Honeywell Aerospace · 10-Q · Item 2 MD&A

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in tables and graphs in millions)

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of Honeywell Aerospace Inc. (“Honeywell Aerospace”, “we”, “us”, or “our”) for the three and six months ended June 27, 2026. The financial information as of June 27, 2026, should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the final Information Statement dated as of June 15, 2026 (the “Information Statement”), which was furnished as Exhibit 99.1 to our Current Report on Form 8-K filed with the SEC on June 15, 2026.

OVERVIEW

Business Overview

We are a leading global tier-1 aerospace and defense supplier of mission critical systems and technologies that enable the production, maintenance, and safe operation of aerospace and defense platforms. Our systems and technologies support original equipment manufacturer (“OEM”), government, defense prime contractors, and aircraft operator customers across the Commercial Air Transport, Business Aviation, and Defense and Space end markets. Our comprehensive portfolio of market leading systems and technologies are organized into the following segments: Electronic Solutions (“ES”), Engines & Power Systems (“E&PS”), and Control Systems (“CS”).

Spin-off from Honeywell

On February 6, 2025, Honeywell announced its intention to separate its Aerospace Business into a standalone publicly traded company through a pro-rata distribution of all of the outstanding common shares of Honeywell Aerospace Inc. to Honeywell shareholders. On June 29, 2026 (the “Distribution Date”), Honeywell completed the spin-off of the Aerospace Business (the “Spin-off”). The Spin-off is intended to be a tax-free pro-rata distribution (the “Distribution”) of all of our outstanding common shares to holders of record of Honeywell's common shares as of the close of business on June 15, 2026 (the “Record Date”), at which time each holder of Honeywell's common shares received one Aerospace common share for every two Honeywell common shares held as of the close of business on the Record Date, resulting in the Distribution of 316,939,750 of our common shares.

Upon completion of the Distribution, we became an independent public company. Our common stock is listed under the symbol “HONA” on The Nasdaq Stock Market LLC (“Nasdaq”). Following the Distribution, Honeywell did not beneficially own any Aerospace common shares and will no longer consolidate Aerospace with Honeywell’s financial results. Refer to Note 9. Debt and Credit Agreements and Note 17. Subsequent Events of the Notes to the Condensed Combined Financial Statements for additional information on the Spin-off and related transactions.

Relationship with Honeywell

The Condensed Combined Financial Statements included herein are derived from Honeywell’s historical accounting records and presented on a standalone basis as if Honeywell Aerospace’s operations had been conducted independently from Honeywell in accordance with GAAP. The Condensed Combined Financial Statements include certain assets and liabilities that have historically been held at the Honeywell corporate level but are specifically identifiable or otherwise attributable to us. Honeywell provides certain services, such as legal, accounting, information technology, human resources, and other infrastructure support, on behalf of Honeywell Aerospace. Honeywell Aerospace and Honeywell consider allocations of these costs to be a reasonable reflection of the benefits we received. However, the financial information presented in the Condensed Combined Financial Statements may not reflect our combined financial position, operating results, and cash flows had we been a separate standalone entity during the periods presented.

Actual costs that would have been incurred if Honeywell Aerospace had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including

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information technology and infrastructure. We consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefits received by Aerospace during the periods presented.

In connection with the Spin-off, we entered into the Separation and Distribution Agreement and certain other agreements with Honeywell, including a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement, and a trademark license agreement. Refer to Note 17. Subsequent Events of the Notes to the Condensed Combined Financial Statements for additional information. We will utilize Honeywell’s services for a transitional period following the Spin-off before we replace these services over time with services supplied either internally or by third parties. The expenses for the services may vary from the historical costs directly billed and allocated to us for the same services.

We have incurred and expect to incur certain costs in connection with our establishment as a standalone public company (the “transaction costs”). The transaction costs include non-recurring expenses associated with the Spin-off and stand up of functions required to operate as a standalone public entity. These non-recurring costs primarily relate to system implementation costs, business and facilities separation, applicable employee-related costs, evolution of our brand, and other matters. The transaction costs are expected to continue through at least fiscal year 2027. Additionally, we will incur increased costs as a result of becoming an independent, publicly traded company, primarily from establishing or expanding the corporate support for our businesses, including IT, human resources, treasury, tax, internal audit, risk management, stock-based compensation programs, accounting and financial reporting, investor relations, governance, legal, procurement, and other services. See “Unaudited Pro Forma Combined Financial Information” in the Information Statement.

