additionally, net tax charges related to separation activities of $654 million were incurred during the year ended December 31, 2019.
 
Note 4: Reclassification adjustments
 
Certain reclassifications have been made to the historical presentation of Raytheon’s balance sheet and statements of operations to conform to the financial statement presentation of UTC.
 
Reclassifications to Raytheon’s consolidated balance sheet as of December 31, 2019 are as follows:
 
(Dollars, in millions)
  
Before
Reclassifications
    
Reclassifications
    
 
Notes
    
After
Reclassifications
  
Assets:
                         
Current Assets
                         
Cash and cash equivalents
  
$
4,292
      $      
   
$
4,292
  
Accounts receivable, net
    
1,364
                    
1,364
  
Contract assets, current
    
6,122
                    
6,122
  
Inventories and contracts in progress, net
    
671
                    
671
  
Other assets, current
    
633
                    
633
  
Total Current Assets
    
13,082
                    
13,082
  
Customer financing assets
    
-
                    
-
  
Future income tax benefits
    
-
      
534
    
(i)
      
534
  
Fixed assets, net
    
3,353
      
252
    
(ii)
      
3,605
  
Operating lease right-of-use assets
    
875
                    
875
  
Goodwill
    
14,882
                    
14,882
  
Intangible assets, net
    
-
      
283
    
(iii)
      
283
  
Other assets
    
2,374
      
(1,069
)
  
(i)
(ii)(iii)
      
1,305
  
Total Assets
   $
34,566
                  
$
34,566
  
Liabilities and Equity:
                              
Short-term borrowings
   $
-
                   $
-
  
Accounts payable
    
1,796
                    
1,796
  
Accrued liabilities
    
-
      
3,357
    
(iv)(v)
(vii)(ix)
      
3,357
  
Accrued employee compensation
    
1,813
      
(1,813
)
  
(vii)
      
-
  
Contract liabilities, current
    
3,267
      
(269
)
  
(ix)
      
2,998
  
Long-term debt currently due
    
-
      
1,499
    
(viii)
      
1,499
  
Commercial paper and current portion of long-term debt
    
1,499
      
(1,499
)
  
(viii)
      
-
  
Other current liabilities
    
1,416
      
(1,416
)
  
(iv)
      
-
  
Total Current Liabilities
    
9,791
                    
9,650
  
Long-term debt
    
3,261
                    
3,261
  
Future pension and postretirement benefit obligations
    
-
      
8,056
    
(vi)
      
8,056
  
Other long-term liabilities
    
-
      
638
    
(v) (vi)
      
638
  
Accrued retiree benefits and other long-term liabilities
    
8,553
      
(8,553
)
  
(vi)
      
-
  
Operating lease liabilities
    
706
                    
706
  
Total Liabilities
   $
22,311
                  
$
22,311
  
Commitments and contingent liabilities
                              
Redeemable noncontrolling interest
   $
32
                   $
32
  
Shareowners’ Equity:
                              
Common Stock
    
3
                    
3
  
Treasury Stock
    
-
                        
Retained earnings
    
21,480
                    
21,480
  
Unearned ESOP shares
    
-
                        
Additional Paid in Capital
    
-
                        
Total Accumulated other comprehensive loss
    
(9,260
)
                  
(9,260
)
Total Shareowners’ Equity
    
12,223
                  
12,223
  
Noncontrolling interest
    
-
                    
-
  
Total Equity
   $
12,223
                   $
12,223
  
Total Liabilities and Equity
   $
34,566
                  
$
34,566
  

i.
Represents the reclassification of $534 million of non-current deferred income tax benefits from Other assets to Future income tax benefits.
 
ii.
Represents the reclassification of $252 million of computer software developed for internal use from Other assets to Fixed assets, net.
 
iii.
Represents the reclassification of $283 million of intangible assets from Other assets to Intangible assets, net.
 
iv.
Represents the reclassification of Other current liabilities to Accrued liabilities.
 
v.
Represents the reclassification of $100 million of long-term environmental remediation costs and $41 million of asset retirement obligations from Accrued liabilities to Other long-term liabilities.
 
vi.
Represents the reclassifications of $8.1 billion from Accrued retiree benefits and other long-term liabilities to Future pension and postretirement benefit obligations and $497 million from Accrued retiree benefits and other long-term liabilities to Other long-term liabilities.
 
vii.
Represents the reclassification of Accrued employee compensation to Accrued liabilities.
 
viii.
Represents the reclassification of Commercial paper and current portion of long-term debt to Long-term debt currently due.
 
ix.
Represents the reclassification of loss reserves from Contract liabilities, current to Accrued liabilities.
 
