Patrick Goris
Senior Vice President and Chief Financial Officer at Carrier Global
Thank you, Dave, and good morning, everyone. I'd like to start by thanking some of my colleagues in the corporate finance team. So far this year, the team has successfully integrated Viessmann Climate Solutions Financials, manage the accounting for five different exit transactions, and more recently has transitioned our financial statements back to 2022 to reflect disc op's treatment for the Fire and Security exits. Just one of those moving pieces would be a big project, the combination of all of these in less than a year is truly an enormous and complex undertaking. So, a big thank you to our Chief Accounting Officer, Kyle Crockett; our Tax and Treasury lead, Mike Sensei, and our Corporate Planning and IR leads, Jen Kloska and Sam Pearlstein, as well as their entire teams. Very much appreciated.
Please turn to slide 9. A reminder that with the exception of preliminary free cash flow, all these results refer to continuing operations. Reported sales of $6 billion were up 21% with organic sales up 4%. Viessmann Climate Solutions contributed 17% to year-over-year sales growth. Q3 adjusted operating profit of over $1 billion was up 19% compared to last year, driven by the contribution of Viessmann Climate Solutions, the benefit of organic growth and price and productivity.
Adjusted operating margin was down 40 basis points. The consolidation of Viessmann Climate Solutions represented about 130 basis point headwind to adjusted operating margin in the quarter. On a year-to-date basis, adjusted operating margin is up 120 basis points, driven by the benefit of organic growth and strong productivity. As Dave already mentioned, core earnings conversion that is excluding the impact of acquisitions, divestitures and currency was about 40% in the quarter, and over 100% year to date.
Adjusted EPS from continuing operations of $0.77 was up 3% year-over-year, driven by organic growth, price and productivity, partly offset by higher net interest expense, a higher tax rate and higher share count. We have included the year-over-year adjusted EPS from continuing operations bridge in the appendix on slide 22, including the $0.06 adjusted EPS from discontinued operations, overall adjusted EPS of $0.83 was better than our guide by about $0.03. Q3 Fire and Security sales now excluded from our reported results were about $500 million.
Preliminary free cash flow for the company, which includes the results of both continuing and discontinued operations was an outflow of about $370 million in the quarter. This figure includes roughly $1.1 billion of cash taxes on the business exit gains, transaction costs and restructuring costs resulting in preliminary underlying free cash flow performance in a quarter of about $700 million. On a year-to-date basis, preliminary free cash flow is $120 million with preliminary underlying performance of about $1.4 billion.
Moving on to the segments starting on Slide 10. HVAC reported sales growth of 26% reflects organic sales growth of 6% and the contribution of Viessmann Climate Solutions. Organic sales in the Americas were up high single digits driven by an almost 20% increase in commercial HVAC and double-digit sales growth for residential HVAC. Light commercial was down mid-single digits. Organic sales in EMEA were up low single digits, driven by double-digit growth in commercial HVAC, partially offset by a decline in resi and light commercial sales, reflecting continued market weakness in that segment.
Sales in Asia Pacific were down low single digits, driven by continued weakness in our residential and light commercial markets in China, partially offset by continued strength in the rest of Asia. The HVAC segment operating margins were down 100 basis points as we expected. The benefit of organic growth and productivity were offset by the consolidation of Viessmann Climate Solutions, which represented about a 200-basis point margin headwind in the quarter. Overall, another solid quarter for HVAC.
Transitioning to refrigeration on slide 11. A reminder that commercial refrigeration results are included in continuing operations, as they do not qualify for disc ops treatment. Reported inorganic sales were up 1%. Transport refrigeration was up 3%. Within transport, container was up 30% year-over-year, while Global Truck and Trailer was down mid-single digits, driven by North America Truck and Trailer which was down over 15%. European truck and Trailer was down low single digits while Asia Truck and Trailer continues to perform very well with about 20% growth.
Our Sensitech business was up double digits. Commercial refrigeration was down low single digits. Q3 is the last quarter to include the commercial refrigeration business as we closed the sale transaction on October 1st through third quarters, commercial refrigeration sales were about $750 million with immaterial adjusted operating profit contribution. Adjusted operating margin for this segment expanded 50 basis points compared to last year, driven by productivity.
Turning to slide 12 for orders. In the interest of time, I will just mention a few highlights. Total company orders were up close to 20% on an organic basis. North America resi HVAC orders were up 30% year-over-year, and recent movement has been stronger than we expected. We're not counting on any material 410A prebuy this year. We see continued strength in Global Commercial HVAC with orders up about 15%. Data centers remain particularly strong and Global Truck and trailer orders are up 85% held by very easy compare.
