Marketing Incentive Contribution
As previously announced, in connection with a new multi-year supplier agreement, the company received a $5.0 million supplier marketing payment in the first quarter of 2012. The company contributed the supplier marketing payment to the Papa John’s National Marketing Fund (“PJNMF”), an unconsolidated, non-profit corporation, for the benefit of domestic restaurants. The company is recognizing the supplier marketing payment evenly as income over the five-year term of the agreement. The company’s contribution to PJNMF was fully expensed in the first quarter of 2012.
PJNMF elected to distribute the $5.0 million supplier marketing payment to the domestic system as advertising credits in the first quarter of 2012. Our domestic company-owned restaurants’ portion of the adverting credits resulted in an increase in income before income taxes of approximately $1.0 million (increase in diluted earnings per share of $0.03).
The overall impact of these transactions, defined as the “Incentive Contribution,” in the first quarter of 2012 was a net reduction to income before income taxes of approximately $3.7 million (diluted earnings per share reduction of $0.10). The impact for full-year 2012 will be a reduction to income before income taxes of approximately $3.0 million (diluted earnings per share reduction of $0.08). The following table reconciles our GAAP financial results to the adjusted financial results, excluding the impact of the Incentive Contribution, for the first quarter ended March 25, 2012:
|Mar. 25,||Mar. 27,|
|(In thousands, except per share amounts)||2012||2011|
|Income before income taxes, as reported||$||27,138||$||26,780|
|Income before income taxes, excluding Incentive Contribution||$||30,859||$||26,780|
|Net income, as reported||$||16,744||$||16,427|
|Net income, excluding Incentive Contribution||$||19,183||$||16,427|
|Earnings per diluted share, as reported||$||0.69||$||0.64|
|Earnings per diluted share, excluding Incentive Contribution||$||0.79||$||0.64|