Macroeconomic Conditions

T1We continue to monitor elevated macroeconomic and geopolitical developments, including armed conflict in the Middle East and its effects on global energy markets and maritime shipping, evolving U.S. trade policy and tariff authorities, inflationary pressures, and financial market uncertainty. Moderated global growth projections and tariffs imposed during 2025 and 2026, together with evolving U.S. trade policy and international negotiations, contributed to increased volatility across global supply chains. T2Elevated energy prices, tariff-related cost impacts, and continued market uncertainty may contribute to supply chain disruptions, cost inflation, and pricing volatility. We continue to work proactively with our suppliers and customers to mitigate shortages, maintain supply continuity, and manage cost impacts.

Mitigation strategies remain important to meeting customer demand in this evolving environment and include supply chain simplification, regional sourcing, strategic dual-source development, long-term capacity planning for constrained materials, enhanced digital visibility across the supply base, direct engagement with critical suppliers, supplier development, and disciplined pricing and inventory management. Strong relationships with strategic suppliers enable collaborative capacity planning, support product launches, improve supply continuity, and, where appropriate, facilitate design or sourcing changes that enhance resiliency. We believe these actions reduce supply risk, support customer commitments, and strengthen operational resilience. Due to our rigorous product qualification and quality processes, we do not believe these mitigation actions have adversely affected product quality or reliability.

To date, these actions have helped reduce our exposure to these conditions. However, their continued effectiveness depends on successful execution, supplier performance, the availability of critical materials, and the broader macroeconomic environment. If these conditions worsen or our mitigation efforts prove insufficient, our results of operations, cash flows, or financial condition could be materially adversely affected.

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RESULTS OF OPERATIONS

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Net Sales by Segment

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Total Segment Profit/Segment Adjusted EBIT by Segment

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COMBINED OPERATING RESULTS

Net Sales

The following table sets forth the factors contributing to year-over-year changes in our Net sales for the three and six months ended June 27, 2026:

Change in net sales from prior period

Organic(1)

5

%

6

%

Foreign currency translation

—

%

—

%

Acquisitions

—

%

—

%

Other

—

%

—

%

Total % change in Net sales

5

%

6

%

__________________

(1)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for the definition of Organic sales growth.

A discussion of Net sales by reportable segment can be found under the “Segment Results” section within this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

T3Net sales increased $233 million due to higher Commercial Aftermarket organic sales of $86 million and $53 million within CS and ES, respectively. Additionally, Net sales increased due to higher organic sales of $65 million within ES relating to Defense and Space.

For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

Net sales increased $511 million due to higher organic sales of $174 million in Defense and Space within ES, $157 million in Commercial Aftermarket within E&PS, and $108 million in Commercial Original Equipment within ES.

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Cost of Products and Services Sold

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

T4Cost of products and services sold increased $216 million primarily due to $164 million of higher direct and indirect material costs and an approximately $50 million increase in inventory obsolescence charges. Gross margin percentage decreased by 1%.

For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

Cost of products and services sold increased $387 million primarily due to $305 million of higher direct and indirect material costs and an approximately $70 million increase in inventory obsolescence charges. Gross margin percentage decreased by 1%.

Research and Development Expenses

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

Research and development expenses increased $16 million compared to the three months ended June 28, 2025, but remained flat at 4% as a percentage of Net sales.

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For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

Research and development expenses increased $36 million compared to the six months ended June 28, 2025, but remained relatively flat at 4% as a percentage of Net sales.

