Papa Johns 2010 Annual Report Download - page 47

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40
The following table summarizes our recorded expense associated with our management
incentive programs, which are included in unallocated G&A costs (in thousands):
Year Ended
December 26,
2010
Year Ended
December 27,
2009 Increase
Equity compensation (1) 6,066$ 5,817$ 249$
Management incentive bonus plan (2) 10,319 7,328 2,991
Total expense
16,385
$
13,145
$
3,240
$
(1)
Stock options and time-based restricted stock are awarded to management and
members of our board of directors annually. Substantially all stock option awards
granted prior to 2009 follow either a two-year cliff vesting period or a three-year
graded vesting period and restricted stock granted prior to 2009 follows a three-year
cliff vesting period. Stock options and restricted stock awards granted in 2009 and
2010 follow either three-year graded, three-year cliff or two-year cliff vesting
periods. At December 26, 2010, there was $5.8 million of unrecognized
compensation cost related to non-vested awards to be recognized in 2011, 2012 and
2013.
(2)
The management incentive bonus plan is based on the Company’s annual operating
performance, domestic unit openings and certain sales measures as compared to pre-
established targets.
(b)
Franchise support initiatives primarily consist of discretionary contributions to the national
marketing fund and other local advertising cooperatives.
(c)
The reduction in the provision for uncollectible accounts and notes receivable was primarily
due to the collection of certain accounts that were previously reserved.
(d)
The increase in other income was primarily due to sales of point-of-sale systems associated
with additional domestic openings.
•
Variable Interest Entities. BIBP generated pre-tax income of $21.0 million in 2010, including
a reduction in BIBP’s cost of sales of $14.2 million associated with PJFS’s agreement to pay to
BIBP for past cheese purchases an amount equal to its accumulated deficit. The remainder was
primarily composed of income associated with cheese sold to domestic Company-owned
restaurants and franchise restaurants of $1.7 million and $5.6 million, respectively. For 2009,
BIBP reported pre-tax income of $22.5 million, which was primarily composed of income
associated with cheese sold to domestic Company-owned restaurants and franchise restaurants of
$5.5 million and $18.1 million, respectively. BIBP also incurred interest expense on outstanding
debt in both 2010 and 2009. See Item 7A. “Quantitative and Qualitative Disclosures About
Market Risk” for additional information regarding BIBP and the movement in cheese prices.
Diluted earnings per share were $1.96 in 2010 (including a $0.16 per share gain from the consolidation of
BIBP, excluding the reduction in BIBP’s cost of sales of $14.2 million associated with PJFS’s agreement
to pay to BIBP for past cheese purchases an amount equal to its accumulated deficit), compared to $2.06
per diluted share in 2009 (including a $0.52 gain from the consolidation of BIBP and a $0.04 gain from
the finalization of certain income tax issues). Since the inception of the share repurchase program in