OVERVIEW
For the second quarter of fiscal 2022, net sales were$4.8 billion , up 8 percent compared with the prior year. Underlying sales, which exclude foreign currency translation, acquisitions and divestitures, were up 10 percent. Foreign currency translation had a 2 percent unfavorable impact. Sales growth continued to be strong in the quarter with favorable results across both business platforms and all geographies. Net earnings common stockholders were$674 , up 20 percent, and diluted earnings per share were$1.13 , up 22 percent compared with$0.93 in the prior year. Adjusted diluted earnings per share were$1.29 compared with$1.07 in the prior year, reflecting strong operating results and a lower effective tax rate in the quarter. The table below presents the Company's diluted earnings per share on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company. Adjusted diluted earnings per share excludes intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction andAspenTech pre-closing costs, and certain gains, losses or impairments. Three Months Ended Mar 31 2021 2022 Diluted earnings per share$ 0.93 1.13 Restructuring and related costs
0.03 0.02
Amortization of intangibles
0.10 0.10
Acquisition/divestiture costs and interest onAspenTech debt
- 0.04
OSI first year acquisition accounting charges
0.01 -
Adjusted diluted earnings per share
The table below summarizes the changes in adjusted diluted earnings per share. The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below. Three Months
Ended
Adjusted diluted earnings per share - Mar 31, 2021 $ 1.07 Operations 0.11 Stock compensation 0.02 Pensions 0.01 Gain on sale of investment - prior year (0.04) Foreign currency 0.01 Lower effective tax rate 0.08 Share repurchases 0.03 Adjusted diluted earnings per share - Mar 31, 2022 $ 1.29 15
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
Following is an analysis of the Company's operating results for the second quarter endedMarch 31, 2021 , compared with the second quarter endedMarch 31, 2022 . 2021 2022 Change Net sales$ 4,431 4,791 8 % Gross profit$ 1,862 1,952 5 % Percent of sales 42.0 % 40.7 % SG&A$ 1,054 1,049 - % Percent of sales 23.8 % 21.9 % Other deductions, net$ 33 40 Amortization of intangibles$ 74 62 Restructuring costs$ 17 10 Interest expense, net$ 38 52
Earnings before income taxes
16.6 % 16.9 % Net earnings common stockholders$ 561 674 20 % Percent of sales 12.7 % 14.1 % Diluted earnings per share$ 0.93 1.13 22 % Net sales for the second quarter of fiscal 2022 were$4.8 billion , up 8 percent compared with 2021. Automation Solutions sales were up 5 percent and Commercial & Residential Solutions sales were up 13 percent. Underlying sales were up 10 percent on 6 percent higher volume and 4 percent higher price, while foreign currency translation had a 2 percent negative impact. Underlying sales were up 14 percent in theU.S. and up 6 percent internationally. TheAmericas was up 14 percent,Europe was up 2 percent andAsia ,Middle East &Africa was up 7 percent (China up 11 percent). Cost of sales for the second quarter of fiscal 2022 were$2,839 , an increase of$270 compared with 2021, due to higher sales volume and higher materials costs. Gross margin of 40.7 percent decreased 1.3 percentage points compared with the prior year as price increases were largely offset by higher material costs, and other inflation negatively impacted margins. Selling, general and administrative (SG&A) expenses of$1,049 decreased$5 and SG&A as a percent of sales decreased 1.9 percentage points to 21.9 percent compared with the prior year, reflecting leverage on higher sales, lower stock compensation expense of$11 and savings from the Company's cost reset actions, partially offset by wage and other inflation. Other deductions, net were$40 in 2022, an increase of$7 compared with the prior year, reflecting acquisition/divestiture costs of$13 , a decline in restructuring costs of$7 and a favorable impact from foreign currency transactions of$9 . Intangibles amortization was lower by$12 , partially due to backlog amortization of$6 in the prior year related to the OSI acquisition. The prior year also included a gain on the sale of an equity investment of$31 . See Notes 6 and 7. Pretax earnings of$811 increased$74 , up 10 percent compared with the prior year. Earnings increased$85 in Automation Solutions and increased$8 in Commercial & Residential Solutions, while costs reported at Corporate increased$5 . See the Business Segments discussion that follows and Note 13. Income taxes were$136 in the second quarter of fiscal 2022 and$169 in 2021, resulting in effective tax rates of 17 percent and 23 percent, respectively. The current year rate included a 6 percentage point benefit related to the completion of tax examinations, while both years included unfavorable discrete items which increased the rates 1 percentage point. 16
