North Face 2015 Annual Report Download - page 50

Reconciliation of Coalition Profit to Consolidated Income Before Income Taxes
There are three types of costs necessary to reconcile total coalition profit to consolidated income before
income taxes. These costs are (i) noncash impairment of goodwill and intangible assets, which is excluded from
coalition profit because these costs are not part of the ongoing operations of the respective businesses, (ii) interest
expense, net, which is excluded from coalition profit because substantially all financing costs are managed at the
corporate office and are not under the control of coalition management, and (iii) corporate and other expenses,
discussed below, which are excluded from coalition profit to the extent they are not allocated to the coalitions.
Impairment of goodwill and intangible assets and net interest expense are discussed in the “Consolidated
Statements of Income” section, and corporate and other expenses are discussed below.
Following is a summary of VF’s corporate and other expenses:
In millions 2015 2014 2013
Information systems and shared services .................................. $307.6 $ 290.9 $ 256.9
Less costs allocated to coalitions ........................................ (236.2) (223.6) (199.9)
71.4 67.3 57.0
Corporate headquarters’ costs .......................................... 138.1 146.9 133.6
Other .............................................................. 44.3 61.3 96.2
Corporate and other expenses .......................................... $253.8 $ 275.5 $ 286.8
Information Systems and Shared Services
These costs include management information systems and the centralized finance, supply chain, human
resources, direct-to-consumer and customer management functions that support worldwide operations. Operating
costs of information systems and shared services are charged to the coalitions based on utilization of those
services. Costs to develop new computer applications are generally not allocated to the coalitions. The increases
in information systems and shared services costs in 2015 and 2014 resulted from the overall growth of the
businesses and costs associated with expanded software system implementations and upgrades.
Corporate Headquarters’ Costs
Headquarters’ costs include compensation and benefits of corporate management and staff, legal and
professional fees and general and administrative expenses that have not been allocated to the coalitions. The
decrease in corporate headquarters’ costs in 2015 compared with 2014 was primarily driven by decreases in cash
and stock-based compensation expense resulting from lower corporate performance versus established goals,
partially offset by additional investments in our global innovation centers. The increase in corporate
headquarters’ costs in 2014 over 2013 was primarily driven by increases in cash and stock-based compensation
expense, resulting from corporate performance in excess of established goals and increases in VF’s share price.
Other
This category includes (i) costs of corporate programs or corporate-managed decisions that are not allocated
to the coalitions, (ii) costs of registering, maintaining and enforcing certain of VF’s trademarks, and
(iii) miscellaneous consolidated costs, the most significant of which is related to the expense of VF’s centrally-
managed U.S. defined benefit pension plans. The decrease in other expense in 2015 compared with 2014 was
driven by a decrease in the value of VF’s deferred compensation liability, partially offset by higher pension
expense. The decrease in other expenses in 2014 compared with 2013 was driven by lower pension expense.
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