Papa Johns 2006 Annual Report Download - page 85

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20. Stock Options
We award stock options from time to time under the Papa John’s International, Inc. 1999 Team Member
Stock Ownership Plan (the “1999 Plan”) and the Papa John's International, Inc. 2003 Stock Option Plan
for Non-Employee Directors (the “Directors Plan”) and other such agreements as may arise. On January
31, 2005, the Company awarded an option to purchase 400,000 shares, at the closing price on that date,
as an inducement grant to Nigel Travis in connection with the commencement of his employment by the
Company pursuant to an employment agreement, which included 165,570 shares subject to an
inducement option outside the 1999 Plan. Shares of common stock authorized for issuance under the
1999 Plan are approximately 6.3 million, which includes shares transferred in from the Papa John’s
International, Inc. 1993 Stock Ownership Incentive Plan, which terminated on April 15, 2003, and
700,000 shares under the Directors Plan. Approximately 2.1 million shares were available for future
issuance under the 1999 Plan and 343,000 shares under the Directors Plan as of December 31, 2006.
Option awards are generally granted with an exercise price equal to the market price of the Company’s
stock at the date of grant. Options granted prior to 2003 generally expire ten years from the date of grant
and vest over one to five-year periods, except for certain options awarded under a previous, multi-year
operations compensation program that vested immediately upon grant. The options granted in 2004 under
the 1999 Plan and the Directors Plan generally expire 30 months from the date of grant and vest over a
12-month period. Options granted in 2005 and 2006 generally expire five years from the date of grant and
vest over a 24-month period. All references in this paragraph to numbers of shares have been adjusted to
reflect a two-for-one stock split effected in January 2006.
We recorded stock-based employee compensation expense of $4.5 million in 2006, $2.4 million in 2005
and $2.1 million in 2004. The total income tax benefit recognized in the income statement for share-
based compensation arrangements was $1.7 million in 2006, $900,000 in 2005 and $800,000 in 2004. At
December 31, 2006, there was $4.1 million of unrecognized compensation cost related to nonvested
option awards, of which the Company expects to recognize $3.2 million in 2007 and $850,000 in 2008.
Options exercised included 1.0 million shares in 2006, 2.8 million shares in 2005 and 1.5 million shares
in 2004, respectively. The total intrinsic value of the options exercised during 2006, 2005 and 2004 was
$18.5 million, $18.2 million and $8.2 million, respectively. Cash received upon the exercise of stock
options was $15.2 million, $42.1 million and $18.2 million during 2006, 2005 and 2004, respectively,
and the related tax benefits realized were $6.8 million, $6.7 million and $3.0 million during the
corresponding periods.