8-KOther Events

RTX Corp 8-K Report, Corporate Update (Mar 13, 2015)

Filed March 13, 2015For Securities:RTX

Summary

United Technologies Corporation (now RTX Corp) announced on March 13, 2015, its entry into two accelerated share repurchase (ASR) agreements totaling $2.65 billion. These agreements with Goldman Sachs and Morgan Stanley are designed to reduce the number of outstanding shares, signaling a commitment to returning capital to shareholders. The initial share delivery is expected to occur on the same day as the announcement, with the final number of shares repurchased determined by market prices over the ASR term, subject to discounts and adjustments. This significant share buyback program is part of the company's broader strategy, fitting within its previously announced $3 billion share repurchase target for 2015 and aligning with existing board authorizations for share purchases. Investors should note that the final settlement is anticipated by the fourth quarter of 2015, and the ASR terms include provisions for potential adjustments and early termination. This action is generally viewed positively by the market as it can increase earnings per share and reflect management's confidence in the company's valuation.

Key Highlights

  • 1United Technologies Corp entered into ASR agreements for $2.65 billion of its common stock.
  • 2The ASR agreements are with Goldman Sachs and Morgan Stanley.
  • 3The company will make initial payments of $1.325 billion to each financial institution.
  • 4An initial delivery of shares is expected on March 13, 2015.
  • 5The final number of shares repurchased will be based on volume-weighted average prices, less a discount.
  • 6This ASR is part of the company's $3 billion share repurchase target for 2015.
  • 7The final settlement is expected no later than the fourth quarter of 2015.

Frequently Asked Questions

An ASR agreement is a transaction where a company buys back its own stock from an investment bank. The company pays the bank, and the bank immediately delivers a portion of the shares. The final number of shares repurchased is then determined over a period based on market prices, with potential adjustments.

This ASR is part of the company's commitment to returning capital to shareholders and is within its previously announced 2015 share repurchase target of $3 billion. Share repurchases can increase earnings per share (EPS) by reducing the number of outstanding shares, and often signal management's confidence in the company's stock value.

The final number of shares repurchased will be determined at the end of the ASR term, which is expected to occur no later than the fourth quarter of 2015. The exact number will be based on the average daily volume-weighted average prices of the company's common stock during the ASR term, subject to a discount and other potential adjustments outlined in the agreements.

The primary risk for the company is the final settlement price of the shares. If the average market price during the ASR term is higher than anticipated, the company might end up repurchasing fewer shares than initially expected for the amount spent. The agreements also contain provisions for adjustments and potential cancellations under certain circumstances.