-------------------------------------------------------------------------------- Net earnings common stockholders in the second quarter of fiscal 2022 were$674 , up 20 percent, compared with$561 in the prior year, and earnings per share were$1.13 , up 22 percent, compared with$0.93 in the prior year. See discussion in the Overview above and the analysis below of adjusted earnings per share for further details. The table below, which shows results on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein. The Company defines adjusted EBITA as earnings excluding interest expense, net, income taxes, intangibles amortization expense, restructuring expense, first year purchase accounting related items and transaction fees, and certain gains, losses or impairments. Adjusted EBITA and adjusted EBITA margin are measures used by management and may be useful for investors to evaluate the Company's operational performance. Three Months Ended Mar 31 2021 2022
Change
Earnings before income taxes$ 737 811 10 % Percent of sales 16.6 % 16.9 % Interest expense, net 38 52 Restructuring and related costs 21 15 Amortization of intangibles 82 76 Acquisition/divestiture costs - 13 OSI first year acquisition accounting charges 10 -
Adjusted EBITA$ 888 967 9 % Percent of sales 20.0 % 20.2 % Business Segments Following is an analysis of operating results for the Company's business segments for the second quarter endedMarch 31, 2021 , compared with the second quarter endedMarch 31, 2022 . The Company defines segment earnings as earnings before interest and taxes. See Note 13 for a discussion of the Company's business segments. AUTOMATION SOLUTIONS Three Months Ended Mar 31 2021 2022 Change Sales$ 2,793 2,937 5 % Earnings$ 471 556 18 % Margin 16.8 % 18.9 % Restructuring and related costs$ 14 11 Amortization of intangibles$ 69 64 Adjusted EBITA$ 554 631 15 % Adjusted EBITA Margin 19.8 % 21.5 %
Sales by Major Product Offering
Measurement & Analytical Instrumentation
836 883 6 % Industrial Solutions 555 602 8 % Systems & Software 670 685 2 % Total$ 2,793 2,937 5 % Automation Solutions sales were$2.9 billion in the second quarter, an increase of$144 or 5 percent. Foreign currency translation had a 2 percent unfavorable impact. Underlying sales increased 7 percent on 5 percent higher volume and 2 percent higher price, reflecting strength inNorth America andChina and favorable results in all major end markets. Supply chain and logistics constraints continued to unfavorably impact sales in the second quarter. Underlying sales 17
-------------------------------------------------------------------------------- increased 13 percent in theAmericas (U.S. up 14 percent), as process end markets continue to recover, whileEurope was down 3 percent, andAsia ,Middle East &Africa increased 6 percent (China up 17 percent). Sales for Measurement & Analytical Instrumentation increased$35 , or 5 percent as market conditions continued to improve for North American process industries. Measurement & Analytical sales were strong inNorth America andAsia ,Middle East &Africa , withChina up over 25 percent, whileEurope was down over 10 percent due to supply chain issues and lower project activity. Valves, Actuators & Regulators increased$47 , or 6 percent, reflecting strength in power and chemical end markets. Demand was favorable in theAmericas (up mid-teens) andChina (up over 20 percent), while sales increased modestly in the rest ofAsia ,Middle East &Africa and were down mid-single digits inEurope . Industrial Solutions sales were up$47 , or 8 percent, on continued strength in discrete end markets. Systems & Software increased$15 , or 2 percent, reflecting strength in process end markets inNorth America andChina , partially offset by weakness inEurope , while power end markets were strong