VANS INC, 10-K, 1997-08-29

VANS INC
10-K, 1997-08-29
RUBBER & PLASTICS FOOTWEAR

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

[XX] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required)

For the fiscal year ended May 31, 1997, or

[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)

For the transition period from ___________ to ___________

Commission file number: 0-19402

VANS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)

Delaware 33-0272893
- --------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)

15700 Shoemaker Avenue, Santa Fe Springs, California 90670
- ---------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

(562) 565-8267
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act:

Common Stock, $.001 par value per share
---------------------------------------
(Title of Class)

Indicate by check mark whether registrant (1) has filed all reports required to
be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X] No
-------- ------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].

The approximate aggregate market value of the Common Stock held by
non-affiliates of registrant (computed based on the average bid and asked prices
of the Common Stock, as reported on the NASDAQ National Market System on August
25, 1997), is $146,829,230.

The number of shares of registrant's Common Stock outstanding at August 25,
1997, is 13,203,401.

Documents Incorporated By Reference:

Portions of registrant's definitive Proxy Statement for its 1997 Annual Meeting
of Stockholders are incorporated by reference into Part III of this report; and
certain exhibits are incorporated by reference into Part IV of this report.

<PAGE> 2

VANS, INC.

FORM 10-K
For the Fiscal Year Ended May 31, 1997

TABLE OF CONTENTS

PAGE NO.
--------
Part I

<S> <C> <C>
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 13
Item 3. Legal Proceedings........................................... 13
Item 4. Submission of Matters to a Vote of Security Holders......... 13

Part II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 14
Item 6. Selected Financial Data..................................... 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 14
Item 8. Financial Statements and Supplementary Data................. 21
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure.................... 21

Part III

Item 10. Directors and Executive Officers of the Registrant.......... 21
Item 11. Executive Compensation...................................... 21
Item 12. Security Ownership of Certain Beneficial
Owners and Management..................................... 21
Item 13. Certain Relationships and Related Transactions.............. 21

Part IV

Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K................................................ 21
</TABLE>

<PAGE> 3

ITEM 1. BUSINESS

GENERAL

Vans, Inc. (the "Company") is a leading designer, manufacturer and
distributor of high quality casual and active-casual footwear and apparel,
performance footwear for enthusiasts sports such as skateboarding and BMX
mountain biking, and snowboard boots and snowboarding outerwear. The Company was
founded in 1966 in Southern California as a domestic manufacturer of vulcanized
canvas shoes. The Company markets its products worldwide to a target customer
base of 10 to 24 year old young men and women. The Company is incorporated in
Delaware.

To capitalize on the strength of the VANS brand with young men and women
worldwide, the Company repositioned itself during fiscal 1996 from a domestic
manufacturer to a marketing-driven company. In particular, the Company: (i)
began sourcing new products from overseas; (ii) leveraged its brand equity with
young people to create products centered around increasingly popular enthusiasts
sports, such as the Company's snowboard boot line, and products that have a
lifestyle orientation; (iii) designed a marketing strategy to promote the VANS
brand and stay close to the product desires of its target customers; (iv)
restructured its operations which culminated with the July 1995 closing of its
underutilized Orange, California manufacturing facility (the "Orange Facility")
and the consolidation of the production of its traditional vulcanized shoes at
its smaller Vista, California manufacturing facility (the "Vista Facility"); and
(v) enhanced its management information and inventory control systems to better
control costs and increase operational efficiencies.

MARKETING AND PROMOTION

The Company markets the VANS brand through the sponsorship of
alternative sport and entertainment events, print and television advertising and
alternative sport athletic endorsements. In addition, point-of-purchase
merchandising used by the Company's customers, as well as the design of the
Company's retail stores and factory outlets, further promote the VANS brand.

ALTERNATIVE SPORTS AND ENTERTAINMENT EVENT SPONSORSHIPS

The Company's marketing and promotion strategy includes the sponsorship
of alternative sporting and entertainment events. Among the events and
activities the Company has sponsored are the 1995 and 1996 World Championships
of Skateboarding (with The Hard Rock Cafe), the 1996 Vans World Championship of
Snowboarding and contests such as the Battle of the Bay and Slam City Pro, the
Brooklyn Bridge Skate Ramp, the Wild Women's Snowboarding Camp, the National
Bike League and the American Bike League. Recently, the Company purchased the
assets associated with the Triple Crown of Surfing, which encompasses three of
the premier events in professional surfing, the Hawaiian Pro Surfing
Championship, the World Cup of Surfing, and the Pipemasters Surfing Classic. The
Company also sponsors snow, skate and surf videos and "demo days" at ski and
snowboard resorts around the country.

The Company is the exclusive title sponsor, and a part-owner, of the
"VANS Warped Tour." This event visits top young adult markets throughout the
world. The 1996 Tour visited 34 markets and was seen by an estimated 200,000
people. The 1997 Tour will visit 29 U.S. and Canadian markets, and eight cities
in Europe and Australia, and will appear before approximately 400,000 people.
The Tour is an affordable daytime lifestyle, music and sports festival for
teenagers and young adults, with skateboarding, biking and climbing events,
retailer booths, video games, prize giveaways and performances by emerging
alternative bands. It also features an amateur skateboarding competition in
selected locations, with the winners being invited to participate at the World
Championships of Skateboarding. The Tour is promoted through local radio, print,
poster and flyer distribution, supplemented by national promotion via
television, print and the Internet. The Company, along with Epitaph Records, has
compiled a CD featuring certain bands performing on the 1997 Tour, to be used as
a gift with a VANS product purchase. The Tour and the CD promotion are designed
to coincide with the "Back to School" season.

The Company also recently signed a letter of intent to purchase a
minority interest in Board Wild LLC ("BW"), producer of the syndicated "Board
Wild" television series, a program which features board sports, such as
snowboarding, surfing and skateboarding, and the athletes who participate in
them. Under the proposed Agreement, the Company will become a permanent sponsor
of the series and will receive preferred advertising placement and rates on
series episodes. The series will also give added exposure to the Company's
athletes and events.

ATHLETIC ENDORSEMENTS

The Company sponsors over 200 of the world's top male and female
athletes in numerous sports including skateboarding, snowboarding, surfing,
wakeboarding, and BMX mountain biking. The Company's sponsored athletes aid in
the design of the Company's products, make promotional appearances, wear the
Company's products exclusively and increase overall consumer awareness of the
VANS brand. The Company supports its sports marketing with print and television
advertising featuring its sponsored athletes.

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PRINT AND TELEVISION ADVERTISEMENTS

The VANS alternative sports image is enhanced by print and advertising
campaigns which depict youthful, contemporary lifestyles and attitudes and are
carried on networks such as MTV, Fox Sports Net and espn2, and in magazines such
as TransWorld SKATEboarding, Thrasher and TransWorld SNOWboarding. The Company
promotes its lifestyle image through advertisements in a number of magazines
that appeal to its target customer group, including Rolling Stone, BMX Plus,
BAM, Spin, Vibe, Option, Bikini, and Details. In addition, the Company
selectively advertises in widely circulated fashion and lifestyle magazines,
such as Seventeen and YM. The Company develops much of its advertising in-house,
which the Company believes allows it to respond more quickly and with a greater
degree of creative and cost control.

WORLD WIDE WEB SITE

Since September 1995, the Company has marketed its products and image
through its interactive home page on the World Wide Web to customers who
directly access the Internet. The Website includes a product catalog, photos,
interviews, sound and video clips of bands who wear VANS products, profiles and
interviews with members of the Company's sports teams, information on
Company-sponsored events, celebrities who wear VANS products and the Company's
history.

Seeking to further exploit the opportunities presented by the World Wide
Web, the Company recently acquired a minority interest in The Zone Network, a
Seattle-based company ("Zone") which publishes "The Mountain Zone," a Website
focusing on mountain-related events, including snowboarding and mountain biking.
As part of this transaction, Zone will assist the Company in re-designing its
Web page and will provide the Company with the opportunity to market the VANS
brand and VANS products on The Mountain Zone.

PRODUCT DESIGN AND DEVELOPMENT

The Company's product design and development efforts are centered around
leading edge trends in the worldwide youth culture, including such areas as
enthusiast sports, alternative music, television, clothing and movies. The
Company's products are then designed and refined based on consumer and retailer
feedback through multiple product reviews. The Company's designers work to
monitor subtle changes in the sports, music, media and fashions which appeal to
the Company's core customers.

The Company traditionally designs and merchandises three lines of
footwear products per year for the annual Spring, "Back to School" and Holiday
seasons. The Company also intends to introduce two lines of clothing per year.

PRODUCTS

The Company produces a wide variety of casual, active-casual and
performance footwear products and snowboard boots, all of which are designed to
appeal to alternative sport enthusiasts seeking performance footwear and
mainstream consumers seeking footwear that represents youth, individuality and
independence. The average retail prices for the Company's footwear products
range from $30 to $80 for casual and performance footwear, and from $130 to $280
for snowboard boots. The Company has also introduced its first clothing and
accessories lines offering knit shirts, T-shirts, hats, shorts and snowboard
outerwear, bags and backpacks.

The Company's footwear line is segmented into the following categories:

High Performance Series(TM). This line includes the most technical
skateboarding shoes that are only sold in independent skate shops.

Performance Unlimited Series(TM). This line includes technical,
performance-oriented skateboarding and biking shoes that are mainly sold in
athletic footwear and fashion/lifestyle stores.

Skate Prelim Series(TM). This line includes skate-influenced,
non-technical casual canvas and leather shoes that are mainly sold to mass
merchandisers.

Classics. This line includes traditional vulcanized canvas and suede
shoes that are sold through all retail levels.

MEN'S FOOTWEAR

High Performance Series(TM) , Performance Unlimited Series(TM) and
Signature Skate Shoes. Throughout its 30-year history, the VANS brand has long
been associated with skateboarding. The Company offers a variety of High
Performance and Performance Unlimited skate shoes that are designed and
developed for skateboarding, and that have specific features for the sport, such
as grippy gum rubber outsoles, double or triple layers of suede or leather in
the ollie area for extra durability, double or triple stitching for durability,
and extra padded tongues and collars for comfort and support. In addition, High

<PAGE> 5

Performance skate shoes have additional features for the most demanding riders,
such as an internal elastic tongue holder, extra durable laces, and rubber toe
guards. For the first time, the Company is also introducing technology in its
skate shoes, as part of the High Performance Series(TM). The Company's new
Impulse Technology(TM) helps to prevent heel bruising (one of the main injuries
in skateboarding), and lengthens the life of heel cushioning. The Company also
offers Signature Skate Shoes, and works with the world's top skaters, such as
Steve Caballero, Salman Agah, Tom Boyle, Omar Hassan, Simon Woodstock and Willy
Santos to develop performance footwear. The Company believes the identification
of its shoes with top skaters helps to increase sales of its performance
footwear. Some of the Company's High Performance Series(TM) shoes are Ehkks(TM),
D.B.D.S.(TM) and A-Tack(TM). Performance Unlimited Series(TM) shoes include the
Fairlane II(TM), Kace(TM) and KNU Skool(TM), and the Signature Skate Series(TM)
shoes include the Omar Hassan, Cab 4(TM), Tom Boyle and Simon Woodstock.

