Discount Auto Parts, Inc. Fiscal 2002 Executive Bonus Plans for Fontaine, Moore, and Harrah
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Summary
Discount Auto Parts, Inc. established individual bonus plans for executives Peter J. Fontaine, C. Michael Moore, and Michael D. "Hank" Harrah for fiscal year 2002. Each plan sets out quarterly bonus calculations based on specific performance metrics such as earnings growth, comparable store sales, inventory turns, average ticket sales, and fill rates. Bonuses are paid in addition to base salary and are determined by formulas tied to company financial results and individual goals. The plans may be adjusted or terminated at management's discretion and require approval by the Compensation Committee.
EX-10.7 3 g71413ex10-7.txt INCENTIVE COMPENSATION PLANS 1 EXHIBIT 10.7 DISCOUNT AUTO PARTS BONUS PLAN: FISCAL 2002 BONUS PLAN FOR: PETER J. FONTAINE Sales and earnings growth are keys to the long-term success of Discount Auto Parts and they incorporate all of the other aspects of our business. Therefore this bonus plan has been designed to incorporate the results of these two areas. Amounts to be paid pursuant to the terms of this plan will be in addition to base pay amounts. The following bonus will be paid quarterly following the formula set forth below: Your quarterly Base Bonus amount will be calculated as follows: Income Before Income Taxes multiplied by 1.0% = Base Bonus. This Base Bonus will then be divided into two equal parts providing an Earnings Growth bonus and a Comparable Store Sales bonus. Our goal for Comparable Store Sales increase is 5%. Our goal for Earnings Growth increase is 25%. For every 1% above the Comparable Store Sales goal of 5% add 5% to the Comparable Store Sales bonus component. For every 1% above the Earnings Growth (as calculated based on Income before Taxes) goal of 25% add 5% to the Earnings Growth bonus component. For every 1% below the Comparable Store Sales goal of 5% deduct 5% from the Comparable Store Sales bonus component. For every 1% below the Earnings Growth (as calculated based on Income before Taxes) goal of 25% deduct 5% from the Earnings Growth bonus component. Bonus calculations will be made on a quarterly basis by comparing the then current quarterly results to the same quarter prior year results. Adjustments will be made for non-comparable weeks. Any resulting bonuses will be paid on a quarterly basis as well. EXAMPLE CALCULATION:
Based on the $115,000 Base Bonus, $57,500 will be dedicated to Earnings Growth and $57,500 to Comparable Store Sales Growth. 2 Based on an example assumption of 4% Comparable Store Sales and 28% Earnings Growth for the quarter, the following bonuses would result: Comparable Store Sales Bonus Amount - ----------------------------------- $57,500 x 90% = $51,750 Earnings Growth Bonus Amount - ---------------------------- $57,500 x 115% = $66,125 The resulting total Bonus earned for quarter would be $117,875. The "Income before Taxes" amount to be used in calculating the quarterly bonus will include a reasonable estimate of the executive bonuses to be paid for the quarter. The Comparable Store Sales and Earnings Growth bonus calculations will be made independent of each other (e.g. a negative Earnings Growth bonus calculation will not offset a positive Comparable Store Sales bonus calculation). This plan may be terminated by the Compensation and Benefits Committee or the Board of Directors at any time and may be subject to periodic adjustments to earnings and/or comparable sales for one-time items or other matters as deemed appropriate by executive management. Agreed To: - ------------------- ------ Peter J. Fontaine Date Note/The above plan was approved by the Compensation Committee on July 16, 2001. 