Dollar General 2010 Annual Report Download - page 38

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total Teamshare bonus, recognizing that EBITDA is the most critical measure of our current
performance, enables the payment of debt, and funds our growth and our day-to-day operations.
For purposes of the 2010 Teamshare program, adjusted EBITDA is computed in accordance
with our credit agreements, and 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 of the most recent five quarters (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 adjusted EBITDA and ROIC calculations shall:
• 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) any
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 common stock or other security; (c) share-based compensation
charges (for adjusted EBITDA only); (d) any gain or loss recognized as a result of derivative
instrument transactions or other hedging activities; (e) any gains or losses associated with the
early retirement of debt obligations; (f) charges resulting from significant natural disasters;
and (g) any significant gains or losses associated with our LIFO computation; and
• unless the Committee disallows any such item, also exclude (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 2010 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 ROIC performance
measures. Since fiscal year 2008, there has not been a maximum level of adjusted EBITDA or 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 the maximum levels.
We did not achieve the threshold Teamshare performance level in fiscal years 2005 or 2006. We
achieved Teamshare performance levels between target and maximum in fiscal year 2007. For fiscal
years 2008 and 2009, we achieved an adjusted EBITDA performance level of approximately 112.47%
and 111.88% of the target, respectively.
The target adjusted EBITDA performance level for the 2010 Teamshare program was
$1.48 billion which, consistent with prior practice, was the same level as our 2010 annual financial plan
objective. The Committee considered that level to be challenging and somewhat more difficult to
achieve than performance targets for prior years. The Committee also established the adjusted
EBITDA threshold at 95% of target, which was consistent with the Committee’s 2008 determination
that such threshold level was more consistent with other companies within the KKR portfolio than the
threshold level used prior to 2008.
The Committee established the threshold ROIC performance level for the 2010 Teamshare
program at the 2009 ROIC year-end actual result of 21.78% because it believed that result was strong
and that 2010 results should be as good or better for that metric. The Committee established the ROIC
target performance level by determining the expected level of improvement over the 2009 ROIC
year-end actual result based on expected productivity enhancements. Specifically, the Company
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