Skate Prelim Series(TM) and Classics. The Company's Skate Prelim Series
includes a wide variety of casual suede, leather and canvas shoes with skate
influence. The Classics include traditional vulcanized surf and skate oriented
footwear, as well as basic canvas styles. Some of the Company's Skate Prelim
Series(TM) shoes are the Wally(TM), POP(TM), Jaxx(TM) and L.T.D.(TM). The
Classics include the Classic Slip-On, Authentic(TM), Old Skool(TM) and
SK8-Hi(TM).

WOMEN'S FOOTWEAR

The Company's footwear products for women include skate-influenced
casual shoes, as well as basic, classic deck shoes. Many of the products
incorporate fundamental features of the Company's skate shoes with
fashion-conscious detailing, colors and fabrics, such as suede, leather, nylon
and canvas. The line includes vulcanized shoes, as well as cemented cup-soled
shoes, and sandals. Some of the Company's women's shoes include the Cara-BethTM,
Phuture(TM), Lampin(TM), Vans Sport(TM) and Old Skool(TM).

CHILDREN'S FOOTWEAR

The Company offers a variety of boys' and youth's casual footwear that
follow the direction of the men's Skate Prelim Series(TM), that is, shoes which
are skate-influenced without technical features, as well as Classics. These
shoes include the Wally(TM), POP(TM), Jaxx(TM) and Old Skool(TM).

SNOWBOARD BOOTS

For the 1997/1998 season, the Company has expanded its snowboard boot
line to include its first-ever signature boot series featuring athletes such as
Shaun Palmer, Jaime Lynn and Circe Wallace. As with the Company's signature
footwear series, these athletes actually participate in the design of the boots.
Also featured in this season's line are: (i) five styles which are compatible
with the Switch AutolockTM system, an innovative and convenient step-in boot
binding system; and (ii) five traditional styles, each with various technical
improvements and featuring the Company's Old Skool side stripe.

CLOTHING

In fiscal 1997, the Company terminated its clothing license agreement
with Oneita Industries and formed an in-house clothing division. At the end of
fiscal 1997, the Company introduced its first clothing lines, featuring
activewear items, such as T-shirts, polo shirts, fleece and jackets, as well as
technical snowboarding outerwear items, including nylon jackets and pants, and a
variety of sweaters and polar fleece. For Spring 1998, the Company will expand
its activewear items to include a focused range of T-shirts, knit-shirts,
shorts, board shorts, and hats, as well as a bag line.

SALES AND DISTRIBUTION

The Company has two primary distribution channels for its products: (i)
wholesale sales, which consist of national sales through national and regional
retailers, as well as independent specialty stores, including skate and surf
shops, and international sales through a wholly-owned foreign subsidiary which
contracts with distributors; and (ii) sales through Company-operated retail and
factory outlet stores.

NATIONAL SALES

The Company sells its products through approximately 2,500 active
accounts, including Journeys, Pacific Sunwear, Mervyn's, The Sports Authority,
Foot Action, Kinney Shoe Corporation (which includes Foot Locker, Kids Foot
Locker, Kinney Shoe Stores, Lady Foot Locker and Champs Sporting Goods), Kohls
and Nordstrom. The Company also sells its products through independent retailers
such as skateboard and surf shops to maintain its authenticity and to stay close
to its core customers.

<PAGE> 6

The Company strives to maintain the integrity of the VANS image by
controlling the distribution channels for its products based on criteria which
include the retailer's image and ability to effectively promote the Company's
products. The Company works with its retailers to display, stock and sell a
greater volume of the Company's products. The Company sells products to its
national accounts primarily through independent sales representatives. Several
of the Company's larger accounts are managed by Company sales executives. The
Company typically engages its independent sales representatives pursuant to
agreements with terms ranging from one to three years in length. Compensation of
independent sales representatives is generally limited to commissions on sales.

INTERNATIONAL SALES

The Company licenses the right to sell VANS products internationally to
its Hong Kong subsidiary, Vans Far East Limited ("VFEL"), which in turn sells
VANS products to distributors for resale in 77 foreign countries. International
distributors of VANS products receive a discount on the wholesale price of
footwear products and are granted the right to resell such products in defined
territories, usually a country or group of countries. Distribution agreements
generally are exclusive, restrict the distributor's ability to sell competing
products, have a term of one to three years, provide a minimum sales threshold
which increases annually, and generally require the distributor to spend up to
5% of its revenues on marketing. VFEL receives payment from all its distributors
in United States dollars.

In fiscal 1997, the Company undertook a strategy to capture increased
international sales and profit by commencing direct operations in selected
countries. In connection with that strategy, the Company acquired 51% of the
common shares of Global Accessories Limited, its distributor for the United
Kingdom ("Global") in November 1996. The Company will acquire the remaining 49%
of the common shares of Global over a five-year period commencing approximately
in November 1997. The Company also recently formed jointly-owned subsidiaries
with a third party to sell the Company's products in Mexico, Brazil and
Argentina. Under this arrangement, the Company will provide product and its
footwear marketing expertise to the ventures, and the third party will provide
financial, advertising and operational support. See "--Certain Considerations -
International Business Operations; Foreign Currency Fluctuations."

Financial information about the Company's export sales is included in
Note 13 to the Company's Financial Statements.

RETAIL SALES

The Company currently operates 84 retail stores. The Company's retail
stores are divided into three store groups, including conventional mall and
freestanding stores, factory outlet stores and clearance stores. The Company's
retail stores carry a wide variety of the Company's footwear products, along
with apparel and accessory items, most of which bear the VANS brand name and
logo. The stores are an integral part of the Company's strategy for building the
VANS brand, providing wide exposure to all of the Company's products and
enabling the Company to stay close to the needs of its customers. During fiscal
1997, the Company continued its strategy of expanding its retail stores beyond
Southern California, opening stores in Williamsburg, Virginia, Las Vegas,
Nevada, Myrtle Beach, South Carolina, and Park City, Utah. Subsequent to the
fiscal year-end, the Company opened stores in Bellport, New York, Riverhead, New
York, and Kansas City, Kansas. It is anticipated that, within the next 12
months, the Company will open its first international stores in Guam and Puerto
Rico.

The standard Company retail store is approximately 1,400 to 2,700 square
feet. A typical Company store is open seven days a week, for an average of
eleven hours per day, and has two or three employees in the store during
business hours. The Company sells factory seconds and discontinued shoes at
discounted prices through 32 factory outlets and clearance stores. The Company
opened five factory outlets during the fiscal 1997. The Company continually
works to upgrade the design and layout of its retail stores as part of its
overall marketing plan and remodels older stores as it resources permit to
further promote the VANS brand image. The Company also, as a matter of course,
seeks to identify underperforming stores for possible closure. The Company
intends to open new factory outlet stores in the leading outlet centers
throughout the country.

DISTRIBUTION FACILITIES

During fiscal 1997, the Company subleased its City of Industry
distribution facility (the "City of Industry Facility"). Domestic distribution
of products is now centralized in the Company's 180,000 square foot facility
located in Santa Fe Springs, California (the "Santa Fe Springs Facility"). See
Item 2. "Properties - Corporate Headquarters and Distribution Facility and -
Sublease of City of Industry Facility." Upon receipt from overseas
manufacturers, the Company's products are inspected, sorted, packaged and
shipped to retail accounts in the United States and abroad. While
foreign-sourced footwear for domestic accounts is generally shipped to the Santa
Fe Springs Facility, such footwear for international sales is typically shipped
directly from the overseas manufacturers to VFEL's international distributors.

<PAGE> 7

SOURCING AND MANUFACTURING

The Company purchases footwear and snowboard boots from VFEL, which
sources such product from independent manufacturers in South Korea and China.
During fiscal 1997, approximately 85% of the Company's shoes and 100% of the
Company's snowboard boots were manufactured offshore by third party
manufacturers. VFEL utilizes sourcing agents for its footwear and snowboard
boots in South Korea. These agents assist the Company in selecting and
overseeing third party contractors, ensuring quality, sourcing fabrics and
monitoring quotas and other trade regulations. The Company's and VFEL's
production staff and independent sourcing agents together oversee all aspects of
manufacturing and production. As is common in the industry, there are no
agreements between VFEL and any of its contractors or suppliers, however, the
Company is advised that VFEL believes that its relationships with its
contractors and suppliers are good.

Approximately 75% of the Company's clothing is sourced off-shore in
countries such as China, Korea, Israel and India. The Company's clothing
division works directly with the foreign factories to source and develop all
fabrics, trims and styles for the line.

The Company manufactures vulcanized footwear at the 90,400 square foot
Vista Facility. The Vista Facility allows the Company to produce a broader line
of its vulcanized footwear products for its retail stores as well as its
domestic and international accounts. The Vista Facility was established in 1992
to apply integrated cellular manufacturing techniques to the traditional method
of shoemaking. During the second half of fiscal 1997, in response to increased
demand for domestically-produced shoes, the Company increased production at the
Vista Facility by nearly 50%, and increased the number of personnel at the
Facility from approximately 400 to more than 600. The Company currently operates
two shifts a day at the Vista Facility. Manufacturing generally operates on a
five-day week, although Saturday shifts are common during periods of peak
production, primarily in the Spring and "Back To School" seasons.

The Company's quality control program is designed to ensure that all
goods bearing its trademarks meet the Company's standards. With respect to
products manufactured by independent contractors, the Company ensures that VFEL
develops and inspects prototypes of each product prior to manufacture by such
contractors, establishes fittings based on the prototype, inspects samples and,
through its employees or sourcing agents, inspects materials prior to
production. VFEL or its sourcing agents inspect the final product prior to
shipment to the Santa Fe Springs Facility. With respect to licensed products,
the Company oversees the quality control programs of its licensees and regularly
inspects samples of their products.

A wide range of materials are used in the domestic and offshore
production of the Company's footwear. The Company has not experienced a
significant manufacturing delay caused by the unavailability of raw materials,
however, there can be no assurance that difficulties in obtaining raw materials,
particularly specialized materials used in certain women's shoes, will not arise
in the future or that any such difficulties would not have a material adverse
effect on the Company's business. To date, the Company has not experienced any
significant safety or health problems from the use or handling of these raw
materials.

