8-KMaterial AgreementsRegulation FDExhibits & Filings

INTUITIVE SURGICAL INC 8-K Report, Material Agreement (May 2, 2014)

Filed May 2, 2014For Securities:ISRG

Summary

Intuitive Surgical, Inc. (ISRG) announced a significant capital allocation decision through an $1 billion accelerated share repurchase (ASR) program agreement with Goldman, Sachs & Co. This program signifies management's confidence in the company's stock valuation and its commitment to returning capital to shareholders. The ASR program is designed to repurchase a substantial amount of ISRG's common stock, with the majority of shares expected to be delivered and retired shortly after the May 7th payment date, and completion anticipated by early November 2014. This move indicates that the company had significant capacity within its existing repurchase authorization, as $1 billion remained prior to this new agreement. Investors should note that while the ASR program offers a clear path for immediate capital return, the exact number of shares repurchased will be determined by market prices during an initial hedging period. The completion of the program is subject to various market conditions and contractual terms outlined in the agreement with Goldman Sachs.

Key Highlights

  • 1Intuitive Surgical enters into a $1 billion accelerated share repurchase (ASR) program with Goldman Sachs.
  • 2The ASR program aims to repurchase a substantial amount of the company's common stock.
  • 3A payment of $1 billion will be made to Goldman Sachs on May 7, 2014, in exchange for shares.
  • 4A majority of the shares are expected to be delivered and retired within the first two weeks of the program.
  • 5The ASR program is expected to be completed by early November 2014, with potential for acceleration.
  • 6The exact number of shares repurchased will be determined based on market prices during an initial hedge period.
  • 7The company had $1 billion remaining under its authorized stock repurchase program prior to initiating this ASR.

Frequently Asked Questions

An Accelerated Share Repurchase (ASR) program is a contract between a company and an investment bank (in this case, Goldman Sachs) where the company agrees to buy back a specified amount of its own stock. Intuitive Surgical is initiating this $1 billion ASR program as a way to efficiently return capital to shareholders, signaling management's belief that the company's stock is currently undervalued or that it's an opportune time to reduce the share count. The structure allows for immediate repurchase and a defined completion timeframe.

The precise number of shares Intuitive Surgical will repurchase is not fixed upfront. It will be determined by the market price of its common stock over an initial 'hedge period' during which Goldman Sachs will establish its hedge. The ASR agreement specifies that the number of shares will be based on the average daily volume-weighted average share price over this period. The final number of shares will be calculated upon the completion of the ASR program.

Intuitive Surgical will make a $1 billion payment to Goldman Sachs on May 7, 2014. The company anticipates receiving a majority of the repurchased shares within the first two weeks following this payment. The entire ASR program is expected to be completed by early November 2014, though Goldman Sachs has the option to accelerate this completion date.

No, prior to entering into this $1 billion ASR program, Intuitive Surgical had $1 billion remaining under its Board of Directors' authorized stock repurchase program. This means the company has the capacity for further repurchases if it chooses, which would require additional Board authorization beyond the current ASR agreement.