Christopher T. Calio
President and Chief Executive Officer at RTX
Thank you, and good morning, everyone. As you saw from our press release this morning, RTX delivered strong operational and financial performance in the second quarter as we continue to execute on our customer commitments and strategic priorities. Let me start with the highlights on Slide three. We saw another quarter of excellent top line growth with adjusted sales of $19.8 billion, which were up 10% organically. Adjusted EPS of $1.41 was up 9% year-over-year, driven by profit growth and margin expansion across all 3 segments. And free cash flow was strong at $2.2 billion.
We also saw continued growth in our backlog, which ended the quarter at $206 billion with a book-to-bill of 1.25. There were also some notable contract wins in the quarter, including a 10-year MRO agreement to support Collins' significant content on Air Canada's 787 fleet of up to 70 aircraft, including avionics, air management and electric power systems. Collins also received a multibillion-dollar award for the U.S. Air Force's next-generation Survivable Airborne Operations Center, and Raytheon received a $639 million award for SPY-6 radar production for the U.S. Navy. As you saw in early July, Germany placed an additional order for Patriot systems. This is on top of the $1.2 billion order they placed for multiple systems in the first quarter of the year.
We also saw some positive GTF announcements at the Farnborough Airshow earlier this week, with over 700 GTF engines ordered, including options and commitments. These include Cebu Pacific selecting the GTF to power the carrier's order for up to 152 additional single-aisle aircraft, and Avolon selecting the GTF engine for up to 160 aircraft. So another quarter of robust orders with significant wins already secured early here in Q3 and more expected as the year progresses. We also continue to make progress on our critical initiatives. Specifically regarding the GTF fleet management plan, we remain on track with our financial and operational outlook consistent with our prior comments. As of the end of Q2, we have inspected over 6,000 powdered metal parts that are in the field across all programs.
And the associated fallout rate remains below the 1% we had assumed and the findings are consistent with the assumptions that underpin our fleet management plan. At our MRO facilities, throughput of engines continues to improve and overall capacity is expanding with the recent addition of 2 new MRO shops into the network. PW1100 MRO output increased 10% versus the first quarter. We expect this ramp to continue in the second half of the year. As it relates to the PW1100 fleet, AOGs have leveled out over the past few months and remain in line with our expectations. We've also now reached support agreements with 20 of our customers, covering roughly 65% of the impacted fleet and the terms are in line with our assumptions.
Beyond our operational performance, let me also comment on the legal and contract charges we outlined in our press release this morning, and then Neil will provide a more detail in a bit. We're nearing completion of agreements with the Department of Justice, SEC and Department of State to resolve several legal matters. These matters primarily arose out of legacy Raytheon Company and Rockwell Collins prior to the merger and acquisition of these companies. We've already taken robust corrective actions to address the legacy gaps that led to these issues, being implementing enhanced compliance and training measures.
We also took a charge related to the anticipated termination of a Raytheon fixed price development contract that was entered into before the merger. As we've been discussing in the last few quarters, we've been battling through some challenges in a handful of fixed price development programs, including this one. But this specific contract is unique in terms of its scope, deliverables and associated risk profile, which led us to pursue termination. So we're pleased to be putting these matters behind us. And as I highlighted earlier, our operational performance was very strong in the quarter.
Given this performance and the continuing strength of our end markets, we are raising our outlook for adjusted sales and EPS. We've also revised our cash outlook for the year as a result of the matters I just discussed. Lastly, as you saw in May, we raised our dividend 7% and remain on track to return $36 billion to $37 billion of capital to share owners from the merger through the end of next year. Okay. With that, let's move to Slide four, and I'll spend a few minutes on our strategic priorities that will enable us to drive best-in-class performance across RTX, including meeting customer demand, continued sales growth, margin expansion across our segments and strong cash flow generation.