Reclassifications to Raytheon’s consolidated statement of operations for the year ended December 31, 2019 are as follows:
 
(Dollars, in millions)
  
Before
Reclassifications
    
Reclassifications
  
Notes
  
After
Reclassifications
  
Net Sales:
                    
Product sales
  
$
24,435
    
$
-
      
$
24,435
  
Service sales
    
4,741
                
4,741
  
     
29,176
                
29,176
  
Costs and expenses:
                          
Cost of products sold
    
17,747
                
17,747
  
Cost of services sold
    
3,666
                
3,666
  
Research and development
    
-
      
732
  
(i)
    
732
  
Selling, general, and administrative
    
2,989
      
(764
)
(i) (iv)
    
2,225
  
     
24,402
                
24,370
  
Other income, net
    
-
      
38
  
(ii)
    
38
  
Operating Profit
    
4,774
                
4,844
  
Non-service pension (benefit) cost
    
688
                
688
  
Interest expense (income), net
    
-
      
138
  
(iii)
    
138
  
Interest expense
    
180
      
(180
)
(iii)
    
-
  
Interest income
    
(42
)
    
42
  
(iii)
    
-
  
Other (income) expense, net
    
(38
)
    
38
  
(ii)
    
-
  
Income (loss) from continuing operations before income taxes
    
3,986
                
4,018
  
Income tax expense (income)
    
658
      
32
  
(iv)
    
690
  
Net income from continuing operations
    
3,328
                
3,328
  
Income (loss) from discontinued operations, net of tax
    
1
                
1
  
Net Income
    
3,329
                
3,329
  
Less: Noncontrolling interest in subsidiaries’ earnings (loss)
    
(14
)
              
(14
)
Net income (loss) attributable to Raytheon common stockholders
  
$
3,343
               
$
3,343
  

i.
Represents the reclassification of $732 million of research and development costs from Selling, general, and administrative expenses to Research and development expenses.
 
ii.
Represents the reclassification of Other (income) expense, net within Income (loss) from operations to Other income, net within Operating profit.
 
iii.
Represents the reclassification of Interest expense and Interest income to Interest expense (income), net.
 
iv.
Represents the reclassification of $32 million of state income taxes from Selling, general, and administrative expenses to Income tax expense (income).
 
Note 5: Purchase price accounting and estimated merger consideration
 
The unaudited pro forma combined balance sheet has been adjusted to reflect a preliminary allocation of the estimated purchase price to Raytheon’s identifiable assets acquired and liabilities assumed, with the excess recorded as goodwill. The preliminary purchase price allocation in this unaudited pro forma combined financial information is based upon an estimated purchase price of approximately $32.7 billion as determined by (1) the price per share of UTC common stock on an “ex-distribution” market as of April 2, 2020, in which UTC shares trade without the right to receive shares of Carrier and Otis common stock distributed pursuant to the Distributions, multiplied by the approximately 649 million shares of UTC common stock that were issued (400 million from Treasury stock) to Raytheon stockholders in connection with the Merger, and the approximately 7.0 million shares of UTC common stock that were issued to Raytheon equity award holders in exchange for awards that will vest upon completion of the Merger, (2) the portion of the fair value attributable to pre-Merger completion service for replacement equity awards that were exchanged for the outstanding awards held by Raytheon employees, and (3) estimated cash consideration payable in lieu of fractional shares owed to current Raytheon equity and equity award holders.
 
The pro forma purchase price adjustments are preliminary and are subject to change. Increases or decreases in the estimated fair value of assets and liabilities may result in adjustments that could materially impact the unaudited pro forma combined financial information.
 