A summary of our research and development costs for the three and six months ended June 27, 2026 and June 28, 2025 is as follows:

Three Months Ended

Six Months Ended

Company funded research and development expenses

$

$

$

$

Customer-sponsored research and development(1)

Total research and development costs

$

$

$

$

__________________

(1)Includes expenditures on customer programs with significant engineering performance obligations, included in Cost of products and services sold in the Condensed Combined Statements of Operations, and capitalized expenditures on deferred customer funded nonrecurring engineering and development activities, included in Other assets in the Condensed Combined Balance Sheets.

Selling, General and Administrative Expenses

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

T5Selling, general and administrative expenses increased $339 million due to $253 million of incremental transaction costs incurred in the period related to the Spin-off and $68 million of higher labor costs.

For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

Selling, general and administrative expenses increased $538 million due to $411 million of incremental transaction costs incurred in the period related to the Spin-off and $86 million of higher labor costs.

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Other Expense, Net

Other expense, net primarily includes the following:

Three Months Ended

Six Months Ended

Environmental expenses

$

$

$

$

Transaction costs

Equity income of affiliated companies

(6)

(6)

Other expense (income), net

Total Other expense, net

$

$

$

$

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

Other expense, net increased by $84 million for the three months ended June 27, 2026, due primarily to higher transaction costs of $59 million related to the Spin-off.

For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

Other expense, net increased by $76 million for the six months ended June 27, 2026, driven by higher transaction costs of $94 million related to the Spin-off, partially offset by lower environmental expenses of $56 million. Refer to Note 15. Commitments and Contingencies of the Notes to Condensed Combined Financial Statements for a discussion of the environmental matters.

Interest and Other Financial Charges

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

T6Interest and other financial charges increased $200 million related to the $16.0 billion of senior unsecured notes issued in connection with the Spin-off. Refer to Note 9. Debt and Credit Agreements of the Notes to the Condensed Combined Financial Statements for further information.

For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

Interest and other financial charges increased $229 million related to the $16.0 billion of senior unsecured notes issued in connection with the Spin-off.

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Income Tax Expense

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

The effective tax rate for the three months ended June 27, 2026, increased 1,750 basis points compared to the effective tax rate for the three months ended June 28, 2025, primarily due to nondeductible transaction costs and frictional tax costs in advance of the Spin-off (2,040 basis points), partially offset by favorable changes in the jurisdictional mix of earnings (290 basis points).

For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

The effective tax rate for the six months ended June 27, 2026, increased 850 basis points compared to the effective tax rate for the six months ended June 28, 2025, primarily due to nondeductible transaction costs and frictional tax costs in advance of the Spin-off (790 basis points) and incremental tax expense associated with reserves for ongoing examinations (290 basis points), partially offset by favorable changes in the jurisdictional mix of earnings (230 basis points).

SEGMENT RESULTS

We manage and report our operating results through three reportable segments: Electronic Solutions, Engines & Power Systems, and Control Systems. The remainder of our operations are presented in Corporate and All Other, which is not a reportable business segment.

Electronic Solutions

The following table sets forth the operating results for our ES segment for the three and six months ended June 27, 2026 and June 28, 2025:

Three Months Ended

Six Months Ended

Net sales

$

$

$

$

Segment profit/Segment adjusted EBIT(1)

Segment profit margin/Segment adjusted EBIT margin(1)

%

%

%

%

__________________

(1)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for the definition of Segment adjusted EBIT and Segment adjusted EBIT margin.

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The following table sets forth the factors contributing to year-over-year changes in our ES segment’s Net sales for the three and six months ended June 27, 2026:

Organic(1)

8

%

%

Foreign currency translation

—

%

—

%

Acquisitions

—

%

—

%

Other

—

%

—

%

Total % change in Net sales

8

%

%

__________________

(1)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for the definition of Organic sales growth.

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

ES Net sales increased $129 million due to higher organic sales of $65 million in Defense and Space and $53 million in Commercial Aftermarket.

Segment Profit and Segment adjusted EBIT decreased by $16 million or 3% and Segment profit margin and Segment adjusted EBIT margin decreased 3% for the three months ended June 27, 2026.

For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

ES Net sales increased $320 million due to higher organic sales of $174 million in Defense and Space and $108 million in Commercial Original Equipment.