inNorth America . Earnings were$556 , an increase of$85 , or 18 percent, and margin increased 2.1 percentage points to 18.9 percent, reflecting leverage on higher volume, favorable mix, savings from cost reduction actions and a 0.3 percentage point benefit from foreign currency transactions. Price-cost was neutral while freight and other inflation was slightly negative. COMMERCIAL & RESIDENTIAL SOLUTIONS Three Months Ended Mar 31 2021 2022 Change Sales: Climate Technologies$ 1,160 1,341 16 % Tools & Home Products 485 516 6 % Total$ 1,645 1,857 13 % Earnings: Climate Technologies$ 245 262 7 % Tools & Home Products 112 103 (7) % Total$ 357 365 2 % Margin 21.7 % 19.7 % Restructuring and related costs$ 5 3 Amortization of intangibles$ 13 12 Adjusted EBITA$ 375 380 1 % Adjusted EBITA Margin 22.8 % 20.5 % Commercial & Residential Solutions sales were$1.9 billion in the second quarter, up$212 , or 13 percent compared to the prior year. Foreign currency translation had a 1 percent unfavorable impact. Underlying sales increased 14 percent on 5 percent higher volume and 9 percent higher price, reflecting growth across nearly all businesses and geographies, with strength in commercial and industrial end markets. Overall, underlying sales increased 15 percent in theAmericas (U.S. up 15 percent), 14 percent inEurope and 11 percent inAsia ,Middle East &Africa (China down 6 percent). Climate Technologies sales were$1.3 billion in the second quarter, an increase of$181 , or 16 percent. Air conditioning, heating and refrigeration sales were strong, reflecting global demand across all end markets. Tools & Home Products sales were$516 in the second quarter, an increase of$31 , or 6 percent. Sales of food waste disposers and professional tools were both up approximately 10 percent, while wet/dry vacuums sales decreased 9 percent. Earnings were$365 , up 2 percent compared with the prior year driven by slightly favorable price-cost due to higher prices. Margin decreased 2.0 percentage points to 19.7 percent, as the benefit from higher prices was mostly offset by higher materials costs. Freight and other inflation also negatively impact margin, partially offset by leverage on higher sales volume and savings from cost reduction actions. 18
--------------------------------------------------------------------------------
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED
Following is an analysis of the Company's operating results for the six months
ended
2021 2022 Change Net sales$ 8,592 9,264 8 % Gross profit$ 3,585 3,774 5 % Percent of sales 41.7 % 40.7 % SG&A$ 2,052 2,060 - % Percent of sales 23.9 % 22.2 %
Gain on subordinated interest $ - (453) Other deductions, net
$ 155 91
Amortization of intangibles
$ 83 19 Interest expense, net$ 78 90
Earnings before income taxes
15.1 % 21.4 % Net earnings common stockholders$ 1,006 1,570 56 % Percent of sales 11.7 % 16.9 % Diluted earnings per share$ 1.67 2.63 57 % Net sales for the first six months of 2022 were$9.3 billion , up 8 percent compared with 2021. Automation Solutions sales were up 5 percent while Commercial & Residential Solutions sales were up 13 percent. Underlying sales were up 9 percent on 5 percent higher volume and 4 percent higher price, and foreign currency translation subtracted 1 percent. Underlying sales increased 12 percent in theU.S. and increased 6 percent internationally. TheAmericas was up 13 percent,Europe was up 2 percent andAsia ,Middle East &Africa was up 7 percent (China up 11 percent). Cost of sales for 2022 were$5,490 , an increase of$483 versus$5,007 in 2021, primarily due to higher sales volume and higher materials costs. Gross margin of 40.7 percent decreased 1.0 percentage point compared to the prior year, reflecting unfavorable price-cost in Commercial & Residential Solutions, partially offset by leverage on higher sales volume and favorable mix. SG&A expenses of$2,060 increased$8 compared with the prior year on increased sales volume, partially offset by lower stock compensation expense of$34 . SG&A as a percent of sales decreased 1.7 percentage points to 22.2 percent, reflecting leverage on higher sales, lower stock compensation expense, and savings from the Company's restructuring and cost reset actions. As previously disclosed, the Company sold its network power systems business (rebranded as Vertiv, now a publicly