Total estimated merger consideration is calculated as follows:
 
(Dollars, in millions)
  
Amount
  
Fair value of UTC common stock issued for Raytheon outstanding common stock and vested equity awards
  
$
32,578
  
Fair value attributable to pre-merger service for replacement equity awards
    
118
  
Total estimated merger consideration
  
$
32,696
  

The fair value of UTC common stock issued for Raytheon outstanding common stock and equity awards that are vested or expected to vest upon completion of the Merger is calculated as follows:
 
(Dollars and shares in millions, except per share amounts)
  
Amount
  
Number of Raytheon ordinary shares outstanding as of April 3, 2020
    
277.3
  
Number of Raytheon stock awards expected to vest as a result of the Merger (i)
    
0.6
  
Total outstanding shares of Raytheon common stock and equity awards entitled to merger consideration
    
277.9
  
Exchange ratio (ii)
    
2.3348
  
Shares of UTC common stock issued for Raytheon outstanding common stock and vested equity awards
    
648.8
  
 Price per share of UTC common stock, excluding Otis and Carrier (iii)
    
50.21
  
Fair value of UTC common stock issued for Raytheon outstanding common stock and vested equity awards
    
32,578
  

(i)
Represents Raytheon stock awards that vested as a result of the Merger, which is considered a “change in control” for purposes of the Raytheon 2010 Stock Plan. Certain Raytheon restricted stock awards and Raytheon RSU awards, issued under the Raytheon 2010 Stock Plan vested on an accelerated basis as a result of the Merger. Such vested awards were converted into the right to receive UTC common stock determined as the product of (1) the number of vested awards, and (2) the exchange ratio.
 
(ii)
The exchange ratio is equal to 2.3348 in accordance with the merger agreement.
 
(iii)
The price per share of UTC common stock is based on an “ex-distribution” market as of April 2, 2020, in which UTC shares trade without the right to receive shares of Carrier and Otis common stock distributed pursuant to the Distributions.
 
The fair value of UTC common stock expected to be issued to replace Raytheon outstanding equity awards is calculated as follows:
 
(Dollars and shares in millions, except per share amounts)
  
Amount
  
Number of Raytheon stock awards outstanding (i)
    
3.0
  
Exchange ratio (ii)
    
2.3348
  
UTC equity awards issued for Raytheon outstanding stock awards
    
7.0
  
Price per share of UTC common stock, excluding Otis and Carrier (iii)
    
50.21
  
Fair value of UTC equity awards issued for Raytheon outstanding stock awards
    
353
  
Less: Estimated fair value allocated to post acquisition compensation expense
    
(235
)
Fair value of awards included in purchase accounting
    
118
  

(i)
Represents Raytheon stock awards that were replaced with UTC stock awards upon completion of the Merger. Raytheon stock awards include awards issued under the Raytheon 2010 Stock Plan and Raytheon 2019 Stock Plan, inclusive of Raytheon restricted stock awards, Raytheon RSU awards, and Raytheon PSU awards.
 
(ii)
The exchange ratio is equal to 2.3348 in accordance with the terms of the merger agreement.
 
(iii)
The price per share of UTC common stock is based on an “ex-distribution” market as of April 2, 2020, in which UTC shares trade without the right to receive shares of Carrier and Otis common stock distributed pursuant to the Distributions. 
 
The following is a preliminary estimate of the assets to be acquired and the liabilities to be assumed by UTC, as if the Merger had occurred on December 31, 2019:
 
(Dollars, in millions)
  
Amount
  
Current assets, including cash acquired
  
$
13,282
  
Fixed assets
    
4,650
  
Goodwill
    
19,685
  
Intangible assets
    
19,240
  
Other assets
    
2,462
  
Total assets
  
$
59,319
  
Future pension and postretirement benefit obligations
    
7,807
  
Long-term debt, including current portion
    
4,909
  
Other liabilities assumed
    
13,875
  
Total Liabilities
  
$
26,591
  
Redeemable noncontrolling interest
    
32
  
Total consideration transferred
  
$
32,696
  

Note 6: Adjustments to Unaudited Pro Forma Combined Balance Sheet
 
  a)
Accounts receivable, net: Represents the elimination of accounts receivable of $43 million owed to UTC from Raytheon.
 
  b)
Other assets, current: Represents elimination of deferred sales commissions of $26 million, an increase of $210 million for Raytheon’s assets held for sale that will be sold to meet regulatory requirements of the Merger and an increase of $59 million  for the elimination of deferred state income taxes which under historical Raytheon policy reduced future recoverable amounts.
 
