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 is recognizing the supplier marketing payment evenly as income over the five-year term of the agreement ($250,000 per quarter). The company then contributed the supplier marketing payment to the Papa John’s Marketing Fund (“PJMF”), an unconsolidated, non-profit corporation, for the benefit of domestic restaurants. The company’s contribution to PJMF was fully expensed in the first quarter of 2012.
PJMF 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 in the first quarter.
The overall impact of the two transactions described above, which are collectively defined as the “Incentive Contribution,” increased income before income taxes $250,000 in the third quarter of 2012 and reduced income before income taxes by approximately $3.2 million for the nine-month period, as outlined in the table below. 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 $0.08).
The following table reconciles our GAAP financial results to the adjusted financial results, excluding the impact of the Incentive Contribution, for the three and nine months ended September 23, 2012:
|Three Months Ended||Nine Months Ended|
|Sept. 23,||Sept. 25,||Sept. 23,||Sept. 25,|
|(In thousands, except per share amounts)||2012||2011||2012||2011|
|Income before income taxes, as reported||$||21,057||$||16,846||$||72,435||$||62,693|
Income before income taxes, excluding Incentive Contribution
|Net income, as reported||$||13,151||$||11,123||$||44,664||$||39,674|
|Net income, excluding Incentive Contribution||$||12,992||$||11,123||$||46,780||$||39,674|
|Earnings per diluted share, as reported||$||0.55||$||0.44||$||1.85||$||1.55|
Earnings per diluted share, excluding Incentive Contribution