Segment Profit and Segment adjusted EBIT increased by $84 million or 9% and Segment profit margin and Segment adjusted EBIT margin remained flat for the six months ended June 27, 2026.

Engines & Power Systems

The following table sets forth the operating results for our E&PS segment for the three and six months ended June 27, 2026 and June 28, 2025:

Three Months Ended

Six Months Ended

Net sales

$

$

$

$

Segment profit/Segment adjusted EBIT(1)

Segment profit margin/Segment adjusted EBIT margin(1)

%

%

%

%

__________________

(1)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for the definition of Segment adjusted EBIT and Segment adjusted EBIT margin.

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The following table sets forth the factors contributing to year-over-year changes in our E&PS segment’s Net sales for the three and six months ended June 27, 2026:

Organic(1)

1

%

6

%

Foreign currency translation

—

%

—

%

Acquisitions

—

%

—

%

Other

—

%

—

%

Total % change in Net sales

1

%

6

%

__________________

(1)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for the definition of Organic sales growth.

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

E&PS Net sales increased $16 million primarily due to higher organic sales of $30 million in Commercial Original Equipment, partially offset by lower organic sales of $20 million in Defense and Space.

Segment profit and Segment adjusted EBIT decreased by $82 million or 32% and Segment profit margin and Segment adjusted EBIT margin decreased 6% for the three months ended June 27, 2026.

For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

E&PS Net sales increased $162 million primarily due to higher organic sales of $157 million in Commercial Aftermarket.

Segment profit and Segment adjusted EBIT increased by $6 million or 1% and Segment profit margin and Segment adjusted EBIT margin decreased 1% for the six months ended June 27, 2026.

Control Systems

The following table sets forth the operating results for our CS segment for the three and six months ended June 27, 2026 and June 28, 2025:

Three Months Ended

Six Months Ended

Net sales

$

$

$

$

Segment Profit/Segment adjusted EBIT(1)

Segment Profit margin/Segment adjusted EBIT margin(1)

%

%

%

%

_________________

(1)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for the definition of Segment adjusted EBIT and Segment adjusted EBIT margin.

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The following table sets forth the factors contributing to year-over-year changes in our CS segment’s Net sales for the three and six months ended June 27, 2026:

Organic(1)

7

%

1

%

Foreign currency translation

—

%

—

%

Acquisitions

—

%

—

%

Other

—

%

—

%

Total % change in Net sales

7

%

1

%

__________________

(1)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for the definition of Organic sales growth.

For the three months ended June 27, 2026 compared with the three months ended June 28, 2025

CS Net sales increased $88 million due to higher organic sales of $86 million in Commercial Aftermarket.

Segment profit and Segment adjusted EBIT increased by $28 million or 8% and Segment profit margin and Segment adjusted EBIT margin remained flat for the three months ended June 27, 2026.

For the six months ended June 27, 2026 compared with the six months ended June 28, 2025

CS Net sales increased $29 million due to higher organic sales of $65 million in Commercial Aftermarket and $15 million in Defense and Space. The increase was offset by lower organic sales of $60 million in Commercial Original Equipment.

Segment profit and Segment adjusted EBIT decreased by $92 million or 11% and Segment profit margin and Segment adjusted EBIT margin decreased 4% for the six months ended June 27, 2026.

Corporate and All Other

Corporate and All Other primarily includes unallocated corporate costs and is not a separate reportable business segment. We monitor the activities in Corporate and All Other to determine the need for further reportable business segment disaggregation.

NON-GAAP FINANCIAL MEASURES

We use non-GAAP financial measures to supplement the financial measures prepared in accordance with GAAP. These include (1) Organic sales growth, (2) Total segment profit, (3) Adjusted EBIT, (4) Adjusted EBIT margin, (5) Segment adjusted EBIT, and (6) Segment adjusted EBIT margin.

