Papa Johns 2001 Annual Report Download - page 51

Download and view the complete annual report

Please find page 51 of the 2001 Papa Johns annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 75

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75

47
4. Special Charges (continued)
In August 1998, Pizza Hut, Inc. filed suit against us in the United States District Court for the Northern
District of Texas, claiming that our “Better Ingredients. Better Pizza.” slogan constituted false and
deceptive advertising in violation of the Lanham Trademark Act. In November 1999, the jury returned a
verdict that our “Better Ingredients. Better Pizza.” slogan was false and deceptive. On January 3, 2000,
the court announced its judgment, awarding Pizza Hut $468,000 in damages and ordering us to cease all
use of the “Better Ingredients. Better Pizza.” slogan. Under the judge’s order, we were to cease using the
slogan in print and broadcast advertising, phase out printed promotional materials and other items
containing the slogan and remove the slogan from restaurant signage, all according to deadlines specified
by the court. We initially estimated that the pre-tax costs of complying with the court’s order and certain
related costs could have approximated $12.0 to $15.0 million, of which $6.1 million was recorded as pre-
tax charges against 1999 earnings. We filed an appeal of the verdict and the court’s order and a motion
for stay of the court’s order pending outcome of the appeal.
On January 21, 2000, the United States Court of Appeals for the Fifth Circuit granted a stay of the
District Court judgment pending our appeal. Oral arguments related to the appeal were held on April 5,
2000. On September 19, 2000, the Fifth Circuit vacated the District Court’s judgment in its entirety and
remanded the case to the District Court for entry of judgment in favor of Papa John’s. On December 18,
2000, Pizza Hut filed a Petition for Writ of Certiorari with the United States Supreme Court. On March
19, 2001, the United States Supreme Court denied Pizza Hut’s Petition for Writ of Certiorari. For the
2000 fiscal year, we incurred an additional $1.0 million of pretax charges related to this issue.
The special charge recorded in 2000 resulted in a write-down of asset carrying value of $16.0 million and
the establishment of accrued liabilities for cash payments of $4.9 million. At December 30, 2001, the
remaining accrued liability related to the special charge was $1.4 million, which relates to future lease
payments for closed or abandoned sites.
5. Debt and Credit Arrangements
Debt and credit arrangements consist of the following (in thousands):
2001 2000
Revolving line of credit 104,600$ 145,000$
Other 710 1,607
105,310 146,607
Current portion of debt (225) (897)
Long-term debt 105,085$ 145,710$