Dollar General 2006 Annual Report Download - page 125

In March 2006, the Committee reviewed Mr. Perdue’ s performance against his
previously established performance goals for fiscal 2005 in order to determine whether he was
eligible for a base salary increase. Those previously established goals included measures relating
to improvements in certain financial metrics (earnings per share, total sales growth, same store
sales growth, operating margins, return on invested capital, free cash flow, inventory turns and
return on assets), leadership development and succession, strategic planning, our growth, new
concept development, distribution and capacity management, inventory management, shrink
improvement, workplace improvements, turnover reduction and retention strategies, third party
relationships (vendors, analysts, rating agencies, media), corporate governance and ethics, legal
matters and internal controls.
The Committee determined that under Mr. Perdue’ s leadership, Dollar General continued
to remain true to each component of its mission of “Serving Others” as further discussed below.
In fiscal 2005, we served our customers by providing consumable basic merchandise at
everyday low prices in a convenient place to shop. We continued to increase our efforts at
finding products our customers need and making them available at competitive prices. We also
continued to open stores that will be convenient for our customers in their neighborhoods or
towns, opening 734 new stores (609 net), including 29 new Dollar General Market® stores.
Also in fiscal 2005, we served our shareholders by remaining committed to our 3-year
strategic plan aimed at strengthening the organization, improving store operation consistency and
revitalizing merchandising initiatives as well as other initiatives to improve the organization’ s
financial health. During fiscal 2005, a number of key executives were hired or promoted into
positions of leadership to strengthen the organization and provide leadership for accomplishing
our strategic plan. By the end of fiscal 2005, we were on the road to improving store operations,
with nearly half of our stores operating as EZstores, using newly engineered processes to run
more effectively and efficiently. Also, the year ended with increases in both total sales and same
store sales. During fiscal 2005, we significantly reduced aged inventory surpassing plan
expectations and leading to an increase in inventory turns over the prior year. Total inventory
per store was also down as a result of this initiative. We generated approximately $350 million
in net income and earnings per share of $1.08, and we opened an eighth distribution center in
South Carolina and began construction on a ninth in Indiana. Free cash flow also jumped
dramatically from fiscal 2004 to fiscal 2005 and capital expenditures were lower than plan.
Finally, in fiscal 2005 under Mr. Perdue’ s leadership, employees were served through our
ongoing commitment to our values including the highest degree of integrity, providing
opportunity for employee growth through the addition of more jobs (additional stores and
distribution centers and related promotional opportunities) and specifically focusing on
simplifying processes easing workloads in the store through EZstore.
The Committee was satisfied with Mr. Perdue’ s performance against his previously
established goals and strategic initiatives and his achievement of established fiscal 2005 financial
measures. Therefore, in accordance with our base salary and short-term incentive policies, Mr.
Perdue was eligible in fiscal 2006 for both a salary increase and participation in the Teamshare
plan to the extent that we achieved our net income goals.
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