LICENSING

The Company has licensed certain of its trademarks for apparel and
accessory products where the Company believed such arrangements would promote
the VANS brand name and image consistent with the Company's overall marketing
and promotion plan.

Currently, the Company has license agreements with five third party
licensees. The licensees have the exclusive right to manufacture and sell
certain products under the Company's trademarks in specified territories. The
licenses provide for a royalty payment to the Company and typically establish
minimum annual royalty amounts. In the U.S., the Company licenses its trademarks
for socks. In Japan, the Company's license agreements cover footwear, caps,
sports bags, snowboards, apparel, watches and sunglasses. In Germany, the
license agreement covers a variety of bags and, in Italy, the Company's license
agreement covers apparel. The Company is generally permitted to sell its
licensed products through its retail stores and its distributors. The Company's
licenses have varying expiration dates.

COMPETITION

Footwear Industry. The athletic and casual footwear industry is highly
competitive. The Company competes on the basis of the quality and technical
aspects of its products, the 30-year heritage of the VANS brand, and the brand's
authenticity with its core customers and the athletes who participate in the
sports sponsored by the Company. Many of the Company's competitors, such as
Nike, Inc., Reebok International Ltd., Adidas AG and Fila Holding SpA, have
significantly greater financial resources than the Company, have more
comprehensive lines of product offerings, compete with the Company in the Far
East for manufacturing sources and spend substantially more on product
advertising than the Company. In addition, the general availability of offshore
shoe manufacturing capacity allows for rapid expansion by competitors and new
entrants in the footwear market. In this regard, the Company faces significant
competition from large, well-known companies, such as Tommy Hilfiger and
Nautica, which have significant brand recognition. In addition, in the casual
footwear market, the Company competes with a number of companies,

7
<PAGE> 8

such as Airwalk, Converse Inc. and Stride Rite Corporation (Keds), many of which
may have significantly greater financial and other resources than the Company.
The Company also competes with smaller companies, such as D.C., Duffs and
Etnies, which specialize in marketing to the Company's core skateboarding
customers. The Company competes on the basis of the quality and technical
aspects of its products, the 30-year heritage of the VANS brand, and the
brand's authenticity with its core customers and the athletes who participate
in the sports sponsored by the Company.

Snowboard Boot Industry. Although the Company has experienced
substantial growth in sales of its line of snowboard boots, and is now one of
the three industry leaders, it faces significant competition, most notably from
Airwalk and Burton Snowboards, Inc., the other two industry leaders. The Company
also anticipates that several large, well-known companies, such as Nike, Inc.
and Fila SpA will enter the snowboard boot industry in the future. These
companies are much larger and have greater financial resources than the Company,
and have significant brand recognition.

Snowboarding is a relatively new sport and there can be no assurance
that it will continue to grow at the rate experienced in recent years, or that
its popularity will not decline. Moreover, the market for snowboarding is
characterized by image-conscious consumers. The failure by the Company to
accurately predict and target future trends or to maintain its progressive image
could have a material adverse effect on its snowboard boots sales. The Company
believes that its future success in the snowboard boot market will depend, in
part, on its ability to continue to introduce innovative, well-received
products, and there can be no assurance that it will do so.

Apparel Industry. The Company is a new entrant in the apparel business.
The apparel industry is highly competitive and fragmented, and many of the
Company's competitors have significantly greater financial resources than the
Company and spend substantially more on product advertising than the Company.
Additionally, the apparel industry is particularly dependent on changes in
fashion, which will require the Company to devote substantial resources to
responding to changes in consumer preferences in a timely manner.

BACKLOG

As of August 28, 1997, the Company's backlog of orders for delivery in
the second quarter of fiscal 1998 was approximately $19.7 million, as compared
to approximately $16.1 million as of August 28, 1996. The Company's backlog
amounts exclude orders from the Company's retail stores. The Company has, in the
last 18 months, expanded its futures program which offers the Company's national
accounts a discount for placing orders early. In addition, increased
international sales have contributed to backlog as such sales typically have
longer lead times. The Company's backlog also depends upon a number of other
factors, including the timing of trade shows, during which a significant
percentage of the Company's orders are received, the timing of shipments,
product mix of customer orders and the amount of in-season orders. As a result
of these and other factors, period-to-period comparisons of backlog may not
necessarily be meaningful.

In addition, the Company has historically shipped less than all orders
in its backlog and a large portion of its products late in the quarter. As a
result, the Company may not learn of sales shortfalls until late in any
particular fiscal quarter, which could result in an immediate and adverse effect
on the Company's business, financial condition and results of operations.

INTELLECTUAL PROPERTY

The Company holds trademarks, copyrights and patents on its products,
brand names and designs which the Company believes are material to its business.
The Company has made federal, state and international filings with respect to
its material intellectual property, and intends to keep these filings current.
The Company believes that its rubber "Off the Wall(R)" sole design, the VANS
trademark, the logo incorporating the VANS trademark, and the striped designs
known as the "Old Skool(TM)" and "Fairlane(TM)" designs, are significant to its
business as they have been in use for many years and have gained acceptance
among consumers and in the footwear industry. The Company is aware of
potentially conflicting trademark claims in the United States, as well as
certain countries in Europe, South America and the Far East, and is currently
engaged in, or contemplating trademark opposition or other legal proceedings,
with respect to these claims. There can be no assurance that the Company will be
able to use all of its trademarks in any of the jurisdictions where conflicts
exist. The Company regards its trademarks and other proprietary rights as
valuable assets and believes that they have significant value in the marketing
of its products. The Company vigorously protects its trademarks against
infringement both in the United States and internationally, including through
the use of cease and desist letters, administrative proceedings and lawsuits.

ENVIRONMENTAL MATTERS

In the ordinary course of business, the Vista Facility generates a small
amount of hazardous waste which is stored on-site and transported off-site by
registered waste haulers for disposal at permitted disposal facilities. The
Company holds permits from local jurisdictions for discharging waste water,
storing hazardous materials, emitting air pollutants, and operating

<PAGE> 9

an air pollution control system and certain other machinery. The Company
believes that it is in substantial compliance with all applicable rules and
regulations of federal, state and local environmental regulatory agencies.

EMPLOYEES

As of August 25, 1997, the Company had 1,269 employees. Of the Company's
1,269 employees, 999 are full-time employees and 270 are part-time employees
(most of whom work at the Company's retail stores). The Company considers its
employee relations to be satisfactory. The Company has never suffered a material
interruption of business caused by labor disputes.

CERTAIN CONSIDERATIONS

Information contained or incorporated by reference in this Report
contains "forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates." Set forth below are cautionary statements
identifying important factors, risks and uncertainties that could cause the
Company's actual results to differ materially from those contained in
forward-looking statements of the Company and its management.

BRAND STRENGTH; CHANGES IN FASHION TRENDS

The Company's success is largely dependent on the continued strength of
the VANS brand and on its ability to anticipate the rapidly changing fashion
tastes of its customers and to provide merchandise that appeals to their
preferences in a timely manner. There can be no assurance that consumers will
continue to prefer the VANS brand or that the Company will respond in a timely
manner to changes in consumer preferences or that the Company will successfully
introduce new models and styles of footwear and apparel. Achieving market
acceptance for new products may also require substantial marketing and product
development efforts and the expenditure of significant funds to create consumer
demand. Decisions with respect to product designs often need to be made several
months in advance of the time when consumer acceptance can be determined. As a
result, the Company's failure to anticipate, identify or react appropriately to
changes in styles and features could lead to, among other things, excess
inventories and higher markdowns, lower gross margins due to the necessity of
providing discounts to retailers, as well as the inability to sell such products
through Company-owned retail and factory outlet stores. Conversely, failure by
the Company to anticipate consumer demand could result in inventory shortages,
which can adversely affect the timing of shipments to customers, negatively
impacting retailer and distributor relationships and diminishing brand loyalty.
The failure to introduce new products that gain market acceptance would have a
material adverse effect on the Company's business, financial condition and
results of operations, and could adversely affect the image of the VANS brand
name.

In response to consumer demand, the Company also uses certain
specialized fabrics in its footwear and apparel. The failure of footwear or
apparel using such fabrics to perform to customer satisfaction could result in a
higher rate of customer returns and could adversely affect the image of the VANS
brand name, which could have a material adverse effect on the Company's business
and results of operations.

The Company also has recently significantly increased the technical
aspects of certain of its footwear and snowboard boots. The failure of such
technical features to satisfy customers, or the failure of the Company to
develop new and innovative technical features in a timely fashion, could
adversely affect the VANS brand and could have a material adverse effect on the
Company's business and results of operations.

COMPETITION

Footwear Industry. The athletic and casual footwear industry is highly
competitive. The Company competes on the basis of the quality and technical
aspects of its products, the 30-year heritage of the VANS brand, and the brand's
authenticity with its core customers and the athletes who participate in the
sports sponsored by the Company. Many of the Company's competitors, such as
Nike, Inc., Reebok International Ltd., Adidas AG and Fila Holding SpA, have
significantly greater financial resources than the Company, have more
comprehensive lines of product offerings, compete with the Company in the Far
East for manufacturing sources and spend substantially more on product
advertising than the Company. In addition, the general availability of offshore
shoe manufacturing capacity allows for rapid expansion by competitors and new
entrants in the footwear market. In this regard, the Company faces significant
competition from large, well-known companies, such as Tommy Hilfiger and
Nautica, which have brand recognition. In addition, in the casual footwear
market, the Company competes with a number of companies, such as Airwalk,
Converse Inc. and Stride Rite Corporation (Keds), many of which may have
significantly greater financial and other resources than the Company. The
Company also competes with smaller companies, such as D.C., Duffs and Etnies,
which specialize in marketing to the Company's core skateboarding customers.