Given our growing installed base and the unprecedented demand for our products, our first priority is executing on our commitments. Powered by our core operating system, our focus is on driving incremental operational improvements to ramp output and deliver on this demand. Today, we have over 4,000 core projects being worked across the company. For example, at Collins, our avionics business improved first pass yield by 2x in its fire detection product line by reconfiguring the production cell layout, creating digital tools and upgrading equipment. And at Raytheon, the team conducted a core leadership week to identify initiatives to more than double weekly output on a key component of our AIM-9X effector. As a result, the team achieved a 90% increase in output in the quarter and is on track to hit their full year target by the end of Q3.
We also continue to add capacity to meet the demands of the industrial ramp-up. During the quarter, we announced a $200 million investment in our carbon brake facility in Spokane, Washington. Once complete, it will add 70,000 square feet of manufacturing footprint to meet rapidly growing demand for our Collins brake solutions. And on the defense side, we're investing in test equipment and tooling to more than double production capacity by year-end in our Coyote program, which is a low-cost kinetic effector for the counter unmanned aircraft systems that directly address today's drone threats.
In addition to creating new capacity, we continue to modernize our existing footprint as part of our Industry 4.0 initiatives. Across RTX, we have now connected 26 factories with our proprietary digital analytics technology, providing us with real-time data to boost equipment efficiency, improve quality and yield higher output. This represents a 30% increase in connected sites since the start of the year, and we remain on track to connect 40 factories by the end of the year. These incremental efficiency, capacity and technology improvements are critical to meeting the needs of our customers as we operate in the strongest demand environment in our history.
Let me move now to our second priority: Innovating for future growth. We are executing on our cross-company technology road map to develop differentiated solutions in areas, such as sustainability, advanced propulsion, next-generation sensing, connected battle space and hypersonics. This year alone, we will spend over $7.5 billion on company and customer-funded research and development to mature and introduce new capabilities to our customers and fill our product pipeline. For example, we are working on a number of hybrid electric demonstrator programs to deliver advanced propulsion technologies and enable greater fuel efficiency across all future aircraft segments.
Recently, our Collins, Pratt and Technology Research Center teams completed a significant milestone in the development of our hybrid-electric demonstrator, validating the integrated system functionality of the engine, electric motor, batteries and high-voltage electric power distribution. And in the quarter, we delivered the first P2 radar that incorporates our proprietary gallium nitride technology. This technology is a game-changer for our sensing capability, providing expanded surveillance range and supporting additional missions in the space domain and hypersonic defense.
We also continue to invest in our digital transformation and AI. This year, we are adding an additional 30-plus use cases that generate incremental productivity and cost savings across RTX using advances in artificial intelligence and deep learning. In total, we have over 200 AI use cases currently deployed across various internal functions. Our AI investments are also enabling new and improved capabilities in our products, such as predicting equipment failures and aiding human operators in executing complex tasks.
These types of investments in innovation will allow us to continue to develop next-gen products and solutions well into the future. Our third priority is to fully leverage our breadth and scale across RTX to drive value for our stakeholders. Specifically, this includes creating a more efficient and competitive cost structure and managing our common supply chain. For example, over 35% of our product procurement spend is with common suppliers that support all 3 of our businesses. And we're using a unified RTX approach to our contracts and sourcing strategy.
It also includes harmonizing our product life cycle and management processes, and developing integrated solutions for strategic campaigns and pursuits, such as NGAD, FLRAA and next-generation commercial platforms. And of course, we'll also continue to review our portfolio and prune where needed, as well as target bolt-on M&A to support our RTX technology road map and grow our core franchises. And underlying all three of these priorities is our unwavering commitment to safety, quality and compliance in everything that we do. It's what we and our customers expect and a commitment we will never compromise on.
Putting it all together, I'm extremely excited and confident about the future of RTX. With that, before I turn it over to Neil, I want to acknowledge the leadership update we announced last week. As you saw, Steve Timm has decided to retire after 28 years with the company. Steve was a great partner in teammate, and I want to thank him vers leadership at Collins. And we're very fortunate to have a strong bench and are very excited that Troy Brunk is taking over as the new President of Collins. Troy has served as the President of 3 of the 6 Collins business units and is uniquely qualified for the role.
Okay. Let me turn it over to Neil to take you through the second quarter results in more detail. Neil?
