Pizza Hut 1999 Annual Report Download - page 60

58
January 1, 2000 to participants with an account balance as of
December 31, 1999. The premium credited totaled approxi-
mately $3 million and was equal to 10% of the participant’s
account balance as of December 31, 1999, excluding invest-
ments in the discounted TRICON Common Stock investment
option discussed above and 1999 deferrals.
Prior to January 1, 1999, we recognized as compensation
expense all investment appreciation or depreciation within the
EID Plan. Subsequent to January 1, 1999, we no longer rec-
ognize as compensation expense the appreciation or
depreciation, if any, attributable to investments in the Discount
Stock Account since investments in the Discount Stock
Account can only be settled in shares of our Common Stock.
For 1998, we expensed $9 million related to appreciation attrib-
utable to investments in the Discount Stock Account. We also
reduced our liabilities by $21 million related to investments in
the Discount Stock Account and increased the Common Stock
Account by the same amount at January 1, 1999.
For periods subsequent to January 1, 2000, we will no longer
recognize as compensation expense the appreciation or depre-
ciation, if any, attributable to investments in any phantom
shares of our Common Stock in the EID Plan since these
investments can only be settled in shares of our Common
Stock. For 1999, we recorded a benefit of $3 million related to
depreciation of investments impacted by the January 2000
plan amendment.
Our obligations under the EID Plan as of the end of 1999 and
1998 were $50 million and $59 million, respectively. We rec-
ognized compensation expense of $6 million in 1999 and $20
million in 1998, including the estimated premium payment,
and $9 million in 1997 for the EID Plan.
Investment options in the RDC Plan consist of phantom shares
of various mutual funds and TRICON Common Stock. During
1998, RDC participants also became eligible to purchase
phantom shares of our Common Stock under YUMSOP as
defined below. We recognize compensation expense for the
appreciation or depreciation, if any, attributable to all invest-
ments in the RDC Plan as well as for our matching contribution.
Our obligations under the RDC program as of the end of 1999
and 1998 were $6 million and $7 million, respectively. We rec-
ognized compensation expense of $1 million in 1999, 1998
and 1997 for the RDC Plan.
We sponsor a contributory plan to provide retirement benefits
under the provision of Section 401(k) of the Internal Revenue
Code (“401(k) Plan”) for eligible full-time U.S. salaried and cer-
tain hourly employees. Participants may elect to contribute up
to 15% of their eligible compensation on a pre-tax basis. We
are not required to make contributions to the Plan. In 1998, a
Stock Ownership Program (“YUMSOP”) was added to the TRI-
CON Common Stock investment option. Under YUMSOP, we
make a partial discretionary matching contribution equal to a
predetermined percentage of each participant’s contribution to
the TRICON Common Stock Fund. We determine our percent-
age match at the beginning of each year based on the
immediate prior year performance of our Core Businesses. We
recognized as compensation expense our total match-
ing contribution of $4 million and $1 million in 1999
and 1998, respectively.
Shareholders’ Rights Plan
On July 21, 1998, our Board of Directors declared
a dividend distribution of one right for each share of
Common Stock outstanding as of August 3, 1998 (the
“Record Date”). Each right initially entitles the registered holder
to purchase a unit consisting of one one-thousandth of a share
(a “Unit”) of Series A Junior Participating Preferred Stock, with-
out par value, at a purchase price of $130 per Unit, subject to
adjustment. The rights, which do not have voting rights, will
become exercisable for our Common Stock ten business days
following a public announcement that a person or group has
acquired, or has commenced or intends to commence a ten-
der offer for, 15% or more, or 20% or more if such person or
group owned 10% or more on the adoption date of this plan,
of our Common Stock. In the event the rights become exercis-
able for Common Stock, each right will entitle its holder (other
than the Acquiring Person as defined in the Agreement) to pur-
chase, at the right’s then-current exercise price, TRICON
Common Stock having a value of twice the exercise price of the
right. In the event the rights become exercisable for Common
Stock and thereafter we are acquired in a merger or other busi-
ness combination, each right will entitle its holder to purchase,
at the right’s then-current exercise price, common stock of the
acquiring company having a value of twice the exercise price
of the right.
We can redeem the rights in their entirety, prior to becoming
exercisable, at $0.01 per right under certain specified condi-
tions. The rights expire on July 21, 2008, unless we extend that
date or we have earlier redeemed or exchanged the rights as
provided in the Agreement.
This description of the rights is qualified in its entirety by refer-
ence to the Rights Agreement between TRICON and
BankBoston, N.A., as Rights Agent, dated as of
July 21, 1998 (including the exhibits thereto).
Share Repurchases
On September 23, 1999, we announced that our
Board of Directors authorized the repurchase of up to
$350 million of our outstanding Common Stock. As of
December 25, 1999, we have purchased 3.3 million shares for
$134 million at an average price per share of $40.
note 17
note 18