<PAGE> 10

DEPENDENCE ON FOREIGN MANUFACTURERS

Approximately 85% of the Company's shoes and 100% of the Company's
snowboard boots sold during fiscal 1997 were manufactured by independent
suppliers located in South Korea. The Company has increased its reliance on
offshore manufacturers by commencing sourcing of footwear and apparel in the
Peoples Republic of China, India and Israel and anticipates that it will begin
sourcing some footwear in Mexico in the near future and some apparel from other
Far East countries, such as Thailand and Taiwan. The Company sources its
foreign-produced products through VFEL. VFEL does not have contracts with its
foreign manufacturers. There can be no assurance that VFEL will not experience
difficulties with such manufacturers, including reduction in the availability of
production capacity, errors in complying with product specifications, inability
to obtain sufficient raw materials, insufficient quality control, failure to
meet production deadlines or increase in manufacturing costs. In addition, if
VFEL's relationship with any of its manufacturers were to be interrupted or
terminated, alternative manufacturing sources will have to be located. The
establishment of new manufacturing relationships involves numerous
uncertainties, and there can be no assurance that VFEL would be able to obtain
alternative manufacturing sources on terms satisfactory to it. Should a change
in its suppliers become necessary, VFEL would likely experience increased costs,
as well as substantial disruption and resulting loss of sales. In addition, VFEL
utilizes international sourcing agents who assist it in selecting and overseeing
third party manufacturers, ensuring quality, sourcing fabrics and monitoring
quotas and other trade regulations. The loss or reduction in the level of
services from such agents could significantly affect the ability of VFEL to
efficiently source products from overseas, which could have a material adverse
effect on VFEL's and the Company's business, financial condition and results of
operations.

Foreign manufacturing is subject to a number of risks, including work
stoppage, transportation delays and interruptions, political instability,
foreign currency fluctuations, changing economic conditions, expropriation,
nationalization, imposition of tariffs, import and export controls and other
non-tariff barriers (including quotas) and restrictions on the transfer of
funds, environmental regulation and other changes in governmental policies.
There can be no assurance that such factors will not materially adversely affect
VFEL's and the Company's business, financial conditions and result of
operations.

All VANS products manufactured overseas and imported into the United
States are subject to duties collected by the United States Customs Service.
Customs information submitted by the Company is subject to review by the Customs
Service. The Company is unable to predict whether additional United States
Customs duties, quotas or restrictions may be imposed on the importation of its
products in the future. The enactment of any such duties, quotas or restrictions
could result in increases in the cost of such products generally and might
adversely affect the sales or profitability of the Company.

MANAGEMENT OF GROWTH

The Company intends to pursue its growth strategy through expanded
marketing and promotion efforts, more frequent introductions of products,
broader lines of casual and performance footwear and snowboard boots, as well as
apparel and other accessories, and increased international market penetration.
To the extent the Company is successful in increasing sales of its products, a
significant strain may be placed on its financial, management and other
resources. The Company's future performance will depend in part on its ability
to manage change in its operations and will require the Company to attract,
train, manage and retain management, sales, marketing and other key personnel.
In addition, the Company's ability to manage its growth effectively will require
it to continue to improve its operational and financial control systems and
infrastructure and management information systems. There can be no assurance
that the Company will be successful in such efforts, and the inability of the
Company's management to manage growth effectively could have a material adverse
effect on the Company's business, financial condition and results of operations.

<PAGE> 11

SEASONALITY AND QUARTERLY FLUCTUATION

The footwear industry is characterized by significant seasonality of net
sales and results of operations. In the past two fiscal years, the Company's
business has been moderately seasonal, with the largest percentage of sales
realized in the first fiscal quarter (June through August), the "Back to School"
months. In addition, because snowboarding is a winter sport, sales of the
Company's snowboard boots have historically been strongest in the first and
second fiscal quarters. As the Company increases its international sales through
VFEL and experiences changes in its product mix, it expects that its quarterly
results will vary from historical trends. Therefore, the results of operations
of any quarter may not necessarily be indicative of the results that may be
achieved for a full fiscal year or any future quarter. In addition to seasonal
fluctuations, the Company's operating results fluctuate on a quarter-to-quarter
basis as a result of holidays, weather and the timing of large shipments. The
Company's gross margins also fluctuate according to product mix, cost of
materials and the mix between wholesale and retail channels. Given these
factors, there can be no assurance that the Company's future results will be
consistent with past results or the projections of securities analysts.
Historically, the Company has shipped a large portion of its products late in
the quarter. Consequently, the Company may not learn of sales shortfalls until
late in any particular fiscal quarter, which could result in an immediate and
adverse effect on the Company's business, financial condition and results of
operations.

TRADE CREDIT RISK

The Company's results of operations are affected by the timely payment
for products by its customers. Although the Company's bad debt expense has not
been material to date, no assurance can be given that it will not increase
relative to net sales in the future or that the Company's current reserves for
bad debt will be adequate. Any significant increase in the Company's bad debt
expense relative to net sales could adversely impact the Company's net income
and cash flow, and could adversely affect the Company's ability to pay its
obligations as they become due.

ECONOMIC CYCLICALITY

Certain economic conditions affect the level of consumer spending on the
products offered by the Company, including, among other things, general business
conditions, interest rates, taxation and consumer confidence in future economic
conditions. The Company and the footwear and apparel industry in general are
highly dependent on the economic environment and discretionary levels of
consumer spending that affect not only the consumer, but also distributors and
retailers of the Company's products. As a result, the Company's results of
operations may be materially adversely affected by downward trends in the
economy of the occurrence of events that adversely affect the economy in
general. In addition, a significant portion of the Company's revenues come from
sales in California, including sales through the Company's retail stores. A
decline in the economic conditions in California could materially adversely
affect the Company's business, financial condition and results of operations.

INTERNATIONAL BUSINESS OPERATIONS; RISK OF FOREIGN CURRENCY FLUCTUATIONS

The Company has recently begun to do business directly in the United
Kingdom, through a subsidiary, and in Mexico, Brazil and Argentina through
subsidiaries co-owned with a third party. See "--Sales and Distribution -
International Sales." The Company may experience certain risks of doing business
directly in these countries including, but not limited to, managing operations
effectively and efficiently from a far distance and understanding and complying
with local laws, regulations and customs. Additionally, these entities may, from
time to time, collect payments in the customers' local currencies and purchase
raw materials or product in currencies other than U.S. dollars. Accordingly, the
Company is exposed to transaction gains and losses that could result from
changes in foreign currency exchange rates.

NATURE OF ENDORSEMENT CONTRACTS

A key element of the Company's marketing strategy has been to obtain
endorsements from prominent enthusiasts sports athletes. See "--Marketing and
Promotional Athletic Endorsements." These contracts typically have fixed terms,
and there can be no assurance that they will be renewed or that endorsers signed
by the Company will continue to be effective promoters of the Company's
products. If the Company were unable in the future to secure suitable athletes
to endorse its products on terms it deemed reasonable, it would be required to
modify its marketing plans and could have to rely more heavily on other forms of
advertising and promotion, which might not be as effective.

<PAGE> 12

PRODUCT LIABILITY

The Company's snowboard boots are often used in relatively high-risk
recreational settings. Consequently, the Company is exposed to the risk of
product liability claims in the event that a user of such boots is injured in
connection with such use. In many cases, users of the Company's boots may engage
in imprudent or even reckless behavior while using such products, thereby
increasing the risk of injury. The Company maintains general liability insurance
(which includes product liability coverage) and excess liability insurance
coverage in an amount the Company believes to be sufficient. However, there can
be no assurance that such coverage will be sufficient, will continue to be
available on acceptable terms, will be available in sufficient amounts to cover
one or more large claims, or that the insurer will not disclaim coverage as to
any future claim. The successful assertion of one or more large claims against
the Company that exceed available insurance coverage, or changes in the
Company's insurance policies, including premium increases or the imposition of
large deductible or co-insurance requirements, could have a material adverse
effect on the Company's financial condition and results of operations.

RELIANCE ON THIRD PARTY TECHNOLOGY

The Company currently licenses certain proprietary technology and the
right to produce snowboard boots for a step-in-boot binding system from Switch
Manufacturing ("Switch"). Such license expires on December 31, 1997 and is
non-exclusive, except that Switch may not enter into license agreements with the
two snowboard boot market leaders measured by sales in 1994. The loss of the
Switch license, failure by Switch to renew such license or the termination of
the Company's limited exclusivity could adversely impact the Company's
competitive position in the snowboard boot market. In addition, failure by
Switch to receive a patent on its binding system, or patent litigation regarding
such system, could significantly reduce the value to the Company of its
relationship with Switch. In that regard, the Company has been advised that
Switch has been sued for patent infringement by Mark Raines, Gregory Deeney and
Preston Binding Company ("Preston"), a division of Ride, Inc. ("Ride"). The suit
alleges that the Switch binding system infringes the patent of a binding system
developed by Messrs. Raines and Deeney which was subsequently assigned to
Preston. Switch has responded to the suit by filing an answer denying such
allegations and a complaint against Preston and Ride seeking a declaratory
judgment of patent non-infringement and damages for alleged bad faith
allegations of patent infringement. The parties are currently conducting
discovery in this matter.

Additionally, the Company has been advised by Switch that K2 Corporation
("K2") has notified Switch that, in its opinion, Switch's binding system
infringes certain allowed claims in a U.S. patent application filed by K2. To
the Company's knowledge, no litigation has commenced in this matter.

The Company has not been named as a defendant in the Preston suit or
threatened with litigation in either of the foregoing matters; however, there
can be no assurance that the Company will not be named in the Preston suit or
any potential litigation which might arise between Switch and K2, and there can
be no assurance as to the outcome of the litigation between Switch and Preston
and Ride or any potential litigation between Switch and K2. In the event Switch
is found liable in the Preston suit or in any suit that may be filed by K2, the
Company may be unable to use the Switch step-in boot binding system, which could
adversely impact the Company's competitive position in the snowboard boot
market.

VOLATILITY OF STOCK PRICE

The market price of the Common Stock has fluctuated substantially since
the Company's initial public offering in August 1991. There can be no assurance
that the market price of the Common Stock will not continue to fluctuate
significantly. Future announcements concerning the Company or its competitors,
quarterly variations in operating results, the introduction of new products or
changes in product pricing policies by the Company or its competitors, weather
patterns that may be perceived to affect the demand for the Company's products,
changes in earnings estimates by analysts or changes in accounting policies,
among other factors, could cause the market price of the Common Stock to
fluctuate substantially. In addition, stock markets have experienced extreme
price and volume volatility in recent years. This volatility has had a
substantial effect on the market prices of securities of many smaller public
companies for reasons frequently unrelated to the operating performance of the
specific companies. These broad market fluctuations could adversely affect the
market price of the Common Stock.