  c)
Future income tax benefits: Deferred income taxes are included in Future income tax benefits and Other long-term liabilities in the unaudited pro forma combined balance sheet as of December 31, 2019. Deferred tax adjustments include a $238 million decrease in Future income tax benefits and a $4.2 billion increase in Other long-term liabilities. These are as a result of the estimated tax impact for the pro forma adjustments. Pro forma adjustments were tax effected at the applicable blended statutory tax rates, generally 23% in 2019. This estimate is preliminary and subject to change based upon final determination of fair values and tax rates. Additionally, the amounts recorded for deferred taxes relating to undistributed earnings may change subsequent to the Separation and the Distributions.
 
  d)
Fixed assets, net: Represents the adjustment in carrying value of Raytheon’s fixed assets from its recorded net book value to its preliminary estimated fair value. The estimated fair value is expected to be depreciated over the estimated useful lives of the assets, generally on a straight-line basis. The fixed assets acquired primarily consist of the following:
 
(Dollars, in millions)
Estimated
Useful Life
  
Raytheon Historical
Carrying Amount
Before
Reclassification
    
Fair Value
Adjustment
    
Estimated
Fair Value
  
Land
    
$
81
    
$
518
    
$
599
  
Buildings and improvements
20 years
    
1,112
      
402
      
1,514
  
Machinery, tools and equipment
6 years
    
1,101
      
125
      
1,226
  
Other, including assets under construction
      
1,059
      
-
      
1,059
  
Total Fixed Assets
    
$
3,353
    
$
1,045
    
$
4,398
  
Right of use assets
      
875
      
43
      
918
  
Total
    
$
4,228
    
$
1,088
    
$
5,316
  

The pro forma adjustment to Fixed assets, net also reflects the elimination of Raytheon’s historical accumulated depreciation of $5.2 billion against the gross carrying value of the related fixed assets of $8.6 billion.
 
  e)
Goodwill: Represents a net increase in goodwill of $4.8 billion, comprised of the elimination of Raytheon’s historical goodwill balance of $14.9 billion, offset by $19.7 billion of goodwill resulting from the Merger. Goodwill resulting from the Merger represents the excess of estimated merger consideration over the preliminary fair value of the underlying tangible and identifiable intangible assets acquired and liabilities assumed. The estimated goodwill to be recognized is attributable primarily to expected synergies, expanded market opportunities, and other benefits that UTC believes will result from combining its operations with the operations of Raytheon. The goodwill created in the Merger is not deductible for tax purposes and is subject to material revision as the purchase price allocation is completed.
 
  f)
Intangible assets, net: Represents adjustments to record the preliminary estimated fair value of intangibles of approximately $19.2 billion, which represents an increase of $19 billion over Raytheon’s net book value of intangible assets prior to the Merger. The estimated fair values of identifiable intangible assets are preliminary and are determined based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). The final fair value determinations for identifiable intangible assets may differ from this preliminary determination, and such differences could be material. The intangible assets acquired primarily consist of the following:
 
(Dollars, in millions)
Estimated
Useful Life
  
Amortization method
  
Estimated Fair
Value
  
Amortized:
            
Customer relationships and other
12-15 years
  
Pattern of economic benefit
  
$
12,900
  
Developed technology and royalty agreements
6-8 years
  
Pattern of economic benefit
    
900
  
Unamortized:
              
Trademarks and other
          
5,440
  
Total
         
$
19,240
  

Pro forma amortization expense of the acquired intangible assets was $1.5 billion for the year ended December 31, 2019. The following table summarizes the expected pro forma amortization expense of the acquired intangible assets for the years 2020 through 2025, which has been prepared to reflect the Merger as if it occurred on January 1, 2019. The finalization of the detailed valuation work may have a material impact on the valuation of intangible assets and the purchase price allocation.
 
