Polaris Industries, Inc. recently announced three moves company leadership said should improve capital structure efficiency, lower the cost of capital and ultimately, increase earnings.
In the first move, Polaris’ board of directors increased the company’s common stock share repurchase authorization by 7 million shares, which, together with the approximately 1.3 million shares remaining available for repurchase under the prior authorization, represents approximately 21 percent of the shares of Polaris’ common stock currently outstanding.
In the second move, the Minnesota-based manufacturer announced it entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. to repurchase up to a maximum of $200 million of its common stock. The number of shares to be repurchased will be subject to market conditions and was expected to be determined on or before Dec. 8.
Under the terms of the accelerated repurchase agreement, Goldman was to deliver the full number of shares to be repurchased on or before Dec. 8. Goldman borrowed the number of shares delivered and is expected to purchase sufficient shares in the open market to return to lenders over a period of time no longer than nine months.
The accelerated share repurchase program is subject to a future purchase price adjustment at completion of the program when Polaris may receive, or be required to pay, a price adjustment based on an adjusted weighted average price as defined in the agreement with Goldman.
Finally, in a third related move, Polaris announced it has entered into a new $450 million unsecured variable interest rate agreement comprised of a $250 million revolving loan facility and a $200 million term loan. The $200 million term loan will be drawn immediately to fund the accelerated share repurchase transaction.
Announced Dec. 4, the new five-year credit agreement expires on Dec. 2, 2011, and replaces the company’s previous $250 million revolving credit agreement.
“Repurchasing our stock has been an ongoing strategy in our commitment of maximizing our shareholders’ investment,” said Polaris CEO Tom Tiller. “We remain confident in the future growth prospects for Polaris and believe that purchasing Polaris stock at current market prices continues to be an excellent use of the company’s capital.”
Polaris has repurchased approximately 25.7 million shares of common stock under its share repurchase program since 1996. The average price has been approximately $28 per share.
Tiller said he believes the terms of the accelerated share repurchase program and revised credit agreement are an economically attractive method of deploying the company’s cash flow while at the same time enhancing shareholder value and maintaining the flexibility to continue to adequately invest in current businesses. psb
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