traded company, symbol VRT) in 2017 and retained a subordinated interest contingent upon the equity holders first receiving a threshold cash return on their initial investment. In the first quarter of fiscal 2022, the equity holders' cumulative cash return exceeded the threshold and as a result, the Company received a distribution of$438 inNovember 2021 (in total, a gain of$453 was recognized in the first quarter). Based on the terms of the agreement and the current calculation, the Company could receive additional distributions of approximately$75 which are expected to be received over the next two-to-three years. However, the distributions are contingent on the timing and price at which Vertiv shares are sold by the equity holders and therefore, there can be no assurance as to the amount or timing of the remaining distributions to the Company. Other deductions, net were$91 in 2022, a decrease of$64 compared with the prior year, reflecting a decline in restructuring costs of$64 , a favorable impact from foreign currency transactions of$35 due to losses in the prior year and gains in the current year, and gains from the sales of capital assets of$15 in the first quarter of fiscal 2022, partially offset by acquisition/divestiture costs of$36 . Intangibles amortization decreased$27 largely due to backlog 19
-------------------------------------------------------------------------------- amortization in the prior year of$17 related to the OSI acquisition. The prior year also included investment-related gains, including a gain of$21 from an investment sale, a$17 gain from the acquisition of full ownership of an equity investment and a gain of$31 on the sale of an equity investment. See Notes 6 and 7. Pretax earnings of$1,986 increased$686 , or 53 percent. Earnings increased$250 in Automation Solutions and decreased$3 in Commercial & Residential Solutions, while costs reported at Corporate increased$2 . See the Business Segments discussion that follows and Note 13. Income taxes were$416 for 2022 and$280 for 2021, resulting in effective tax rates of 21 percent and 22 percent, respectively. The current year rate included a 3 percentage point benefit related to the completion of tax examinations, partially offset by portfolio restructuring activities which negatively impacted the rate by 2 percentage points. Net earnings common stockholders in 2022 were$1,570 , up 56 percent compared with the prior year, and earnings per share were$2.63 , up 57 percent compared with$1.67 in 2021. Results reflected strong operating results and included a pretax gain of$453 ($358 after-tax,$0.60 per share) related to the Company's subordinated interest in Vertiv. See the analysis below of adjusted earnings per share for further details.
The table below, which shows results on an adjusted EBITA basis, is intended to supplement the Company's discussion of its results of operations herein.
Six Months Ended Mar 31 2021 2022 Change Earnings before income taxes$ 1,300 1,986 53 % Percent of sales 15.1 % 21.4 % Interest expense, net 78 90 Restructuring and related costs 90 33 Amortization of intangibles 163 153 Gain on subordinated interest - (453) Acquisition/divestiture costs - 36
Gain on acquisition of full ownership of equity investment (17)
- OSI first year acquisition accounting charges and fees 31 - Adjusted EBITA$ 1,645 1,845 12 % Percent of sales 19.2 % 19.9 % 20
-------------------------------------------------------------------------------- The table below presents the Company's diluted earnings per share on an adjusted basis to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company. Six Months Ended Mar 31 2021 2022 Diluted earnings per share$ 1.67 2.63 Restructuring and related costs
0.12 0.04
Amortization of intangibles
0.20 0.20
Gain on subordinated interest
- (0.60)
Acquisition/divestiture costs and interest onAspenTech debt
- 0.07
Gain on acquisition of full ownership of equity investment
(0.03) -
OSI first year acquisition accounting charges and fees 0.04 - Adjusted diluted earnings per share