ACQUISITION-RELATED RISKS

From time to time, the Company evaluates and considers the acquisition
of businesses. Acquisitions involve numerous risks, including difficulties in
the assimilation of the operations, technologies and products of the acquired
companies, the diversion of management's attention from other business concerns,
risks associated with entering markets or conducting operations with which the
Company has no or limited direct prior experience, and the potential loss of key
employees of the acquired company. Moreover, there can be no assurance that the
anticipated benefits of an acquisition will be realized. Future acquisitions by
the Company could result in potentially dilutive issuances of equity securities,
the incurrence of debt and contingent liabilities and amortization expenses
related to goodwill and other intangibles assets, all of which could materially
adversely affect the Company's business, financial condition, results of
operations or stock price.
12

<PAGE> 13

ITEM 2. PROPERTIES

Corporate Headquarters. The Company leases approximately 180,000 square
feet of space in Santa Fe Springs, California which houses the Company's
corporate headquarters and distribution operations. The initial term of the
lease is 10 years and the Company has one option to extend the lease an
additional 10 years. The rental structure under the lease is triple net, and the
current monthly rent is $66,600. Such rent is subject to adjustment according to
the C.P.I. Index throughout the term of the lease.

Vista, California Manufacturing Facility. The Company leases the 90,400
square foot Vista Facility. The term of the lease is eleven years and six
months, with two consecutive five-year extension options. The rental structure
under the lease is triple net. The current monthly base rent under the lease is
$39,107 and is subject to adjustment according to the C.P.I. Index throughout
the term of the lease.

Retail Stores. Of the Company's 84 retail stores, two are owned by the
Company and the remainder are leased. Two of the leases are with the Company's
founders, who are no longer affiliated with the Company. The Company does not
have any franchised stores.

Lease of the Orange Facility. The Company leases the Orange Facility to
two companies, one of whom currently pays the Company rent of $24,000 per month
pursuant to a gross lease, and one of whom currently pays the Company rent of
$19,000 per month pursuant to a triple net lease. Each of such leases has an
initial term of five years, and each lessee has one option to extend the term of
their lease an additional five years. The leases also provide for annual rent
increases.

Sublease of City of Industry Facility. During fiscal 1997, the Company
subleased the City of Industry Facility to a distribution company. Under the
sublease, such company pays the Company $40,500 per month. The Company remains
primarily liable under the master lease. The term of the sublease expires upon
the expiration of the master lease, February 27, 2000.

The Company believes that its operating facilities and retail space are
adequate for its current needs.

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to certain litigation which arises in the
ordinary course of its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable

<PAGE> 14

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "VANS." The following table sets forth, for the periods indicated,
the high and low sales prices of the Common Stock as reported on the Nasdaq
National Market.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
(IN DOLLARS)
<S> <C> <C>
FISCAL YEAR ENDED MAY 31, 1997:
1st Quarter ................... 20 1/8 12
2nd Quarter ................... 21 3/4 14 3/8
3rd Quarter ................... 17 1/4 10 3/4
4th Quarter ................... 13 7/8 9
FISCAL YEAR ENDED MAY 31, 1996:
1st Quarter ................... 7 3/8 4 1/4
2nd Quarter ................... 8 3/8 5 5/8
3rd Quarter ................... 13 3/4 6 7/8
4th Quarter ................... 20 5/8 11 7/8
</TABLE>

On August 25, 1997, the last reported sales price on the Nasdaq National
Market for the Company's Common Stock was $12.25 per share. As of August 25,
1997, there were 158 holders of record of the Common Stock.

The Company has never declared or paid a cash dividend on its Common
Stock. The Company presently intends to retain its earnings to fund the
development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. In addition, the terms of
the Company's secured line of credit prohibit the payment of such dividends
without the consent of the bank.

ITEM 6. SELECTED FINANCIAL DATA

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales .......................... $159,391 $117,407 $ 88,056 $80,476 $86,563
Net earnings (loss) ................ $ 10,437 $ 3,148 $(37,135)(1) $ 1,361 2,709
Net earnings (loss) per share before
extraordinary item ............. $ 0.76 $ 0.40 $ (3.86)(1) $ 0.14 $ 0.28
Weighted average common shares
and equivalents(2) .............. 13,805 10,406 9,611 9,731 9,645

BALANCE SHEET DATA:

Total assets ....................... $105,824 $ 90,461 $73,066 $97,204 $96,252
Long-term debt ..................... $ 481 $ 344 $22,416 $29,000 $29,000
Stockholders' equity ............... $ 88,282 $ 72,728 $20,264 $57,155 $55,518
</TABLE>

- ------------

(1) Reflects: (i) a $20.0 million write-off of goodwill associated with the
closure of the Orange Facility; (ii) $10.0 million of restructuring
costs associated with such facility closure; and (iii) a $6.3 million
write-down of inventory in the fourth quarter of fiscal 1995.

(2) See Note 2 of Notes to Consolidated Financial Statements for an
explanation of the method used to determine the number of shares used in
per share computations.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion contains forward-looking statements that
involve risk and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed hereunder,
as well as those discussed under the caption "Certain Considerations."

<PAGE> 15

OVERVIEW

The Company is the successor to Van Doren Rubber Company, Inc., a
California corporation that was founded in 1966 ("VDRC"). VDRC was acquired by
the Company in February 1988 in a series of related transactions for a total
cost (including assumed liabilities) of $74.4 million (the "Acquisition"). The
Acquisition resulted in the recognition of approximately $48.0 million of
goodwill by the Company (the "Acquisition Goodwill"). VDRC was merged with and
into the Company in August 1991 at the time of the Company's initial public
offering.

Prior to fiscal 1995, the Company manufactured all of its footwear at
two domestic manufacturing facilities located in Southern California. As part of
the Company's strategic redirection, in the first quarter of fiscal 1995 the
Company began to source from South Korea its line of casual and performance
footwear known as the International Collection. The success of the International
Collection created a domestic manufacturing overcapacity problem for the Company
which contributed to an overstock in domestic inventories. In the second quarter
of fiscal 1995, the Company increased the inventory valuation allowance from
$324,772 to approximately $600,000 in order to help mitigate the risks
associated with increased inventory balances. In the third quarter of fiscal
1995, the Company took steps to adjust its U.S. production; however, customer
demand for the International Collection continued to grow. In the fourth quarter
of fiscal 1995, it first became apparent that domestic manufacturing workforce
reductions would not be sufficient to address the increase in orders for the
International Collection and the decrease in demand for domestically-produced
footwear, and the Company determined that a plant closure would be required.
Therefore, on May 30, 1995 the Board of Directors voted to close the Orange
Facility and in July 1995, the Company closed the Orange Facility. Accordingly,
the Company recognized restructuring costs of $30.0 million in the fourth
quarter of fiscal 1995. Of that amount: (i) $20.0 million represented a
write-off of the goodwill allocated to the manufacturing know-how associated
with the Orange Facility (the "Orange Facility Goodwill"); and (ii) $10.0
million represented restructuring costs to close the Orange Facility. All
remaining U.S. production of the Company was shifted to the Vista Facility.

In the fourth quarter of fiscal 1995, the Company wrote-down $6.3
million of inventory. The write-down of inventory consisted of $4.5 million of
domestically-produced finished goods and $1.8 million of raw material inventory.
Such inventory became impaired as a result of the following events which
occurred in the fourth quarter of fiscal 1995: (i) the expanding sales of the
International Collection; (ii) the slowing of sales of domestically-produced
footwear and related price erosion and discounting; (iii) the decrease in
domestic production as a result of the above factors and the subsequent closure
of the Orange Facility; and (iv) the discontinuance of certain
domestically-produced product.

Management of the Company, with the assistance of outside valuation
consultants, calculated the amount of the Orange Facility Goodwill based on an
analysis of the Company's business at the date of the Acquisition. At that time,
the Company's strategy was one of manufacturing efficiency, and the Company's
fixed assets as of the date of the Acquisition were primarily deployed to
manufacture footwear, and the Company's chain of retail stores served as outlets
for the footwear manufactured at the Orange Facility.

Based on this analysis, and a similar analysis of the other components
of the Acquisition Goodwill (trademarks and dealer relationships), management
determined that approximately 53% of the Acquisition Goodwill should have been
allocated to the manufacturing know-how associated with the Orange Facility at
the date of the Acquisition. The unamortized portion of the Orange Facility
Goodwill at May 31, 1995 was $20.0 million, and was written-off in connection
with the closure of the Orange Facility.

On May 9, 1996, the Company established VFEL, and granted a worldwide
license (excluding the United States) to VFEL to use the Company's trademarks in
connection with the manufacture and distribution of footwear. VFEL, in turn,
contracts with distributors for foreign countries.

As reported in the Company's Form 10-Q for the first quarter of fiscal
1997, the Company has leased the Orange Facility to two companies. In the fourth
quarter of fiscal 1997, the Company relocated its corporate headquarters to
180,000 square feet of space in Santa Fe Springs, California, which now also
houses the Company's distribution center (the "Santa Fe Springs Facility"). See
"--Liquidity and Capital Resources - Capital Expenditures."

As reported in the Company's Form 8-K, dated November 20, 1996, the
Company acquired 51% of the outstanding Common Shares ( the "Global Shares") of
Global Accessories Limited, the Company's exclusive distributor for the United
Kingdom ("Global"), in a stock-for-stock transaction (the "Global Acquisition").
The Company will acquire the remaining 49% of the Global Shares over a five-year
period commencing in approximately November 1997.

<PAGE> 16

RESULTS OF OPERATIONS

FISCAL YEAR 1997 AS COMPARED TO FISCAL YEAR 1996

Net Sales

Net sales for fiscal 1997 increased 35.8% to $159.4 million, compared to
$117.4 million for fiscal 1996. The sales increase was primarily driven by
continued increased unit sales in each of the Company's sales channels.

Sales to the Company's wholesale accounts on a worldwide basis increased
39.0% to $122.4 million in fiscal 1997, compared to $88.1 million for fiscal
1996. Within the Company's wholesale business, sales to national accounts
increased 26.6% during fiscal 1997 to $78.1 million, compared to $61.7 million
for fiscal 1996. Increased sales to existing accounts was the primary reason for
the increase, as evidenced by a 25.6% increase in sales to the Company's top ten
national accounts. Sales to international distributors increased 68.0% to $44.3
million for fiscal 1997, compared to $26.3 million for fiscal 1996. Increased
sales to Japan, France and UK were the principal reasons for the increase.

Domestic and international sales of the Company's line of snowboard boots
increased 69.0% to approximately $12.3 million, or 7.7% of net sales for fiscal
1997, from approximately $7.2 million, or 6.2% of net sales for fiscal 1996.

Sales through the Company's 84-store retail chain (as of May 31, 1997)
increased 26.0% to $37.0 million in fiscal 1997 from $29.4 million for fiscal
1996. Comparable store sales (sales at stores open one year or more) increased
17.1% from the prior fiscal year. Comparable store sales increased overall for
each store type category with the exception of the Company's three clearance
stores, which represent less than 5.0% of retail sales.