Below are definitions and reconciliations of certain non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. Management believes these non-GAAP financial measures provide investors with a more meaningful measure of its performance period to period, align with how management evaluates performance internally, and make it easier for investors to compare our performance to peers. These measures should be considered in addition to, and not as replacements for, the most directly comparable GAAP measure. The non-GAAP financial measures we use are as follows:

•Organic sales growth: We define organic sales growth as the change in reported Net sales relative to the comparable period, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date, and other items that are unusual and non-recurring in nature (e.g. impact of comprehensive settlement related

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to Flexjet litigation). We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

•Total segment profit: We define Total segment profit as Net income, excluding taxes, interest, amortization of acquisition-related intangibles, stock compensation expense, environmental expense, pension income (expense), repositioning and other charges, transaction costs, expenses associated with the Honeywell trademark license, and other items within Other expense, net. We believe this measure is useful to investors as it provides greater transparency with respect to supplemental information used by management in its financial and operational decision making, as well as for understanding ongoing operating trends.

•Adjusted EBIT and Adjusted EBIT margin: We define Adjusted EBIT as Net income excluding taxes, interest, amortization of acquisition-related intangibles, stock compensation expense, environmental expense, pension income (expense), repositioning and other charges, transaction costs, expenses associated with the Honeywell trademark license, other items within Other expense, net, and other items that are unusual or non-recurring in nature, including but not limited to impairment charges and litigation charges (e.g., comprehensive settlement related to Flexjet litigation). We define Adjusted EBIT margin as Adjusted EBIT divided by Net sales adjusted for the impact of the Flexjet-related litigation settlement. We believe these measures are useful to investors as they provide greater transparency with respect to supplemental information used by management in its financial and operational decision making, as well as for understanding ongoing operating trends.

•Segment adjusted EBIT and Segment adjusted EBIT margin: We define Segment adjusted EBIT as Income before taxes excluding interest, amortization of acquisition-related intangibles, stock compensation expense, environmental expense, pension income (expense), repositioning and other charges, transaction costs, expenses associated with the Honeywell trademark license, other items within Other expense, net, and other items that are otherwise of an unusual or non-recurring in nature, including but not limited to impairment charges and litigation charges (e.g., comprehensive settlement related to Flexjet litigation). We define Segment adjusted EBIT margin as Segment adjusted EBIT divided by Net sales adjusted for the impact of the Flexjet-related litigation settlement. We believe these measures are useful to investors as they provide greater transparency with respect to supplemental information used by management in its financial and operational decision making, as well as for understanding ongoing operating trends.

Three Months Ended

Amount

Percentage of Net Sales

Amount

Percentage of Net Sales

Net Income

$

6

%

$

%

Income tax expense

3

%

3

%

Amortization of acquisition-related intangibles(1)

1

%

—

%

Stock compensation expense(2)

1

%

1

%

Environmental expense(3)

—

%

1

%

Transaction costs(4)

7

%

—

%

Interest and other financial charges

4

%

—

—

%

Other, net(5)

—

%

—

%

Total segment profit/Segment adjusted EBIT

$

%

$

%

__________________

(1)Amounts included in Cost of products and services sold and Selling, general and administrative.

(2)Amounts included in Selling, general and administrative expenses.

(3)Amounts included in Cost of products and services sold and Other expense, net.

(4)Amounts included in Selling, general and administrative expenses and Other expense, net.

(5)Amounts include pension income (expense) and repositioning and other charges.

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Electronic Solutions

Engines & Power Systems

Control Systems

Amount

Margin %

Amount

Margin %

Amount

Margin %

Segment profit/Segment adjusted EBIT

$

%

$

%

$

%

Electronic Solutions

Engines & Power Systems

Control Systems

Amount

Margin %

Amount

Margin %

Amount

Margin %

Segment profit/Segment adjusted EBIT

$

%

$

%

$

%

Six Months Ended

Amount

Percentage of Net Sales

Amount

Percentage of Net Sales

Net Income

$

%

$

%

Income tax expense

3

%

4

%

Amortization of acquisition-related intangibles(1)

1

%

—

%

Stock compensation expense(2)

1

%

1

%

Environmental expense(3)

—

%

1

%

Transaction costs(4)

6

%

—

%

Interest and other financial charges

3

%

—

—

%

Other, net(5)

—

%

—

%

Total segment profit/Segment adjusted EBIT

$

%

$

%

__________________

(1)Amounts included in Cost of products and services sold and Selling, general and administrative.