The table below summarizes the changes in adjusted diluted earnings per share. The items identified below are discussed throughout MD&A, see further discussion above and in the Business Segments and Financial Position sections below. Six Months Ended Adjusted diluted earnings per share - Mar 31, 2021 $ 2.00 Operations 0.21 Stock compensation 0.05 Pensions 0.03 Gains on sales of investments - prior year (0.07) Gains on sales of capital assets - current year 0.02 Foreign currency 0.03 Lower effective tax rate 0.02 Share repurchases 0.05 Adjusted diluted earnings per share - Mar 31, 2022 $ 2.34 21
-------------------------------------------------------------------------------- Business Segments Following is an analysis of operating results for the Company's business segments for the six months endedMarch 31, 2021 , compared with the six months endedMarch 31, 2022 . The Company defines segment earnings as earnings before interest and taxes. AUTOMATION SOLUTIONS Six Months Ended Mar 31 2021 2022 Change Sales$ 5,485 5,742 5 % Earnings$ 832 1,082 30 % Margin 15.2 % 18.8 % Restructuring and related costs$ 78 23 Amortization of intangibles$ 137 129 Adjusted EBITA$ 1,047 1,234 18 % Adjusted EBITA Margin 19.1 % 21.5 % Sales by Major Product Offering Measurement & Analytical Instrumentation$ 1,430 1,502 5 % Valves, Actuators & Regulators 1,642 1,699 3 % Industrial Solutions 1,063 1,168 10 % Systems & Software 1,350 1,373 2 % Total$ 5,485 5,742 5 % Automation Solutions sales were$5.7 billion in the first six months of 2022, an increase of$257 , or 5 percent. Foreign currency translation had a 1 percent unfavorable impact. Underlying sales increased 6 percent on 5 percent higher volume and 1 percent higher price, reflecting continued recovery in most end markets and world areas despite supply chain and logistics constraints which unfavorably impacted sales. Underlying sales increased 10 percent in theAmericas , whileEurope decreased 2 percent andAsia ,Middle East &Africa was up 6 percent (China up 17 percent). Sales for Measurement & Analytical Instrumentation increased$72 , or 5 percent. Sales were strong inAsia ,Middle East &Africa and up moderately inNorth America on continued improvement for North American process industries, while sales were down moderately inEurope due to supply chain constraints. Valves, Actuators & Regulators increased$57 , or 3 percent, reflecting strong demand in theAmericas andChina , partially offset by softness in the rest ofAsia ,Middle East &Africa andEurope . Industrial Solutions sales increased$105 , or 10 percent, reflecting strong global demand in discrete end markets. Systems & Software increased$23 , or 2 percent, reflecting strength in process end markets inNorth America andChina , partially offset by weakness inEurope , while power end markets were strong inAsia ,Middle East &Africa and up modestly inNorth America . Earnings were$1,082 , an increase of$250 , or 30 percent, and margin increased 3.6 percentage points to 18.8 percent, reflecting leverage on higher volume, lower restructuring expense which benefited margins 1.0 percentage point, savings from cost reduction actions and favorable mix, partially offset by higher inflation. Foreign currency transactions also benefited margins by 0.4 percentage points. 22
-------------------------------------------------------------------------------- COMMERCIAL & RESIDENTIAL SOLUTIONS Six Months Ended Mar 31 2021 2022 Change Sales: Climate Technologies$ 2,191 2,504 14 % Tools & Home Products 930 1,024 10 % Total$ 3,121 3,528 13 % Earnings: Climate Technologies$ 457 454 (1) % Tools & Home Products 210 210 - % Total$ 667 664 - % Margin 21.4 % 18.8 % Restructuring and related costs$ 8 7 Amortization of intangibles$ 26 24 Adjusted EBITA$ 701 695 (1) % Adjusted EBITA Margin 22.4 % 19.7 % Commercial & Residential Solutions sales were$3.5 billion in the first six months of 2022, an increase of$407 , or 13 percent compared to the prior year. Underlying sales were up 14 percent on 6 percent higher volume and 8 percent higher price, while foreign currency translation subtracted 1 percent. Overall, underlying sales increased 16 percent in theAmericas , 14 percent inEurope and 7 percent inAsia ,Middle East &Africa (China down 3 percent). Climate Technologies sales were$2.5 billion in the first six months of 2022, an increase of$313 , or 14 percent. Air conditioning, heating and refrigeration sales were strong, reflecting global demand across all end markets. Tools & Home Products sales were$1.0 billion in the first six months of 2022, up$94 , or 10 percent. Sales of professional tools were up nearly 15 percent and food waste disposers were up 10 percent, while wet/dry vacuums were up slightly. Earnings were$664 , flat compared to the prior year, and margin decreased 2.6 percentage points, due to unfavorable price-cost reflecting steel prices, partially offset by leverage on higher volume and savings from cost reduction actions. 23