Gross Profit

Gross profit increased 35.4% to $62.7 million in fiscal 1997 from $46.3
million in fiscal 1996. As a percentage of net sales, gross profit was flat at
39.3% for fiscal 1997, versus 39.4% for fiscal year 1996. Fiscal 1997 margins
were affected by: (i) a continued shift in sales mix toward the international
sales channel which historically has had lower gross margins because
international distributors absorb certain operating costs which otherwise would
be absorbed by the Company; (ii) a continued shift in production mix to lower
gross margin snowboard boots; and (iii) an approximately 50% ramp-up in
production at the Vista Facility.

Earnings from Operations

Earnings from operations increased 65.3% to $13.8 million in fiscal 1997
from $8.3 million in fiscal 1996. Operating expenses in fiscal 1997 increased to
$48.9 million from $38.0 million in fiscal 1996, primarily due to a $4.7 million
increase in selling and distribution expense and a $4.9 million increase in
marketing, advertising and promotion expense, each as discussed below. As a
percentage of net sales, operating expenses declined from 32.3% in fiscal 1996
to 30.7% in fiscal 1997.

Selling and distribution. Selling and distribution expenses increased
19.9% to $28.1 million in fiscal 1997 from $23.4 million in fiscal 1996,
primarily due to: (i) increased personnel costs in the Company's retail division
to appropriately manage sales growth; (ii) the addition of a new apparel
division; (iii) increased building and equipment rents related to new retail
store openings and new point-of-sale registers installed throughout the
Company's retail chain; (iv) increased commissions to independent sales
representatives due to increased sales to national accounts; (v) the cost of
establishing VFEL and subsidiaries for Mexico, Argentina and Brazil; and (vi)
costs related to the operations of Global.

Marketing, advertising and promotion. In connection with the Company's
efforts to build the VANS brand, marketing, advertising and promotion expenses
increased 58.9% to $13.2 million in fiscal 1997 from $8.3 million in fiscal
1996, primarily due to: (i) increased television and print advertising; (ii)
sponsorship of the Vans World Championships of Snowboarding, the Vans Warped
Tour, and other promotional events; and (iii) an increase in the number of
athletes representing the Company's products.

General and administrative. General and administrative expenses
increased 29.5% from $4.7 million in fiscal 1996 to $6.1 million in fiscal 1997,
primarily due to: (i) the payment of bonuses under the fiscal 1997 bonus program
and a full year of expense for two senior executives hired during fiscal 1996;
(ii) increased expenses associated with the prosecution of trademark and other
intellectual property infringement claims by the Company; (iii) the first annual
deposit required under the Company's deferred compensation plan; and (iv)
payment of the full management fee due to McCown De Leeuw & Co., a significant
stockholder of the Company ("MDC"), pursuant to a Management Services Agreement.
One-half of such fee was waived by MDC for the second half of fiscal 1996.

<PAGE> 17

Provision for doubtful accounts. Provision for doubtful accounts
decreased slightly from $762,000 in fiscal 1996 to $711,000 in fiscal 1997. This
was primarily due to fewer accounts written off in fiscal 1997.

Amortization of intangibles. Amortization of intangibles increased from
$777,000 in fiscal 1996 to $836,000 in fiscal 1997 due to the increase in
goodwill associated with the Global Acquisition.

Interest Income

Interest income increased from $79,000 in fiscal 1996 to $597,000 in fiscal
1997 primarily due to the investment of the net proceeds of the Company's May
1996 public offering of Common Stock (the "Offering").

Interest and Debt Expense

Interest and debt expense decreased from $3.4 million in fiscal 1996 to
$438,000 in fiscal 1997 due to the repayment of the Company's 9.6% Senior Notes
and a secured bank line of credit with a portion of the net proceeds of the
Offering. See "-- Liquidity and Capital Resources."

Other Income

Other income, primarily income from the licensing of the Company's
trademarks to its Japanese distributor, increased 44.0% to $2.8 million in
fiscal 1997 from $1.9 million in fiscal 1996.

Income Tax Expense (Benefit)

Income tax expense increased to $6.0 million in fiscal 1997 from $2.8
million for fiscal 1996 as a result of the higher earnings discussed above.
Income tax expense as a percentage of earnings before taxes decreased primarily
due to tax benefits derived from the establishment of VFEL.

Minority Interest

A minority interest of $302,000 was recorded in fiscal 1997 related to the
Global Acquisition and the formation of Vans Latinoamericana (Mexico) S.A. de
C.V. ("Vans Latinoamericana").

FISCAL YEAR 1996 AS COMPARED TO FISCAL YEAR 1995

Net Sales

Net sales increased 33.3% to $117.4 million in fiscal 1996 from $88.1
million in fiscal 1995. The sales increase was primarily driven by the Company's
product line expansion through the introduction of the International Collection
and snowboard boots which represented new markets and product lines for the
Company, as well as increased sales through each of the Company's three
distribution channels.

Domestic and international sales of the International Collection increased
from approximately $18.6 million, or 21.1% of net sales, for fiscal 1995 to
approximately $68.8 million, or 58.6% of net sales, for fiscal 1996, and sales
of the Company's recently introduced line of snowboard boots increased from
approximately $269,000 for fiscal 1995, or 0.3% of net sales, to $7.2 million,
or 6.2% of net sales, for fiscal 1996.

Sales to national accounts for fiscal 1996 increased 22.3% to $61.7 million,
compared to $50.5 million for fiscal 1995. An increased volume of sales to
existing accounts and increased average selling prices were primarily
responsible for the increase. Despite this increase, sales to national accounts
were relatively even in the second half of the year, compared to the same period
of the previous year due to: (i) working capital constraints, which forced the
Company to delay purchases of International Collection goods in the period (see
"--Liquidity and Capital Resources"); (ii) the generally soft national retail
environment that existed during the third fiscal quarter; and (iii) the
existence of a relatively large amount of close-out sales in the third quarter
of fiscal 1995, which resulted from the Company's inventory imbalance between
domestic and foreign-produced footwear. See "--Overview."

Sales to international distributors increased 103.5% to $26.3 million for
fiscal 1996 from $12.9 million for fiscal 1995. Increased sales to Germany,
France, Canada and the United Kingdom were the principal reasons for the
increase.

Sales through the Company's 82-store retail chain (as of May 31, 1996)
increased 19.1% to $29.4 million for fiscal 1996, as compared to $24.6 million
for fiscal 1995. Comparable store sales (sales at stores open one year or more)
increased 10.2% from

<PAGE> 18

the prior fiscal year. Comparable store sales increased for each of the
Company's three store types (conventional mall and freestanding stores, factory
outlet stores and clearance stores).

Gross Profit

Gross profit increased 67.1% to $46.3 million in fiscal 1996 from $27.7
million in fiscal 1995. As a percentage of net sales, gross profit increased to
39.4% for fiscal 1996 from 31.5% for fiscal 1995. The increase in gross profit
was primarily due to the unusually low margin in the fourth quarter of fiscal
1995 which resulted from the write-down of inventory. See "--Overview." Fiscal
1996 margins were adversely impacted by: (i) the operation of the Orange
Facility for the first two months of fiscal 1996, as required by the Federal
Worker Adjustment and Retraining Notification Act, after announcing the closure
of such Facility (see "--Overview"); (ii) the ramp-up of production at the Vista
Facility due to the transfer of production from the Orange Facility (see
"--Overview"); (iii) a significant shift in the sales mix of the Company's
distribution channels towards lower gross margin sales to international
distributors who absorbed certain operating expenses which would otherwise be
absorbed by the Company; (iv) a shift in product mix to lower gross margin
snowboard boots; and (v) increased discounts offered to customers who booked
orders either 120 days or 150 days in advance under the Company's new futures
program. Decreases in gross margins were partially offset by the higher gross
margins associated with sales of International Collection footwear throughout
all of the Company's distribution channels.

Earnings (Loss) from Operations

Earnings from operations increased to $8.3 million in fiscal 1996 from a
loss of $38.4 million in fiscal 1995. Operating expenses decreased to $38.0
million in fiscal 1996 from $66.1 million in fiscal 1995. Operating expenses for
fiscal 1995 included $30.0 million of charges associated with the fiscal 1995
restructuring. See "--Overview."

Selling and distribution. Selling and distribution expenses increased
21.1% to $23.4 million in fiscal 1996 from $19.4 million in fiscal 1995,
primarily due to: (i) increased distribution expenses related to the operation
of the Company's City of Industry distribution facility, which did not exist
until March 1995; (ii) increased commissions to independent sales
representatives due to increased sales to national accounts; and (iii) costs
associated with increased personnel in the Company's design and sourcing groups.

Marketing, advertising and promotion. Marketing, advertising and
promotion expenses increased 52.3% to $8.3 million in fiscal 1996 from $5.4
million in fiscal 1995 due to increased expenditures to support the Company's
sales growth and the introduction of the Company's new snowboard boot line.

General and administrative. General and administrative expenses
decreased from $8.3 million in fiscal 1995 to $4.7 million in fiscal 1996
primarily due to the following: (i) $850,000 in separation payments which
occurred in the fourth quarter of fiscal 1995; (ii) the departure of two senior
executives in early fiscal 1996 who were not replaced; (iii) large decreases in
consulting and legal expenses which were incurred in fiscal 1995 in connection
with an attempt to unionize the Orange Facility; and (iv) the absence of
significant executive search fees in fiscal 1996.

Restructuring costs. No additional restructuring costs were recorded in
fiscal 1996. See "--Overview."

Provision for doubtful accounts. Provision for doubtful accounts
decreased to $762,000 for fiscal 1996 from $1.4 million for fiscal 1995
primarily due to the recording of a provision in fiscal 1995 related to the
settlement of the Company's account with its former distributor for Mexico.

Amortization of intangibles. Amortization of intangibles decreased from
$1.6 million for fiscal 1995 to $777,000 for fiscal 1996 due to the write-off of
the Orange Facility Goodwill on May 31, 1995. See "--Overview."

Interest Income

Interest income was derived primarily from restricted cash used as
collateral for the Company's $2.3 million surety bond maintained for the
Company's self-insurance program for workers' compensation claims.

Interest and Debt Expense

Interest and debt expense increased to $3.4 million in fiscal 1996 from $2.9
million in fiscal 1995, due to higher levels of secured and unsecured debt.
These increases were partially offset by the lower interest expense resulting
from the repayment of $5.8 million of principal of the Company's 9.6% Senior
Notes made on August 1, 1995. Such Notes were paid in full by the Company in May
1996. See "--Liquidity and Capital Resources--Cash Flows."

