Dollar General 2011 Annual Report Download - page 37

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As a threshold matter, a named executive officer’s eligibility to receive a bonus under the
Teamshare program depends upon his or her receiving an overall individual performance rating of
satisfactory (see ‘‘Use of Performance Evaluations’’). Accordingly, Teamshare fulfills an important part
of our pay for performance philosophy while aligning the interests of our named executive officers and
our shareholders.
(a) 2011 Teamshare Structure. The Committee selected adjusted EBITDA and adjusted
return on invested capital (‘‘ROIC’’) as the financial performance measures for the 2011 Teamshare
program. The Committee weighted the adjusted ROIC measure and the adjusted EBITDA measure at
10% and 90%, respectively, of the total Teamshare bonus, recognizing that EBITDA is the most critical
measure of our current performance, enables debt repayment, and funds our growth and day-to-day
operation, while ROIC reflects the importance of achieving an appropriate return on our invested
capital and the management and level of investments necessary to achieve superior performance.
For purposes of the 2011 Teamshare program, adjusted EBITDA is computed in accordance
with our credit agreements, and adjusted ROIC is calculated as total return (calculated as the sum of
operating income, depreciation and amortization and minimum rentals, less taxes) divided by average
invested capital (calculated as the sum of total assets and accumulated depreciation and amortization,
less cash, goodwill, accounts payable, other payables, accrued liabilities, plus 8x minimum rentals). Each
of the adjusted EBITDA and adjusted ROIC calculations shall be further adjusted to exclude the
impact of:
• (a) certain costs, fees and expenses related to our acquisition and related financing by KKR,
any refinancings, any related litigation or settlements of such litigation, and the filing and
maintenance of a market maker registration statement; (b) costs, fees and expenses directly
related to any transaction that results in a Change in Control (within the meaning of our
2007 Stock Incentive Plan) or related to any primary or secondary offering of our securities;
(c) share-based compensation charges (for adjusted EBITDA only); (d) gain or loss
recognized as a result of derivative instrument transactions or other hedging activities;
(e) gain or loss associated with early retirement of debt obligations; (f) charges resulting
from significant natural disasters; and (g) significant gains or losses associated with our LIFO
computation; and
• unless the Committee disallows any such item, (a) non-cash asset impairments; (b) any
significant loss as a result of an individual litigation, judgment or lawsuit settlement
(including a collective or class action lawsuit and security holder lawsuit, among others);
(c) charges for business restructurings; (d) losses due to new or modified tax or other
legislation or accounting changes enacted after the beginning of the fiscal year; (e) significant
tax settlements; and (f) any significant unplanned items of a non-recurring or extraordinary
nature.
The Committee established threshold (below which no bonus may be paid) and target
performance levels, discussed below, for each of the adjusted EBITDA and adjusted ROIC
performance measures. Since 2008, there has not been a maximum level of adjusted EBITDA or
adjusted ROIC performance associated with the Teamshare program, although any individual payout is
capped at $5 million, in order to avoid discouraging employees from striving to achieve performance
results beyond maximum levels.
We did not achieve the threshold Teamshare performance level in 2006. We achieved
Teamshare performance levels between target and maximum in 2007. For 2008, 2009 and 2010, we
achieved an adjusted EBITDA performance level of 112.47% (or $916.6 million), 111.88% (or
$1.278 billion) and 105.47% (or $1.561 billion) of the target, respectively. For 2010, we achieved an
adjusted ROIC performance level of 100.9% of the target or 22.31%.
The target adjusted EBITDA performance level for the 2011 Teamshare program was
$1.815 billion which, consistent with prior practice, was the same level as our 2011 annual financial plan
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