--------------------------------------------------------------------------------
FINANCIAL CONDITION
Key elements of the Company's financial condition for the six months ended
Mar 31, 2021 Sept 30, 2021 Mar 31, 2022 Operating working capital$ 781 $ 704 $ 1,300 Current ratio 1.3 1.3 1.7 Total debt-to-total capital 44.4 % 40.3 % 50.9 % Net debt-to-net capital 35.1 % 30.4 % 27.6 % Interest coverage ratio 16.6 X 18.6 X 21.5 X The Company's operating working capital increased compared to the same quarter last year and compared toSeptember 30, 2021 due to higher inventory levels to support sales growth and reflecting ongoing supply chain and logistics constraints. The increase in the current ratio reflects increased cash from the Company's$3 billion of debt issued in the first quarter of fiscal 2022 to support theAspenTech transaction and cash received in the first quarter related to the Vertiv subordinated interest of$438 . The interest coverage ratio (earnings before income taxes plus interest expense, divided by interest expense) of 21.5X for the first six months of fiscal 2022 compares to 16.6X for the six months endedMarch 31, 2021 . The increase reflects higher pretax earnings in the current year, including the Vertiv subordinated interest gain of$453 . Excluding the gain, the interest coverage ratio was 16.8X. InDecember 2021 , the Company issued$1 billion of 2.00% notes due 2028,$1 billion of 2.20% notes due 2031 and$1 billion of 2.80% notes due 2051. The net proceeds from the sale of the notes will be used to pay a portion of the Company's contribution of approximately$6.0 billion to existing stockholders of Aspen Technology, Inc. ("AspenTech") as part of theAspenTech transaction. In the second quarter of fiscal 2022, the Company increased its commercial paper borrowings by approximately$2.2 billion to generate additional cash to fund theAspenTech transaction. The Company expects to finance the remainder of the contribution through existing sources, including cash on hand, short-term debt capacity, and cash from operations. See Note 4 and Note 10. Operating cash flow for the first six months of fiscal 2022 was$965 , a decrease of$650 compared with$1,615 in the prior year due to higher inventory levels to support sales growth and reflecting ongoing supply chain and logistics constraints. Operating cash flow was also negatively impacted by approximately$45 of taxes paid in the second quarter of fiscal 2022 on the Vertiv subordinated interest gain. The remaining taxes owed on the gain are approximately$45 and are expected to be paid by the end of fiscal 2022. Free cash flow of$740 in the first six months of fiscal 2022 (operating cash flow of$965 less capital expenditures of$225 ) decreased$653 compared to free cash flow of$1,393 in 2021 (operating cash flow of$1,615 less capital expenditures of$222 ), reflecting the decrease in operating cash flow. Cash provided by investing activities was$159 , reflecting cash received related to the Vertiv subordinated interest of$438 . Cash provided by financing activities was$3,499 , primarily due to proceeds of nearly$3 billion from theDecember 2021 debt issuance and increased commercial paper borrowings of$2.2 billion to fund theAspenTech transaction, partially offset by the repayment of$500 of long-term debt, dividend payments, and share repurchases. OnMarch 27, 2020 , the CARES Act was enacted in response to the COVID-19 pandemic, and among other things, provides tax relief to businesses. Tax provisions of the CARES Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions. The Company deferred$73 of certain payroll taxes through the end of calendar year 2020, of which approximately$37 was paid inDecember 2021 with the remaining amount due inDecember 2022 . Emerson maintains a conservative financial structure to provide the strength and flexibility necessary to achieve our strategic objectives and has been successful in efficiently deploying cash where needed worldwide to fund operations, complete acquisitions and sustain long-term growth. Emerson is in a strong financial position, with total assets of$29 billion and stockholders' equity of$11 billion , and has the resources available for reinvestment in existing businesses, strategic acquisitions and managing its capital structure on a short- and long-term basis. 24