<PAGE> 19

Other Income

Other income for fiscal 1996 was comprised primarily of royalty income and
sublease income. Other income increased to $1.9 million in fiscal 1996 from $1.6
million in fiscal 1995, due to increases in royalty income.

Income Tax Expense ( Benefit)

Income tax expense increased to $2.8 million for fiscal 1996 from a benefit
of $2.5 million for fiscal 1995, as a result of increased earnings.

Extraordinary Item

The extraordinary loss on early extinguishment of debt relates to a payment
of a $1.5 million makewhole amount and the write-off of $241,000 in deferred
financing costs in connection with the prepayment of the Company's 9.6% Senior
Notes in May 1996. See "--Liquidity and Capital Resources -- Cash Flows." This
item is reported net of an income tax benefit of $677,000.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

The Company finances its operations with a combination of cash flows from
operations and borrowings. On May 24, 1996, the Company completed the Offering.
The Company obtained net proceeds of $47.7 million from the Offering. Of such
amount, $25.4 million was utilized to repay the Company's 9.6% Senior Notes due
August 1, 1999 (including a $1.5 million makewhole amount resulting from the
prepayment of such Notes), and $8.1 million was utilized to repay debt under a
secured bank line of credit. See "-- Borrowings." The balance of the net
proceeds was utilized for general corporate purposes.

The Company experienced a cash inflow from operations of $7.0 million for
fiscal 1997, compared to a cash outflow of $11.2 million for fiscal 1996. The
cash provided from operations for fiscal 1997 resulted primarily from net
earnings, the add-back for depreciation and amortization, and the increase in
income taxes payable. Cash provided by operations was partially offset by
increases in inventories and accounts receivables (discussed below) and a
decrease in the restructuring costs accrual. Cash used in operations for fiscal
1996 was due to increases in accounts receivable and inventories combined with
decreases in accounts payable, accrued workers compensation and the
restructuring costs accrual.

Inventories increased to $25.1 million at May 31, 1997, from $19.4 million
at May 31, 1996, primarily due to: (i) an increased number of finished goods to
support increased sales; (ii) increased apparel inventory to support sales from
the Company's new apparel division; and (iii) consolidation of approximately
$870,000 and $121,000 in inventories held by Global and Vans Latinoamericana,
respectively.

Net accounts receivable increased to $24.4 at May 31, 1997 from $20.8
million at May 31, 1996, primarily due to the increase in net sales the Company
experienced during the fourth quarter of fiscal 1997 and the timing of such
sales, and the consolidation of $959,000 and $150,000 in net accounts receivable
from Global and Vans Latinoamericana, respectively.

The Company incurred a net cash outflow from investing activities of $5.6
million for fiscal 1997, compared to a net cash outflow of $1.8 million for
fiscal 1996. These outflows represented capital expenditures related to new
retail store openings, tenant improvements made to the Orange Facility,
investments in the entity which owns the Vans Warped Tour musical event, and
costs related to upgrading the Company's distribution and shipping computer
software system. See "--Capital Expenditures." Cash used in investing activities
for fiscal 1996 was primarily related to the ramp-up of production at the Vista
Facility and the opening of the new retail stores.

The Company incurred a net cash outflow from financing activities of
$314,000 for fiscal 1997, compared to a net cash inflow of $24.0 million for
fiscal 1996. The outflows primarily related to the repayment of short-term
borrowings, substantially offset by the net proceeds for the issuance of Common
Stock. The net inflow of cash from financing activities for fiscal 1996 resulted
primarily from the net proceeds of the Offering and short-term borrowing, offset
by the repayment of the Company's 9.6% Senior Notes.

Borrowings

The Company has a secured line of credit (the "Secured Line of Credit") with
Bank of the West (the "Bank"). The Secured Line of Credit permits the Company to
borrow up to $20.0 million, and is secured by the Company's accounts receivables
and inventories, other than snowboard boot accounts receivable and inventories.
The Company pays interest on the debt incurred under the Secured Line of Credit
at the prime rate established by the Bank from time to time, plus a percentage
which varies depending on the Company's ratio of debt to earnings before
interest, taxes, depreciation, and amortization (the "Debt to

<PAGE> 20

EBITDA Ratio"). The Company has the option to pay interest at the LIBOR rate
plus a percentage which varies with the Company's Debt to EBITDA Ratio. Under
the agreement establishing the Secured Line of Credit, the Company must maintain
certain financial covenants and is prohibited from paying dividends or making
any other distribution without the Bank's consent. Debt incurred under the
Secured Line of Credit is due and payable on November 1, 1997. At May 31, 1997,
the Company had no funds drawn down under the Secured Line of Credit.

Current Cash Position

The Company's cash position was $15.4 million as of May 31, 1997, compared
to $14.2 million at May 31, 1996. The Company's cash position was, in the past
two years, adversely impacted by increased working capital requirements caused
by the rapid sales growth of the imported International Collection. These
working capital constraints, in turn, adversely impacted sales to the Company's
national accounts in the second half of fiscal 1996 because the Company had
previously committed a significant portion of its available funds to produce
goods to support increased international sales which are ordered earlier in the
year than production for national sales. Because the International Collection is
imported, there are greater timing differences between the payment for goods and
the receipt of cash from sales of such goods than if produced domestically.
Additionally, because payment terms in the ski and snow industry are longer than
the Company's traditional distribution channels, there are even greater timing
differences between payment for the Company's line of snowboard boots and the
receipt of cash from sales of such boots.

Notwithstanding the foregoing, for the next 24 months, the Company believes
that cash from operations, together with borrowings from the Secured Line of
Credit (which the Company anticipates, but cannot assure, will be renewed as it
matures), should be sufficient to meet its working capital needs. NOTE: THE
PREVIOUS SENTENCE IS A FORWARD-LOOKING STATEMENT. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE: (I) THE COMPANY'S RATE OF GROWTH; (II) THE COMPANY'S
PRODUCT MIX BETWEEN THE INTERNATIONAL COLLECTION, SNOWBOARD BOOTS AND
DOMESTICALLY-PRODUCED FOOTWEAR; (III) THE COMPANY'S ABILITY TO EFFECTIVELY
MANAGE ITS INVENTORY LEVELS; (IV) TIMING DIFFERENCES IN PAYMENT FOR THE
COMPANY'S FOREIGN-SOURCED PRODUCT, WHICH ARE DISCUSSED IN THE FOREGOING
PARAGRAPH; (V) THE INCREASED UTILIZATION OF LETTERS OF CREDIT FOR PURCHASES OF
FOREIGN-SOURCED PRODUCT; AND (VI) TIMING DIFFERENCES IN PAYMENT FOR PRODUCT
WHICH IS SOURCED FROM COUNTRIES WHICH HAVE LONGER SHIPPING LEAD TIMES, SUCH AS
CHINA.

Capital Expenditures

The Company's capital expenditures for fiscal 1997 were $5.1 million. In the
fourth quarter of fiscal 1997, the Company relocated its corporate offices to
the Santa Fe Springs Facility at a cost of approximately $2.2 million. In the
first month of fiscal 1998 the Company also relocated its distribution center
from Industry, California to the Santa Fe Springs Facility. The Company
estimates that it will need to spend an additional $600,000 - $1.1 million for
new equipment and the completion of certain tenant improvements for such
Facility.

In fiscal 1998, the Company plans to open approximately 10-12 new retail
stores. The stores will be opened throughout the year and consist primarily of
outlet stores located in California and other states. At the same time, the
Company will continue to identify and close under-performing stores.

The Company is also exploring a number of other projects which may involve
capital expenditures. While it is too early to estimate the depth, and therefore
the cost of these projects, the Company does not currently anticipate a
significant increase in the level of capital expenditures in fiscal 1998 and
estimates that these projects will be financed with internally generated funds.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement Of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 specifies new standards designed to improve the earnings
per share ("EPS") information provided in financial statements by simplifying
the existing computational guidelines, revising the disclosure requirements and
increasing the comparability of EPS data on an international basis. Some of the
changes made to simplify the EPS computations include: (a) eliminating the
presentation of primary EPS and replacing it with basic EPS, with the principal
difference being that the common stock equivalents are not considered in
computing basic EPS, (b) eliminating the modified treasury stock method and the
three percent materiality provision, and (c) revising the contingent share
provisions and the supplemental EPS data requirements. SFAS No. 128 also makes a
number of changes to existing disclosure requirements. SFAS No. 128 is effective
for financial statements issued for periods ending after December 15, 1997,
including interim periods. The Company has not yet determined the impact of the
implementation of SFAS No. 128.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." The new statement is effective for both interim and annual periods
beginning after December 15, 1997. The Company has not yet determined the impact
of adopting this new standard on the consolidated financial statements.

<PAGE> 21

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." The new statement is effective for
fiscal years beginning after December 15, 1997. The Company has not yet
determined the impact of adopting this new standard on the consolidated
financial statements.

SEASONALITY

The footwear industry is characterized by significant seasonality of net
sales and results of operations. In the past two years, the Company's business
has been moderately seasonal, with the largest percentage of sales realized in
the first fiscal quarter (June through August), the so-called "Back to School"
months. In addition, because snowboarding is a winter sport, sales of the
Company's snowboard boots have historically been strongest in the first and
second fiscal quarters. As the Company increases its international sales through
VFEL and experiences changes in its product mix, it believes that future
quarterly results will vary from historical trends. In addition to seasonal
fluctuations, the Company's operating results fluctuate quarter-to-quarter as a
result of the timing of holidays, weather, timing of shipments, product mix,
cost of materials and the mix between wholesale and retail channels. Because of
such fluctuations, the results of operations of any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year or any
future quarter. In addition, there can be no assurance that the Company's future
results will be consistent with past results or the projections of securities
analysts.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is set forth at pages F-2 - F-18
of this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL

DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated herein by
reference to the captions "Proposal 1 - Election of Directors," Information
Relating to Executive Officers" and "Section 16(a) Beneficial Ownership
Reporting Compliance" on pages 4, 7, and 15 of the Proxy Statement for the
Company's 1997 Annual Meeting of Stockholders, which will be filed with the
Commission within 120 days after the end of the fiscal year covered by this
report.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by
reference to the caption "Executive Compensation and Other Information" on page
9 of the Proxy Statement for the Company's 1997 Annual Meeting of Stockholders,
which will be filed with the Commission within 120 days after the end of the
fiscal year covered by this report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated herein by
reference to the caption "Security Ownership of Management and Certain
Beneficial Owners" on page 2 of the Proxy Statement for the Company's 1997
Annual Meeting of Stockholders, which will be filed with the Commission within
120 days after the end of the fiscal year covered by this report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated herein by
reference to the disclosure under the caption "Certain Transactions" on page 15
of the Proxy Statement for the Company's 1997 Annual Meeting of Stockholders,
which will be filed with the Commission within 120 days after the end of the
fiscal year covered by this Report.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) FINANCIAL STATEMENTS

The Company's Financial Statements and the Notes thereto are set
forth at pages F-2 - F-18 of this Report.