3 DISCOUNT AUTO PARTS, INC. BONUS PLAN: FISCAL 2002 BONUS PLAN FOR: C. MICHAEL MOORE Earnings and inventory turns are two keys to the long term success of Discount Auto Parts and can be impacted by your position of employment. Therefore this bonus plan has been designed to incorporate the results of those two areas. Amounts to be paid pursuant to the terms of this plan will be in addition to base pay amounts. The following bonus will be paid quarterly following the formula set forth below: Your quarterly Base Bonus amount will be calculated as follows: Income Before Income Taxes multiplied by .40% = Base Bonus. This Base Bonus will then be divided into two components: 1. Earnings - 75% 2. Inventory Turns - 25% The Company's goal for Inventory Turns is 1.75. Our 2002 earnings goals are as follows: Q1 - $.31 Q2 - $.21 Q3 - $.19 Q4 - $.45 For the Inventory Turns component percentage, add or deduct 5% for every .05 turns off the goal of 1.75. For every $.01 above or below the quarterly EPS goal add/deduct 5% from the earning bonus component. Bonus calculations will be made on a quarterly basis. Adjustments will be made for non-comparable weeks. Any resulting bonuses will be paid on a quarterly basis as well. EXAMPLE CALCULATION:
Based on the $46,000 Base Bonus, $34,500 will be dedicated to Earnings, and $11,500 to Inventory Turns. 4 Based on an example assumption of 1.60 Inventory Turns and Q1 EPS of $.29 the following bonuses would result: Earnings Bonus Amount - ----------------------- $34,500 x 90% = $31,050 Inventory Turns Bonus Amount - ---------------------------- $11,500 x 85% = $9,775 The resulting total Bonus earned for quarter would be $40,825. The "Income before Taxes" amount to be used in calculating the Base Bonus will include a reasonable estimate of the executive bonuses to be paid for the quarter. The component bonus calculations will be made independent of each other. This plan may be terminated by executive management at any time and may be subject to periodic adjustments to earnings and/or comparable sales for one-time items or other matters as deemed appropriate by executive management. Agreed To: /s/ C. Michael Moore July 25, 2001 - -------------------- ------------------ C. Michael Moore Date Note/ The above plan was approved by the Compensation Committee on July 16, 2001. 5 DISCOUNT AUTO PARTS, INC. BONUS PLAN: FISCAL 2002 BONUS PLAN FOR: MICHAEL D. "HANK" HARRAH Average ticket sales, fill rates and inventory turns are among the keys to the long term success of Discount Auto Parts and can be impacted by your position of employment. Therefore this bonus plan has been designed to incorporate the results of those three areas. Amounts to be paid pursuant to the terms of this plan will be in addition to base pay amounts. The following bonus will be paid quarterly following the formula set forth below: Your quarterly Base Bonus amount will be calculated as follows: Income Before Income Taxes multiplied by .20% = Base Bonus. This Base Bonus will then be divided into three equal parts providing an Average Ticket bonus, a Fill Rate bonus and an Inventory Turns bonus. Our goal for DIY Average Ticket sales for FY 2002 is as follows: Q1 = Q2 = Q3 = Q4 = Our goal for Inventory Turns is 1.75. Our goal for Fill Rates is 95.5%. For every $.10 above/below the quarterly Average Ticket Sales goal add/deduct 5% to/from the Average Ticket bonus component. For every .05 Inventory Turns above/below the Inventory Turn goal of 1.75 add/deduct 5% to/from the Inventory Turns bonus component. For every .5% above/below the 95% Fill Rate goal add/deduct 5% to/from the Fill Rate bonus component. Bonus calculations will be made on a quarterly basis. Adjustments will be made for non-comparable weeks. Any resulting bonuses will be paid on a quarterly basis as well. EXAMPLE CALCULATION:
6 Based on the $23,000 Base Bonus, $7,667 each will be dedicated to Average Ticket, Inventory Turns and Fill Rates. Based on an example assumption of a $ Average Ticket for Q1, 93.5% Fill Rates and 1.60 Inventory Turns the following bonuses would result: Average Ticket Bonus Amount - --------------------------- $7,667 x 100% = $7,667 Fill Rates Bonus Amount - ----------------------- $7,667 x 80% = $6,134 Inventory Turns Bonus Amount - ---------------------------- $7,667 x 85% = $6,517 The resulting total Bonus earned for quarter would be $20,318. The "Income before Taxes" amount to be used in calculating the Base Bonus will include a reasonable estimate of the executive bonuses to be paid for the quarter. The component bonus calculations will be made independent of each other. This plan may be terminated by executive management at any time and may be subject to periodic adjustments to earnings and/or comparable sales for one-time items or other matters as deemed appropriate by executive management.