(2)Amounts included in Selling, general and administrative expenses.

(3)Amounts included in Cost of products and services sold and Other expense, net.

(4)Amounts included in Selling, general and administrative expenses and Other expense, net.

(5)Amounts include pension income (expense) and repositioning and other charges.

Electronic Solutions

Engines & Power Systems

Control Systems

Amount

Margin %

Amount

Margin %

Amount

Margin %

Segment profit/Segment adjusted EBIT

$

%

$

%

$

%

Electronic Solutions

Engines & Power Systems

Control Systems

Amount

Margin %

Amount

Margin %

Amount

Margin %

Segment profit/Segment adjusted EBIT

$

%

$

%

$

%

LIQUIDITY AND CAPITAL RESOURCES

Sources of Historical Liquidity

We historically generated positive net operating cash flows. As part of Honeywell, Aerospace was dependent upon Honeywell for its working capital and financing requirements. Honeywell used a centralized approach

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to cash management and financing of its operations. Our excess cash in participating bank accounts was transferred to Honeywell daily, and Honeywell funded our operating and investing activities as needed. This arrangement is not reflective of the manner in which the Aerospace Business would have financed its operations had it been a standalone business separate from Honeywell during the periods presented. Transfers of cash between Honeywell and the Aerospace Business have been included within Net transfers to Parent in the Condensed Combined Statements of Cash Flows and the Condensed Combined Statements of Equity.

Future Sources of Liquidity

Following our Spin-off from Honeywell on June 29, 2026, we no longer participate in Honeywell’s centralized treasury management and funding programs. Our ability to fund our operating needs depends on our ability to continue to generate positive cash flows from operations, and on our ability to obtain debt or equity financing on acceptable terms. Management believes that our cash balances and funds provided by operating activities, along with expected borrowing capacity and access to capital markets, taken as a whole, will provide (i) adequate liquidity to meet all of our current and long-term obligations when due, including for at least the next 12 months, and fund capital expenditures and (ii) flexibility to make investment opportunities, including acquisitions, that may arise. However, there can be no assurance that we will be able to obtain additional debt or equity financing on acceptable terms in the future.

We expect to utilize our cash flows to continue to invest in our business, growth strategies, people, and the communities in which we operate, as well as to service and repay our indebtedness over time.

In connection with the Spin-off, we issued senior unsecured notes in an aggregate principal amount of $16.0 billion. We distributed $6.0 billion of notes due 2046, 2056, and 2066 and $9.1 billion of net cash proceeds from the remaining series of senior unsecured notes to Honeywell as partial consideration for the contribution of assets by Honeywell to us in connection with the distribution. The balance was retained to pay fees and expenses related to the separation, the distribution, the debt transactions, and for general corporate purposes.

In addition, we entered into a 364-day senior unsecured revolving credit facility and a five-year senior unsecured revolving credit facility, together in an aggregate committed amount as of the date of distribution of $4.0 billion, and a $4.0 billion senior unsecured commercial paper program. The undrawn portion of the credit facilities serves as a backup facility for the issuance of the commercial paper program. We expect to use proceeds from the senior unsecured revolving credit facilities and senior unsecured commercial paper program for general corporate purposes.

Cash and Cash Requirements

Summary

As of June 27, 2026 and December 31, 2025, our cash and cash equivalents totaled $1,057 million and $213 million, respectively. Our ability to generate positive cash flows from operations is dependent on general economic conditions and the competitive environment in our industry and is subject to the business and other risk factors described in the section of the Information Statement titled “Risk Factors.” If we are unable to generate sufficient cash flows from operations or otherwise comply with the terms of any external borrowings, we may be required to seek additional financing alternatives.

We continually assess the relative strength of each business in our portfolio as to strategic fit, industry position, profit, and cash flow contribution in order to identify target investment and acquisition opportunities in order to upgrade our combined portfolio. We identify acquisition candidates that will further our strategic plan and strengthen our existing core businesses.

