Dollar General 2012 Annual Report Download - page 39

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(a) 2012 Teamshare Structure. The Compensation Committee selected adjusted EBITDA and
return on invested capital (‘‘ROIC’’) as the financial performance measures for the 2012 Teamshare
program. The Committee weighted the ROIC measure and the adjusted EBITDA measure at 10% and
90%, respectively, of the total Teamshare bonus, recognizing the importance of EBITDA in the
measurement of our current performance, the ability to repay our debt and funding our growth and
day-to-day operation, while ROIC reflects the importance of achieving an appropriate return on our
invested capital and managing investments necessary to achieve superior performance.
For purposes of the 2012 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 (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 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 Amended and Restated 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 ROIC performance
measures. Since 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
2012) and $10 million (in 2013 and thereafter), in order to avoid discouraging employees from striving
to achieve performance results beyond maximum levels.
For 2008 through 2011, we achieved an adjusted EBITDA performance level ranging from
101.79% (in 2011) to 112.47% (in 2008) of the target. For 2010 and 2011, we achieved an ROIC
performance level of 100.9% of the target and 100.78% of the target, respectively.
The target adjusted EBITDA performance level for the 2012 Teamshare program was
$1.992 billion which, consistent with prior practice, was the same level as our 2012 annual financial plan
objective. The Committee considered that level to be challenging and more difficult to achieve than
performance targets for prior years, requiring superior execution and success on many of our new
business initiatives. As it has done since 2008, the Committee also established the adjusted EBITDA
threshold at 95% of target.
The Committee established the target ROIC performance level for the 2012 Teamshare
program at 20.95% which was the same level as our 2012 annual financial plan objective. Again, the
Committee viewed the target as challenging to achieve. The threshold ROIC performance level was set
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