UTX
#Thanks, <UNK>
I'm on slide four, and I'll be speaking of the segments in constant currency, as we usually do
And as a reminder, there's an appendix on slide 12 with additional segment data as a reference
Otis sales were $3.1 billion in the quarter
That was up 1% organically
Excluding China, organic sales were up 4%
Operating profit was down 5% at constant currency
Contribution from higher service volume and productivity was more than offset by continued pricing and mix pressure in China and strategic investments in service and E&D
Foreign exchange translation was a 2 point headwind to sales and earnings
New equipment sales were up 1%
Mid-teen growth in North America and high single-digit growth in Europe were largely offset by a 12% decline in China, where the market environment remains very challenging
Service sales were up 5%, including the benefit of acquisitions
Otis saw solid growth in modernization and repair, while maintenance sales were up low single digit
New equipment orders were flat in the quarter, with 6% growth in North America offset by a decline of 14% in Europe on tough compares
In China, Otis saw 3% orders growth, with unit orders up 7%
Full-year expectations remain unchanged
We continue to expect operating profit to be down $125 million to $175 million at actual currency, with slightly higher than expected pricing and mix pressure but less FX headwind
Turning to slide 5, Climate, Controls & Security sales grew 7% at constant currency in the quarter
Operating profit declined 1% at constant currency, and FX translation was a 1 point headwind to sales and earnings
CCS sales grew 5% organically in the quarter, driven by strong North America residential HVAC sales of 11%
Global commercial HVAC was up 3%
And following a strong Q1, commercial refrigeration sales were up 12%
And after more than a year of declines, transport refrigeration saw 3% growth
Equipment orders at CCS were strong again in Q2, up 11% organically after 7% growth in Q1. And as Greg said, the orders growth was across all major product lines
Transport refrigeration orders were up 38%
North America residential HVAC was up 16%, and commercial refrigeration was up 9%
Commercial HVAC and fire & security products were up mid-single digits
In short, this was the best growth in CCS organic equipment orders since Q4 of 2014. Despite solid top line growth, operating profit declined 2% from the prior year, including the impact of FX
Consistent with Q1, we saw negative impact from mix at several CCS business units
Additionally, CCS added to the charge they took on a large commercial project in Q1. That charge was largely offset by positive one-time benefits, including the sale of a joint venture investment
Looking ahead, we expect improvement in the second half, driven by strength in equipment orders, productivity initiatives, and lower FX headwind
We continue to expect CCS operating profit to grow by $100 million to $150 million at actual FX in 2017, but likely closer to the low end of the range
We now expect that CCS will see low to mid-single-digit organic sales growth for the full year
Turning to Aerospace on slide 6, Pratt & Whitney sales were up 6% organically in the quarter
This was driven by 30% growth in the military engines business, which benefited from higher F135 deliveries, aftermarket strength, and development revenues
Commercial aftermarket sales were up 4%, with V2500 strength partially offset by lower sales at Pratt & Whitney Canada
Commercial OEM sales were down 10%, with increased Geared Turbofan deliveries offset by lower shipments of V2500, GP7000, and Pratt & Whitney Canada engines
The recent supplier quality escape discussed at the Paris Air Show, which was related to engines supporting the A320neo program, unfortunately impacted Airbus Q2 aircraft deliveries
Pratt & Whitney worked aggressively to mitigate the impact of this temporary disruption
Pratt delivered 134 GTF engines in the first half of the year, including customer deliveries and spares
We continue to expect a full-year total of 350 to 400 GTF engines, as Greg mentioned earlier
Operating profit of $408 million declined 10%
Drop-through from increased military sales, commercial aftermarket, and favorable FX and pension was more than offset by the absence of the prior year's contract settlements and sale of legacy hardware
Continued ramp-related investments and lower Pratt & Whitney Canada shipments were also headwinds in the quarter
Based on first half results and anticipated increases in negative engine margin in the second half, we still see Pratt & Whitney full-year operating profit being down $150 million to $200 million, but likely closer to the $200 million end of the range
Turning to slide 7, Aerospace Systems sales were down 1% organically
Operating profit of $603 million was up 2%
Commercial OEM sales were down 8%, driven by declines in legacy program volume that more than offset growth on new programs in the quarter
Of note, the end of the Boeing 777 landing gear production at Aerospace Systems impacted commercial OEM sales in the quarter by approximately 3 points
New program ales are expected to ramp more significantly in the back half of the year
Commercial aftermarket was up 7%, driven by 17% growth in provisioning
Parts were up 2% while repair was up 7%
Military sales growth resumed in Q2 and was up 5%, with growth in both OEM and aftermarket
Operating profit growth was driven by drop-through on higher commercial aftermarket and military sales, continued cost reductions, and favorable FX impact
These tailwinds were partially offset by unfavorable commercial OEM volume and mix
With solid first half results at Aerospace Systems, we continue to expect operating profit to be up $50 million to $100 million for the full year and likely toward the high end of the range
And with that, I'll turn it back to Greg
Sam, overall the Pratt large engine aftermarket is doing pretty well
We're going to do more V2500 overhauls this year than we did last year
There's probably demand out there for better than 900 shop visits on a worldwide basis, so that's the good news
The content has also been pretty healthy there as well
But the overall trajectory hasn't really changed when you think about the fleet demographics
The 4000 continues to be in attrition mode
We'll see fewer shop visits year over year there
So overall, I think we're happy with how the aftermarket is trending this year
It looks like it's going to be pretty decent rounding out the balance of the year
But overall, no real change to the fundamental trajectory that we set coming into the year
<UNK>, we'll see year-over-year declines on those volumes in 2017 throughout the back half and maybe some sequential improvement
But as Greg just said, the long-term trend, it feels like it's yet to fully bottom
So about what we expected coming into the year, maybe some modest improvement sequentially on volumes, but no major change
