Dollar General 2012 Annual Report Download - page 162

10-K
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Commitments and contingencies (Continued)
certain of these lawsuits, if decided adversely to the Company or settled by the Company, may result in
liability material to the Company’s financial position or may negatively affect operating results if
changes to the Company’s business operation are required.
10. Benefit plans
The Dollar General Corporation 401(k) Savings and Retirement Plan, which became effective on
January 1, 1998, is a safe harbor defined contribution plan and is subject to the Employee Retirement
and Income Security Act (‘‘ERISA’’).
A participant’s right to claim a distribution of his or her account balance is dependent on the plan,
ERISA guidelines and Internal Revenue Service regulations. All active participants are fully vested in
all contributions to the 401(k) plan. During 2012, 2011 and 2010, the Company expensed approximately
$11.9 million, $10.9 million and $9.5 million, respectively, for matching contributions.
The Company also has a nonqualified supplemental retirement plan (‘‘SERP’’) and compensation
deferral plan (‘‘CDP’’), known as the Dollar General Corporation CDP/SERP Plan, for a select group
of management and other key employees. The Company incurred compensation expense for these plans
of approximately $1.4 million, $1.7 million and $1.7 million in 2012, 2011 and 2010, respectively.
The CDP/SERP Plan assets are invested in accounts selected by the Company’s Compensation
Committee or its delegate. These investments are classified as trading securities and the associated
deferred compensation liability is reflected in the consolidated balance sheets as further discussed in
Note 7.
11. Share-based payments
The Company accounts for share-based payments in accordance with applicable accounting
standards, under which the fair value of each award is separately estimated and amortized into
compensation expense over the service period. The fair value of the Company’s stock option grants are
estimated on the grant date using the Black-Scholes-Merton valuation model. Forfeitures are estimated
at the time of valuation and reduce expense ratably over the vesting period. The application of this
valuation model involves assumptions that are judgmental and highly sensitive in the determination of
compensation expense.
On July 6, 2007, the Company’s Board of Directors adopted the 2007 Stock Incentive Plan for Key
Employees, which plan was subsequently amended (as so amended, the ‘‘Plan’’). The Plan provides for
the granting of stock options, stock appreciation rights, and other stock-based awards or dividend
equivalent rights to key employees, directors, consultants or other persons having a service relationship
with the Company, its subsidiaries and certain of its affiliates. The number of shares of Company
common stock authorized for grant under the Plan is 31,142,858. As of February 1, 2013, 20,140,249 of
such shares are available for future grants.
Under the Plan, the Company has granted options that vest solely upon the continued employment
of the recipient (‘‘Time Options’’), options that vest upon the achievement of predetermined annual or
cumulative financial-based targets (‘‘Performance Options’’) and other awards. Time and Performance
stock options generally vest ratably on an annual basis over a five-year period, with limited exceptions,
while other awards vest over varying time periods.
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