   
Remaining
  
(Dollars, in millions)
  
2020
    
2021
    
2022
    
2023
    
2024
    
2025 and
thereafter
  
Amortization expense
  
$
1,465
    
$
959
    
$
1,015
    
$
1,074
    
$
935
    
$
6,852
  

  g)
Other assets: Represents the elimination of deferred sales commissions of $29 million and a $28 million decrease of the pension and postretirement benefit assets based upon revaluation using UTC’s methodology.
 
  h)
Accounts payable: Represents the elimination of accounts payable of $43 million owed to UTC by Raytheon.
 
  i)
Accrued liabilities: Represents adjustment for directly attributable transaction costs related to the Merger not yet accrued by UTC and Raytheon of approximately $150 million and $95 million, respectively, a $166 million increase related to the recognition of onerous contracts at fair value, and a $28 million accrual for change in control payments due to certain Raytheon personnel shortly after the Merger.
 
  j)
Contract liabilities, current: Reflects a decrease in deferred revenue of $44 million as a result of fair value purchase accounting.
 
  k)
Long-term debt: Reflects an increase of $149 million in historical Raytheon indebtedness to fair value in connection with preliminary purchase price allocation.
 
  l)
Future pension and postretirement benefit obligations: Represents a decrease of the pension and postretirement benefit obligation determined under UTC’s methodology.
 
  m)
Other long-term liabilities: Reflects a $4.2 billion increase as a result of the estimated deferred tax impact of pro forma adjustments and a $9 million decrease in deferred revenue as a result of fair value purchase accounting.
 
  n)
Total Shareowners’ Equity: Represents the elimination of Raytheon common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive loss, as well as the following adjustments to reflect the capital structure of the combined company.
 
(Dollars, in millions)
  
Common Stock
    
Treasury Stock
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Loss
  
Fair value of UTC common stock issued for Raytheon common stock and equity awards (i)
  
$
10,428
    
$
-
    
$
-
    
$
-
  
Issuance of UTC treasury shares for Raytheon common stock and equity awards (i)
    

 -		      
22,268
      

 -		      

 -		  
Elimination of Raytheon historical shareholders’ equity (i)
    
(3
)
            
(21,480
)
    
-
  
Adjustments related to pensions and postretirement benefits (ii)
    
-
      
-
      
-
      
(9,132
)
Recognition of Merger-related transaction costs (iii)
    
-
      
-
      
(150
)
    
-
  
Elimination of cash flow hedge and treasury rate lock losses (iv)
    
-
      
-
      
-
      
(4
)
Elimination of foreign currency translation adjustment (v)
    
-
      
-
      
-
      
(124
)
Total
  
$
10,425
    
$
22,268
    
$
(21,630
)
  
$
(9,260
)

(i)
Represents an adjustment to increase the common stock of the combined company for 249 million of additional shares issued and the use of 400 million treasury shares for the total of the 649 million shares issued as consideration for the Merger, and to eliminate the par value of the Raytheon common stock acquired, as well as to increase additional paid-in capital for the net difference.
 
(ii)
Represents adjustment to eliminate unamortized prior service costs and actuarial losses, as a result of fair value purchase accounting.
 
(iii)
Represents recognition of approximately $150 million of anticipated transaction costs that are directly attributable to the transactions but that were not incurred by UTC as of December 31, 2019.
 
(iv)
Represents elimination of accumulated other comprehensive losses associated with Raytheon cash flow hedges and treasury rate locks in connection with purchase accounting.
 
(v)
Represents adjustment to eliminate foreign currency translation associated with the translation of non-USD denominated entities to USD, which was recorded by Raytheon, as a result of fair value purchase accounting.
 
Note 7: Adjustments to Pro Forma Combined Statements of Operations
 

 o)
Product sales: Represents a decrease to product sales for the elimination of $244 million in revenues earned by UTC on sales to Raytheon that would be considered intercompany transactions and will be eliminated in the consolidated financial statements of the combined company following completion of the Merger, as well as a $44 million decrease related to the preliminary fair value of Raytheon’s deferred revenue in purchase accounting. The pro forma adjustment related to the reduction in deferred revenue reflects the difference between prepayments related to extended arrangements and the preliminary fair value of the assumed performance obligations as they are satisfied, assuming the Merger was completed on January 1, 2019.
 

 p)
Cost of products and services sold: Represents adjustments to cost of products and services sold comprised of the following:
 
1. Cost of products sold:
   
Year Ended
12/31/2019
   
(Dollars, in millions)
Amortization of acquired intangible assets (i)
  
$
1,391
  
Depreciation of fixed assets step-up (ii)
    
32
  
Adjustment to pension service cost (iii)
    
(16
)
Elimination of costs related to intercompany sales from UTC to Raytheon (iv)
    
(244
)
Amortization of onerous contracts (v)
    
(71
)
Total pro forma adjustment to cost of products sold
  
$
1,092
  

2. Cost of services sold:
Year Ended
12/31/2019
(Dollars, in millions)
Depreciation of fixed assets step-up (ii)
  
$
4
  
Adjustment to pension service cost (iii)
    
(3
)
Total pro forma adjustment to cost of services sold
  
$
1
  

(i)
Represents net impact of removal of historical amortization expense and amortization expense recognized due to the identification of definite-lived intangible assets in purchase accounting.
 
