What is an accelerated share repurchase (ASR) agreement?

An accelerated share repurchase (ASR) agreement is a transaction where a company buys back its own stock from a financial institution (like Morgan Stanley in this case) for a predetermined amount. The company typically pays the institution upfront and receives a significant portion of the shares immediately, with the final number of shares repurchased determined later based on market prices. This allows for a swift and efficient execution of a buyback program.

Why is L3Harris conducting an ASR?

L3Harris is conducting this ASR as part of its ongoing Common Stock repurchase program. This action indicates management's belief that the company's stock is undervalued or that repurchasing shares is an effective way to return capital to shareholders, potentially increasing earnings per share and overall shareholder value.

How will the final number of shares repurchased be determined?

The final number of shares will be based on the average of the daily volume-weighted average price per share of L3Harris's common stock during the term of the ASR transaction. This average price will have a discount applied, and the total number of shares will be adjusted based on the terms outlined in the ASR Agreement.

What is the expected impact on the company's stock?

Share repurchases, especially through an ASR, tend to reduce the number of outstanding shares. This can lead to an increase in earnings per share (EPS) and can signal confidence from management, which may positively influence investor sentiment and stock price over time. The exact impact depends on market conditions and the final number of shares repurchased.

LHX 8-K SEC Disclosure

Summary

L3Harris Technologies, Inc. (formerly Harris Corporation) announced on February 6, 2017, its entry into a significant $350 million fixed dollar accelerated share repurchase (ASR) transaction with Morgan Stanley. This move is part of the company's ongoing commitment to its stock repurchase program and signals a proactive approach to returning capital to shareholders. The ASR agreement allows for immediate execution and flexibility in the final settlement, demonstrating management's confidence in the company's financial position and future prospects. The initial phase of the ASR involves an immediate delivery of approximately 2.85 million shares, representing about 85% of the expected total repurchase, based on the stock's prior closing price. The final number of shares repurchased will be determined by the volume-weighted average price over the transaction period, adjusted for a discount. This structure aims to provide a cost-effective way to reduce the number of outstanding shares, potentially boosting earnings per share and enhancing shareholder value.

Key Highlights

1L3Harris Technologies entered into a $350 million accelerated share repurchase (ASR) agreement with Morgan Stanley.
2The ASR is part of the company's existing Common Stock repurchase program.
3An initial payment of $350 million was made on February 6, 2017.
4Approximately 2,852,349 shares were initially delivered by Morgan Stanley.
5The initial share delivery represents about 85% of the expected total repurchase, based on a February 3, 2017 closing price of $104.30.
6The final number of shares repurchased will be based on the average daily volume-weighted average price (VWAP) during the ASR term, less a discount.
7Final settlement of the ASR transaction is expected before the end of fiscal year 2017.

L3HARRIS TECHNOLOGIES, INC. /DE/ 8-K Report, Corporate Update (Feb 6, 2017)

Summary

Key Highlights

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