Turning to slide 13, guidance. Our guidance for 2024 now reflects continuing operations with the exception of free cash flow. There are a few moving pieces, but our new adjusted EPS guide is essentially unchanged compared to the July adjusted EPS guide, except for the impact of discontinued operations. We now expect reported full year sales of roughly $22.5 billion compared to the prior guide that included Fire and Security, with underlying organic growth of about 3%. Our adjusted operating margin guidance remains roughly 15.5%, up 150 basis points year-over-year, and we continue to expect full year core earnings conversion to be well north of 50%.
Our guide for adjusted EPS of continuing operations is now about $2.50. As I mentioned earlier, the change versus our July guide of $2.85 is all related to the transition to disc ops treatment of the fire and security exits. In the appendix, we have included a guide-to-guide bridge on slide 23, as well as on slide 24, a bridge from what we called core adjusted EPS to the 250 guide of continuing operations.
As you will recall, we estimated earlier this year that 2024 full year adjusted EPS of the businesses we are retaining would amount to $2.60. As you will see on the bridge, the difference between a 260 and a 250 adjusted EPS is all related to disc ops, and more specifically the treatment of costs previously allocated to the Fire and Security segment and net interest expense in dis cops accounting. As I mentioned earlier, commercial refrigeration has an immaterial adjusted EPS contribution in 2024, hence it is not included on the bridge.
Our free cash flow outlook is now an outflow of $200 million versus an inflow of $400 million in the July guide, reflecting about $600 million of cash tax payments related to the business exit of commercial and residential fire. This was not in our July guide, given timing of the definitive agreement. Our underlying free cash flow outlook remains about $2.4 billion, and we now expect capital expenditures of about $500 million and cash restructuring closer to $150 million.
From a capital structure perspective, we expect to be at about two times net leverage at the end of the calendar year, consistent with the commitment we made earlier in the year. In the appendix on slide 26, there is a summary of additional items which were also updated as part of the new guide.
Moving on to Slide 14, while we plan to issue 2025 adjusted EPS guide when we report earnings in early February, I want to update you on some of the building blocks, starting with our current 2024 guide of 250 of adjusted EPS. Consistent with our value creation framework, we expect to deliver double digit adjusted EPS growth from organic revenue growth. In addition to that, we expect tailwinds from the elimination of costs previously allocated to the Fire and Security segment. As Sam mentioned, these costs are included in the 250 adjusted EPS of continuing ops. We started addressing these costs at the very beginning of calendar 2024, and will have eliminated about $200 million of run rate costs throughout 2024, with some residual benefit in 2025 as you can see on this slide.
Moving on to an expected tailwind from lower net interest expense, debt paydown throughout 2024 means that 2025 net interest expense is expected to be a $0.05 to $0.10 tailwind. Finally, we expect second half 2024 and 2025 share repurchases to amount to about $5 billion, eliminating the dilution from shares issued from the VCS acquisition by the end of 2025. In short, given these building blocks, we expect to have another year of strong adjusted EPS growth in 2025.
From a capital deployment perspective, we expect to continue to target a growing and sustainable dividend representing about a 30% payout. We also expect to pay down the $1.2 billion maturity early next year and refinance the EUR750 million debt tranche subject to market conditions.
Moving on to slide 15. At the end of last week, we announced important settlements related to AFFF. Let me start with estate claims or claims that Carrier is responsible for any liabilities of KFI, including all those related to the manufacturer or sale of AFFF. Upon court approval, this settlement will permanently resolve all such present and future claims, whether water, personal injury, airport or anyone else.
Moving on to direct claims, or claims for UTC's actions between 2005 and 2013 when it owned the AFFF business. We believe the settlements will resolve substantially all current and future AFFF related claims by public water providers and airports. We also believe that any potential remaining claims lack merit. Cash settlement payments amount to $615 million, which we estimate will be paid over time, as you can see on the slide. Importantly, we expect insurance payments received in the aggregate will cover the full amounts paid by Carrier under the settlements, though timing is not expected to match the timing of outflows in the early years. The settlement enables Carrier to receive up to $2.4 billion from shared insurance recoveries. In addition to the $615 million of cash payments, the settlement also provides that the KFI net sales proceeds of $115 million are contributed. This is a non-cash item for Carrier, as is the $125 million contribution from insurance recovery. The settlements will not impact our capital deployment plans, including dividends and share repurchases.
In short, we had another good quarter, transformation is substantially behind us, and we're optimistic about 2025 and beyond. With that, we'll open it up for questions.