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Share Repurchase Program

T7On July 23, 2026, our Board of Directors authorized a share repurchase program under which we may repurchase up to $3.5 billion of our outstanding common stock. We expect to fund repurchases from operating cash flows and available liquidity. The program is intended to return capital to shareholders and offset dilution from our equity compensation programs. Refer to Note 17. Subsequent Events of the Notes to the Condensed Combined Financial Statements for additional information.

Cash and Cash Equivalents Held by Foreign Subsidiaries

Cash and cash equivalents held by Aerospace’s foreign subsidiaries were $491 million and $209 million as of June 27, 2026 and December 31, 2025.

Cash Flow Summary

Summarized cash flow information for the six months ended June 27, 2026 and 2025 are as follows:

Six Months Ended

Net cash provided by operating activities

$

$

Net cash used for investing activities

Net cash provided by (used for) financing activities

Operating

Net cash provided by operating activities decreased $679 million for the six months ended June 27, 2026 compared to the same period in 2025. The decrease in net cash provided by operating activities is attributable to an increase of $450 million in transaction costs paid related to the separation and distribution and $377 million driven by the Flexjet litigation settlement payments partially offset by decreased inventory purchases of $102 million.

Investing

Net cash used for investing activities remained flat for the six months ended June 27, 2026 compared to the same period in 2025.

Financing

Net cash provided by financing activities increased $1.4 billion for the six months ended June 27, 2026 compared to the same period in 2025, primarily due to net proceeds from the issuance of senior unsecured notes in connection with the Spin-off of $15.8 billion, partially offset by higher net transfers to Honeywell of $14.5 billion.

Borrowings

We leverage a variety of debt instruments to manage our overall borrowing costs. As of June 27, 2026, our total borrowings were $15.9 billion. We had immaterial borrowings outstanding as of December 31, 2025.

Fixed rate notes

$

$

—

Variable rate notes

—

Other

6

9

Debt issuance costs

—

Total borrowings

$

$

9

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A key source of liquidity is our ability to access the corporate bond markets. Through these markets, we issue a variety of long-term fixed rate notes to manage our overall funding costs.

Another key source of liquidity is our ability to access the commercial paper market. Commercial paper notes are sold at a discount or premium and have a maturity of not more than 397 days from date of issuance. Borrowings under the commercial paper program are available for general corporate purposes.

We also have the following revolving credit agreements:

•A $1.0 billion 364-day credit agreement (the 364-Day Credit Agreement) with a syndicate of banks, dated as of March 6, 2026. Amounts borrowed under the 364-Day Credit Agreement are required to be repaid no later than March 5, 2027, unless (i) we elect to convert all then outstanding amounts into a term loan, upon which such amounts shall be repaid in full on March 5, 2028, or (ii) the 364-Day Credit Agreement is terminated earlier pursuant to its terms. As of June 27, 2026, there were no outstanding borrowings under our 364-Day Credit Agreement.

•A $3.0 billion five-year credit agreement (the Five-Year Credit Agreement) with a syndicate of banks, dated as of March 6, 2026. As of June 27, 2026, there were no outstanding borrowings under our Five-Year Credit Agreement.

Refer to Note 9. Debt and Credit Agreements of Notes to Condensed Combined Financial Statements for additional information regarding our debt instruments.

Credit Ratings

Our ability to access the global debt capital markets and the related cost of these borrowings is affected by the strength of our credit rating and market conditions. Our credit ratings are periodically reviewed by the major independent debt rating agencies. As of June 27, 2026, S&P Global Inc. (S&P), Fitch Ratings Inc. (Fitch), and Moody’s Investor Service (Moody’s) have ratings on our debt set forth in the table below:

S&P

Fitch

Moody’s

Outlook

Positive

Stable

Stable

Short-term

A-2

F1

P-2

Long-term

BBB+

A-

A3

OTHER MATTERS

Critical Accounting Estimates

There were no material changes during the three and six months ended June 27, 2026, to the items disclosed as critical accounting estimates in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Information Statement.

Recent Accounting Pronouncements

Refer to Note 2. Summary of Significant Accounting Policies of the Notes to Condensed Combined Financial Statements for a discussion of recent accounting pronouncements.