What is an accelerated share repurchase (ASR) agreement?

An accelerated share repurchase (ASR) agreement is a contract where a company agrees to buy back a significant amount of its own stock from a bank (in this case, Bank of America and Goldman Sachs). The company typically makes an upfront payment, and the bank delivers a portion of the shares immediately. The final number of shares repurchased is determined later based on the average market price over a specified period, often with a discount.

How does this affect the total amount of share repurchases planned for 2018?

This ASR program significantly increases Norfolk Southern's capital return plans. The company was already targeting $1.5 billion in share repurchases through its regular open-market program. With the addition of the $1.2 billion ASR, the total targeted share repurchases for 2018 now stand at approximately $2.7 billion.

What is the immediate impact of this announcement on the stock?

While the filing itself is an announcement, the market typically views significant share repurchase programs positively. It signals management's confidence in the company's future prospects and can increase earnings per share (EPS) by reducing the number of outstanding shares. Investors might see this as a sign of financial strength and a commitment to enhancing shareholder value.

Are the repurchased shares delivered immediately?

Under the terms of the ASR agreements, Norfolk Southern expected to receive approximately 5.7 million shares of common stock on August 3, 2018. However, the final quantity of shares repurchased under these agreements will be determined by the volume-weighted average stock price during the term of the agreements, less a discount, and subject to potential adjustments.

NSC 8-K: Regulation FD

Summary

Norfolk Southern Corporation (NSC) announced on August 2, 2018, its entry into accelerated share repurchase (ASR) agreements with Bank of America N.A. and Goldman Sachs & Co. LLC. These agreements will result in the repurchase of an aggregate of $1.2 billion of NSC common stock. This substantial ASR program is in addition to the company's ongoing open-market share repurchases. This filing significantly increases the company's total planned share repurchases for 2018. Previously, Norfolk Southern had targeted approximately $1.5 billion in share repurchases for the year through its ongoing open-market activities. With the addition of the $1.2 billion from the ASR agreements, the company is now targeting approximately $2.7 billion in total share repurchases for 2018. Investors should view this as a strong signal of management's confidence in the company's financial health and its commitment to returning capital to shareholders.

Key Highlights

1Norfolk Southern entered into accelerated share repurchase (ASR) agreements totaling $1.2 billion.
2The ASR agreements are with Bank of America N.A. and Goldman Sachs & Co. LLC.
3These repurchases are in addition to ongoing open-market share buybacks.
4The company has increased its total 2018 share repurchase target to approximately $2.7 billion (up from $1.5 billion).
5Approximately 5.7 million shares are expected to be received on August 3, 2018, under the ASR program.
6The final number of shares repurchased under the ASR will be based on the volume-weighted average stock price during the agreement term, less a discount.

NORFOLK SOUTHERN CORP 8-K Report, Regulation FD Disclosure (Aug 3, 2018)

Summary

Key Highlights

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