7 DISCOUNT AUTO PARTS, INC. BONUS PLAN: FISCAL 2002 BONUS PLAN FOR: CLEMENT A. BOTTINO Sales, retention, controllable expenses and average ticket are among the keys to the long-term success of Discount Auto Parts and can be impacted by your position of employment. Therefore this bonus plan has been designed to incorporate the results of those four areas. Amounts to be paid pursuant to the terms of this plan will be in addition to base pay amounts. The following bonus will be paid quarterly following the formula set forth below: Your quarterly Base Bonus amount will be calculated as follows: Income Before Income Taxes multiplied by .20% = Base Bonus. This Base Bonus will then be divided into four equal parts providing a Comparable Store Sales bonus, a Retention bonus, a Retail Controllable Expense bonus and an Average Ticket bonus. Our Retail Controllable Expense goals and DIY Average Ticket goals are as follows:
Our goal for Comparable Store Sales increase is 5%. Our goal for Retention is 55%. For every 1% above the Comparable Store Sales goal of 5% add 5% to the Comparable Store Sales bonus component. For every 1% above the Retention goal of __% add 5.0% to the Retention Bonus component. For every 1% below the Comparable Store Sales goal of 5% deduct 5% from the Comparable Store Sales bonus component. For every 1% below the Retention goal of __% deduct 5.0% from the Retention Bonus component. For every .1% below/above the Controllable Expense goal add/deduct 5% to the Controllable Expense bonus component. For every $.10 above/below the Average Ticket goal add/deduct 5% to the Average Ticket bonus component. Bonus calculations will be made on a quarterly basis. Adjustments will be made for non-comparable weeks. Any resulting bonuses will be paid on a quarterly basis as well. 8 EXAMPLE CALCULATION:
Based on the $23,000 Base Bonus, $5,750 will be dedicated to each Average Ticket, Comparable Store Sales Growth, Retention and Controllable Expenses. Based on an example assumption of 4% Comparable Store Sales, Retention for the quarter, DIY Controllable Expense % for Q1 and a Average Ticket for Q1, the following bonuses would result:
The resulting total Bonus earned for quarter would be $20,412. The "Income before Taxes" amount to be used in calculating the Base Bonus will include a reasonable estimate of the executive bonuses to be paid for the quarter. The component bonus calculations will be made independent of each other (e.g. a negative Average Ticket bonus calculation will not offset a positive Comparable Store Sales and Retention bonus calculation). This plan may be terminated by executive management at any time and may be subject to periodic adjustments to earnings and/or comparable sales for one-time items or other matters as deemed appropriate by executive management.
9 DISCOUNT AUTO PARTS, INC. BONUS PLAN: FISCAL 2002 BONUS PLAN FOR: DAVID C. VIELE Sales, gross profit, fill rates and inventory turns are keys to the long term success of Discount Auto Parts and can be impacted by your position of employment. Therefore this bonus plan has been designed to incorporate the results of these areas. Amounts to be paid pursuant to the terms of this plan will be in addition to base pay amounts. The following bonus will be paid quarterly following the formula set forth below: Your quarterly Base Bonus amount will be calculated as follows: Income Before Income Taxes multiplied by .20% = Base Bonus. This Base Bonus will then be divided into four equal parts providing a Comparable Store Sales bonus, a Gross Profit bonus, an Inventory Turn bonus and a Fill Rate bonus. Our goal for Comparable Store Sales increase is 5%. Our goal for Fill Rate increase is 95.5%. Our goal for Gross Profit is 40.5%. Our goal for Inventory Turns is 1.75. For every 1% above the Comparable Store Sales goal of 5% add 5% to the Comparable Store Sales bonus component. For every .1% above the Gross Profit goal of 40.5% add 5% to the Gross Profit bonus component. For every .05 Inventory Turns above the goal of 1.75, add 5% to the Inventory Turns bonus component. For every .5% above the 95.5% adjusted Fill