Papa Johns 2001 Annual Report Download - page 58

54
We are subject to claims and legal actions in the ordinary course of business. We believe that all such
claims and actions currently pending against us are either adequately covered by insurance or would not
have a material adverse effect on us if decided in a manner unfavorable to us.
13. Share Repurchase and Common Equity Put Options
The Papa John’s Board of Directors has authorized the repurchase of up to $275.0 million of common
stock under a share repurchase program that began December 9, 1999, and runs through December 29,
2002. Funding for the share repurchase program has been provided through a $200.0 million credit
facility, operating cash flows and the liquidation of available investments, cash and cash equivalents.
Through December 30, 2001, a total of 8.9 million shares with an aggregate cost of $217.3 million and an
average price of $24.54 per share were repurchased under this program and placed in treasury.
Subsequent to year-end, through March 15, 2002, an additional 1.3 million shares with an aggregate cost
of $35.2 million were repurchased.
There were 250,000 common equity put options outstanding at December 31, 2000 (none in 2001), all of
which were sold in the third quarter 2000. The options expired at various dates through July 2001 and had
exercise prices between $19.50 and $21.99. The $5.2 million total exercise price of the options
outstanding was reflected in the balance sheet in other long-term liabilities at December 31, 2000, and the
related offset, net of premiums received of $556,000, was recorded in treasury stock. Additionally, during
2001, we sold 50,000 common equity put options at an exercise price of $28.50 that expired during the
fourth quarter of 2001. Premiums received from the sale of the common equity put options, which
amounted to $120,000 and $556,000 in 2001 and 2000, respectively, reduced the net cost of treasury
stock as reported in the accompanying consolidated statements of stockholder’s equity.
14. Stockholder Protection Rights Agreement
On February 14, 2000, the Board of Directors of the Company adopted a Stockholder Protection Rights
Agreement (the “Rights Plan”). Under the terms of the Rights Plan, one preferred stock purchase right
was distributed as a dividend on each outstanding share of Papa John’s common stock held of record as of
the close of business on March 1, 2000. The rights generally will not become exercisable until a person or
group acquires beneficial ownership of 15% or more of the Company’s common stock in a transaction
that is not approved in advance by the Board of Directors. The Company’s Founder and CEO, John
Schnatter, who owns approximately 27% of the outstanding common stock, will be excluded from
operation of the Rights Plan unless (together with his affiliates and family members) he acquires more
than 40% of the Company’s common stock.
If the rights are triggered, then each right owned by a stockholder other than the unapproved acquirer
entitles its holder to purchase shares of Company common stock at 50% of its market price. In addition,
after the rights are triggered, if the Company is acquired by an unapproved acquirer in a merger or other
business combination transaction, each right that has not previously been exercised will entitle its holder
to purchase, at the right’s current exercise price, common shares of such other entity having a value of
twice the right’s exercise price. The Company may redeem the rights for a nominal amount at any time
prior to an event that causes the rights to become exercisable.