--------------------------------------------------------------------------------
FISCAL 2022 OUTLOOK
Emerson continues to see strong overall business performance while managing continued macroeconomic and geopolitical uncertainty, supply chain constraints and challenges related to COVID-19. For the full year, consolidated net sales are expected to be up 8 to 10 percent, with underlying sales up 9 to 11 percent excluding a 1 percent unfavorable impact from foreign currency translation. Automation Solutions net sales are expected to be up 6 to 8 percent, with underlying sales up 7 to 9 percent excluding a 1 percent unfavorable impact from foreign currency translation. Commercial & Residential Solutions net sales are expected to be up 11 to 13 percent with underlying sales up 12 to 14 percent excluding a 1 percent unfavorable impact from foreign currency translation. Earnings per share are expected to be$4.77 to$4.92 , while adjusted earnings per share are expected to be$4.95 to$5.10 . Adjusted earnings per share exclude a$0.20 impact from restructuring actions, a$0.39 impact from amortization of intangibles, a$0.60 gain from the Vertiv subordinated interest (see Note 4), and a$0.19 impact from transaction and Aspen Tech pre-closing costs. Operating cash flow is expected to be approximately$3.6 billion and free cash flow, which excludes projected capital spending of$600 million , is expected to be approximately$3.0 billion . Share repurchases are expected to be approximately$250 to$500 million in fiscal 2022. Emerson's guidance excludes the operational impact of the transaction withAspenTech , which is expected to close in the second calendar quarter of 2022, but does include estimated transaction fees and interest expense on$3 billion of debt already issued to fund the transaction. The guidance also excludes the effect of theTherm-O-Disc sale, expected to close in the second calendar quarter of 2022. The guidance includes the operational impact of exiting theRussia business, discussed below, but excludes any potential charges or other costs associated with the exit. Statements in this report that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties, and Emerson undertakes no obligation to update any such statements to reflect later developments. These risks and uncertainties include the Company's ability to successfully complete on the terms and conditions contemplated, and the financial impact of, the proposedAspenTech transaction, the scope, duration and ultimate impact of the COVID-19 pandemic, and theRussia -Ukraine conflict, as well as economic and currency conditions, market demand, including related to the pandemic and oil and gas price declines and volatility, pricing, protection of intellectual property, cybersecurity, tariffs, competitive and technological factors, inflation, among others, which are set forth in the "Risk Factors" of Part I, Item 1A, and the "Safe Harbor Statement" of Part II, Item 7, to the Company's Annual Report on Form 10-K for the year endedSeptember 30, 2021 and in subsequent reports filed with theSEC , which are hereby incorporated by reference. OnMay 4, 2022 , Emerson announced its intention to exit business operations inRussia and is exploring strategic options to divest Metran, itsRussia -based manufacturing subsidiary. Emerson is committed to an orderly transfer of these assets and will support its employees through this process. Emerson's historical net sales inRussia were principally in the Automation Solutions segment and in total, represent approximately 1.5 percent of consolidated annual sales. As ofMarch 31, 2022 , Emerson's Russian operations had net assets of approximately$50 and accumulated foreign currency translation losses of approximately$145 (which will be recognized as a non-cash charge when the exit is completed). The Company is currently unable to estimate the full financial consequences of the exit due to uncertainty regarding the commercial terms of the exit and related tax impacts.
© Edgar Online, source