Rate goal, add 5% to the Fill Rate bonus component. For every 1% below the Comparable Store Sales goal of 5% deduct 5% from the Comparable Store Sales bonus component. For every .1% below the Gross Profit goal of 40.5% deduct 5% from the Gross Profit bonus component. For every .05 Inventory Turns below the goal 1.75, deduct 5% from the Inventory Turns bonus component. For every .5% below the 95.5% adjusted Fill Rate goal, deduct 5% from the Fill Rate bonus component. Bonus calculations will be made on a quarterly basis. Adjustments will be made for non-comparable weeks. Any resulting bonuses will be paid on a quarterly basis as well. EXAMPLE CALCULATION:
10 Based on the $23,000 Base Bonus, $5,750 each will be dedicated to Comparable Store Sales, Gross Profit, Inventory Turns and Fill Rate. Based on an example assumption of 4% Comparable Store Sales, 40.2% Gross Profit, 93% Fill Rates, and 1.60 Inventory Turns the following bonuses would result:
The resulting total Bonus earned for quarter would be $19,550. The "Income before Taxes" amount to be used in calculating the Base Bonus will include a reasonable estimate of the executive bonuses to be paid for the quarter. The component bonus calculations will be made independent of each other (e.g. a negative Fill Rate bonus calculation will not offset a positive Comparable Store Sales and Gross Profit bonus calculation). This plan may be terminated by executive management at any time and may be subject to periodic adjustments to earnings and/or comparable sales for one-time items or other matters as deemed appropriate by executive management.
11 DISCOUNT AUTO PARTS, INC. BONUS PLAN: FISCAL 2002 BONUS PLAN FOR: C. ROY MARTIN Fill rates, inventory turns and DC expenses are among the keys to the long term success of Discount Auto Parts and can be impacted by your position of employment. Therefore this bonus plan has been designed to incorporate the results of those three areas. Amounts to be paid pursuant to the terms of this plan will be in addition to base pay amounts. The following bonus will be paid quarterly following the formula set forth below: Your quarterly Base Bonus amount will be calculated as follows: Income Before Income Taxes multiplied by .20% = Base Bonus. This Base Bonus will then be divided into three equal parts providing a Fill Rate bonus, an Inventory Turns bonus and a DC Expense bonus. Our goal for Inventory Turns is 1.75. Our goal for Fill Rates is 95.5%. Our quarterly goals for gross DC Expense (i.e. before UNICAP) (for both DC's) as percentages of consolidated sales are as follows:
For every .1% above or below the DC Expense goals above deduct/add 5% from/to the DC Expense component bonus. For every .05 Inventory Turns above/below the Inventory Turn goal of 1.75 add/deduct 5% to/from the Inventory Turns bonus component. For every .5% above/below the 95.5% Fill Rate goal add/deduct 5% to/from the Fill Rate bonus component. Bonus calculations will be made on a quarterly basis. Adjustments will be made for non-comparable weeks. Any resulting bonuses will be paid on a quarterly basis as well. 12 EXAMPLE CALCULATION:
Based on the $23,000 Base Bonus, $7,667 each will be dedicated to Inventory Turns, Fill Rate and DC Expense bonus components. Based on a quarter 3 example assumption of 93% Fill Rates, 1.60 Inventory Turns and DC Expense of the following bonuses would result: DC Expense Bonus Amount - ----------------------- $7,667 x 100% = $7,667 Fill Rates Bonus Amount - ----------------------- $7,667 x 75% = $5,750 Inventory Turns Bonus Amount - ---------------------------- $7,667 x 85% = $6,517 The resulting total Bonus earned for quarter would be $19,934. The "Income before Taxes" amount to be used in calculating the Base Bonus will include a reasonable estimate of the executive bonuses to be paid for the quarter. The component bonus calculations will be made independent of each other. This plan may be terminated by executive management at any time and may be subject to periodic adjustments to earnings and/or comparable sales for one-time items or other matters as deemed appropriate by executive management.