(ii)
Represents adjustment to depreciation expense due to the recognition of Raytheon’s fixed assets at their preliminary fair values in purchase accounting, depreciated over their estimated remaining useful lives, determined in accordance with UTC policy.
 
(iii)
Represents the impact of the pension and postretirement service cost expense as determined under UTC’s plan assumptions.
 
(iv)
Represents elimination of cost of sales relating to transactions between UTC and Raytheon that would be considered intercompany transactions and will be eliminated in the consolidated financial statements of the combined company following the Merger.
 
(v)
Represents amortization of onerous contracts recorded at their preliminary fair values in purchase accounting.
 

 q)
Research and development expenses: Reflects an increase of $4 million in depreciation expense due to the recognition of Raytheon’s fixed assets at their preliminary fair values in purchase accounting, as well as a $1 million decrease reflecting the impact of the pension and post retirement service cost expense determined under UTC’s plan assumptions.
 

 r)
Selling, general and administrative expenses: Represents adjustments to selling, general and administrative expenses comprised of the following:
 
    
Year Ended
12/31/2019
   
(Dollars, in millions)
Depreciation of fixed assets step-up (i)
  
$
1
  
Adjustment to pension service cost (ii)
    
(2
)
Elimination of deferred commissions amortization (iii)
    
(26
)
Elimination of transaction costs (iv)
    
(152
)
Total pro forma adjustment to selling, general, and administrative expenses
    
(179
)

(i)
Represents adjustment to depreciation expense due to the recognition of Raytheon’s fixed assets at their preliminary fair values in purchase accounting, depreciated over their estimated remaining useful lives, determined in accordance with UTC policy.
 
(ii)
Represents the impact of the  pension and postretirement service cost expense as determined under UTC’s plan assumptions.
 
(iii)
Represents elimination of amortization recognized on deferred commissions that are eliminated in purchase accounting.
 
(iv)
Represents the elimination of non-recurring transaction costs incurred related to the Merger.
 

 s)
Non-service pension (benefit) cost: The $1.1 billion adjustment to Non-service pension (benefit) cost for the twelve months ended December 31, 2019 reflects the elimination of prior service cost and actuarial loss amortization, which was recorded by Raytheon, as a result of fair value purchase accounting, net of the impact of the pension and postretirement benefit (expense) determined under UTC’s plan assumptions.
 

 t)
Interest expense (income), net: reflects the amortization of the incremental fair value of assumed debt recognized in connection with purchase accounting.
 

 u)
Income tax expense: reflects the tax effect of pro forma adjustments. The pro forma adjustments were tax effected at the applicable blended statutory tax rate, generally 23%. UTC’s effective tax rate may be materially different after conclusion of final acquisition accounting, removal of one-time items reflected in historical amounts, analysis of the post-closing geographical mix of income, and other factors. Adjustments to tax assets and liabilities will occur in conjunction with the finalization of the purchase accounting, and these items could be material.
 

 v)
Basic weighted average number of shares outstanding: Reflects the pro forma issuance of 649 million shares of UTC common stock issued in exchange for Raytheon outstanding common stock and equity awards that vest immediately upon closing of the Merger in accordance with the merger agreement.
 

 w)
Diluted weighted average number of shares outstanding: Reflects the pro forma issuance of 3.1 million shares of UTC common stock issued in exchange for Raytheon outstanding common stock and equity awards that vested immediately upon closing of the Merger and the issuance of shares of common stock under replacement equity awards issued in accordance with the merger agreement. In connection with the Merger, unvested awards held by certain Raytheon employees were converted to UTC restricted stock awards, such that the total value of equity awards held by Raytheon employees post-Merger will be substantially economically equivalent to the value of such awards prior to the Merger.