<PAGE> 22

(2) FINANCIAL STATEMENT SCHEDULES

The Financial Statement Schedule and the report of independent
auditors thereon are set forth at pages F-19 and F-20 of this report.

(3) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------

<S> <C>
(8) 2.1 Agreement of Merger between the Registrant and Van Doren
Rubber, dated July 31, 1991

(2) 2.1 Certificate of Ownership and Merger (Delaware) of Van Doren
Rubber into the Registrant, dated August 19, 1991

(2) 2.2 Certificate of Ownership (California) of the Registrant and Van
Doren Rubber, dated August 19, 1991

(2) 3.1 Restated Certificate of Incorporation of the Registrant, dated
August 30, 1991

(2) 3.1.1 Certificate of Retirement of Class A and Class B Preferred
Stock of the Registrant, dated August 29, 1991

(2) 3.2 Restated By-laws of the Registrant

(6) 3.2.1 Amendment No. 1 of Restated By-laws of the Registrant

(6) 3.2.2 Amendment No. 2 of Restated By-laws of the Registrant

(8) 3.3 Certificate of Designation of Preferences and Rights of Series A
Junior Participating Preferred Stock of the Registrant

4.1 Reference is made to Exhibits 3.1 and 3.2

(8) 4.2 Specimen Stock Certificate

(2) 4.12 Note Purchase Agreement, dated as of August 21, 1991, between the
Registrant and holders of the Registrant's Senior Notes due
August 1, 1999 (executed composite)

(6) 4.12.1 Amendment No. 1 to the Note Purchase Agreement, dated as of
August 5, 1993, by and between the Registrant and Teachers
Insurance and Annuity Association (the "Teachers Note Agreement")
re: Fixed Charge Coverage Ratio

(6) 4.12.2 Amendment No. 2 to Note Purchase Agreement, dated as of August 9,
1993, by and among the Registrant and Connecticut General Life
Insurance Company, Connecticut General Life Insurance Company, on
behalf of one or more separate accounts, and Life Insurance
Company of North America (the "CIGNA Note Agreement") re: Fixed
Charge Coverate Ratio

(4) 4.12.3 Amendment No. 2 to the Teachers Note Agreement, dated as of
December 15, 1993, re: Fixed Charge Coverage Ratio

(4) 4.12.4 Amendment No. 2 to the CIGNA Note Agreement, dated as of December
20, 1993, re: Fixed Charge Coverage Ratio

(9) 4.12.5 Amendment No. 3 to the Teachers Note Agreement, dated as of May
13, 1994, re: Fixed Charge Coverage Ratio

(9) 4.12.6 Amendment No. 3 to the CIGNA Note Agreement, dated as of May 23,
1994, re: Fixed Charge Coverage Ratio
</TABLE>

<PAGE> 23

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------

<S> <C>

(10) 4.12.7 Modification Letter, dated as of July 1, 1995, by and among the
Registrant, Teachers and Cigna, regarding amending the Teachers
and Cigna Note Agreements.

(14) 4.12.8 Modification Letter No. 2 , dated as of August 25, 1995, by and
among the Registrant, Teachers and Cigna

(15) 4.12.9 Modification Letter No. 3, dated as of March 29, 1996, by and
among the Registrant, Teachers and Cigna

(7) 4.13 Form of Preferred Stock Purchase Rights Certificate

(7) 4.14 Rights Agreement, dated as of February 22, 1994, by and between
the Registrant and Chemical Trust Company of California, as
Rights Agent

(21) 4.14.1 Amendment No. 1 to Rights Agreement, dated as of December 18,
1996, by and between the Registrant and ChaseMellon Shareholder
Services, successor to Chemical Trust Company of California as
Rights Agent

(6) 10.1 Management Services Agreement, dated as of February 16, 1988, by
and between Van Doren Rubber Company, Inc., the Registrant's
predecessor ("Van Doren Rubber"), and McCown De Leeuw & Co.

(6) 10.1.1 Amendment to Management Services Agreement, dated as of July 11,
1991, by and between Van Doren Rubber and MDC Management Company
("MDC Management Agreement")

(11)10.1.2 Amendment No. 2 to the MDC Management Agreement

(6) 10.2 MDV Holdings, Inc. (now known as Vans, Inc.) Incentive Stock
Option Plan

(6) 10.2.1 Amendment No. 1 to MDV Holdings, Inc. Incentive Stock Option Plan
dated June 28, 1991

(2) 10.3 Standard Industrial Lease-Net, dated as of May 27, 1992, by and
between the Registrant and Golden West Vista Associates (the
"Vista Lease")

(9) 10.3.1 Amendment No. 1 to the Vista Lease

(9) 10.3.2 Letter Agreement modifying Amendment No. 1 to the Vista Lease

(1) 10.4 Employment Agreement, dated as of March 10, 1997, by and between
the Registrant and Craig E. Gosselin, superseding his Employment
Agreement, dated July 1, 1992

(6) 10.5 1991 Long-Term Incentive Plan

(2) 10.5.1 Amendment No. 1 to 1991 Long-Term Incentive Plan

(2) 10.5.2 Amendment No. 2 to 1991 Long-Term Incentive Plan

(9) 10.5.3 Amendment No. 3 to the 1991 Long-Term Incentive Plan

(11)10.5.4 Amendment No. 4 to the 1991 Long-Term Incentive Plan

(11)10.5.5 Amendment No. 5 to the 1991 Long-Term Incentive Plan

(18) 10.5.6 Amendment No. 6 to the 1991 Long-Term Incentive Plan

(6) 10.6 International Distributor Agreement, dated as of December 7,
1992, by and between W. P. Lavori In Corso s.r.l. and the
Registrant
</TABLE>

<PAGE> 24

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C>
(6) 10.7 Trademark License Agreement, dated as of December 7, 1992, by and
between W. P. Lavori In Corso s.r.l. and the Registrant (the
"Lavori Trademark Agreement")

(16)10.7.1 Letter of Agreement, dated December 3, 1995, amending the Lavori
Trademark Agreement

(6) 10.8 Software License Agreement, dated March 31, 1993, by and between
the Registrant and J.D. Edwards Software, Inc., and Addenda
thereto

(6) 10.9 License Agreement for Software Products, dated July 29, 1993, by
and between the Island Pacific Systems Corporation and the
Registrant

(6) 10.10 Software License Agreement, dated as of May 27, 1993, by and
between the Registrant and STR, Inc.

(9) 10.11 Incentive Stock Option Agreement, dated as of September 22, 1993,
by and between the Registrant and Walter E. Schoenfeld, covering
30,000 shares

(9) 10.12 Incentive Stock Option Agreement, dated as of September 22, 1993,
by and between the Registrant and Walter E. Schoenfeld, covering
100,000 shares

(10)10.13 Agency Agreement, dated as of June 15, 1994, by and between the
Registrant and Sung Won International

(1) 10.14 Employment Agreement, dated as of March 10, 1997, by and between
the Registrant and Sari K. Ratsula, superseding her Employment
Agreement, dated June 15, 1994

(1) 10.15 Employment Agreement, dated as of March 10, 1997, by and between
the Registrant and Steven J. Van Doren, superseding his
Employment Agreement, dated June 15, 1997

(9) 10.17 Employment Agreement, dated as of June 15, 1994, by and between
the Registrant and Robert E. Diamond

(11)10.18 Loan and Security Agreement, dated as of July 1, 1995, by and
between the Registrant and Bank of the West

(14)10.18.1 First Amendment to Loan and Security Agreement, dated as of
August 25, 1995, by and between the Registrant and Bank of the
West

(16)10.18.2 Second Amendment to Loan and Security Agreement, dated as of
November 8, 1995, by and between the Registrant and Bank of the
West

(13)10.18.3 Third Amendment to Loan and Security Agreement, dated as of
March 29, 1996, by and between the Company and Bank of the West

(22)10.18.4 Fourth Amendment to Loan and Security Agreement, dated as of
April 11, 1996, by and between the Company and Bank of the West

(16)10.18.5 Fifth Amendment to Loan and Security Agreement, dated as of
July 16, 1996, by and between the Company and Bank of the West

(18) 10.18.5 Amendment and Restated Loan and Security Agreement, dated
December 2, 1996, by and between the Company and Bank of the West

(11)10.19 Agreement, dated as of April 26, 1995, by and between Ssangyong
Corporation and the Registrant

(11)10.20 Employment Agreement, dated as of May 25, 1995, by and between
the Registrant and Gary L. Dunlap
</TABLE>

<PAGE> 25

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C>
(21)10.21 Tour Title Sponsorship Agreement, dated as of May 8, 1996, by and
between the Registrant and C.C.R.L., LLC

(12)10.22 License Agreement dated as of August 10, 1995, by and between the
Registrant and Switch Manufacturing

(12)10.23 Amendment, dated as of January 5, 1995, by and between the
Registrant and Switch Manufacturing

(12)10.24 Trademark License Agreement, dated as of November 15, 1995, by
and between the Registrant and Oneita Industries

(12)10.25 Employment Agreement, dated as of September 1, 1995, by and
between the Registrant and Gary H. Schoenfeld

(1) 10.25.1 Amendment No. 1 to the Employment Agreement of Gary H. Schoenfeld

(12)10.26 Incentive Stock Option, dated as of September 1, 1995, by and
between the Registrant and Gary H. Schoenfeld

(13)10.27 Employment Agreement dated as of December 1, 1995, by and between
Walter E. Schoenfeld and the Registrant

(19)10.27.1 Amendment No. 1 to the Employment Agreement of Walter E.
Schoenfeld

(13)10.28 Incentive Stock Option Agreement, dated as of May 11, 1995, by
and between Walter E. Schoenfeld and the Registrant

(13)10.29 Amendment to Incentive Stock Option of Walter E. Schoenfeld,
dated as of January 8, 1996

(13)10.30 Financing Agreement, dated as of March 29, 1996, by and between
the Registrant and Ssangyong (U.S.A.), Inc.

(13)10.31 Letter, dated March 7, 1996, from Gary H. Schoenfeld to Ssangyong
Corporation re the Financing Agreement

(13)10.32 Intercreditor Agreement, dated as of March 29, 1996, by and among
the Registrant, Ssangyong (U.S.A.), Inc., Bank of the West, Cigna
and Teachers

(13)10.33 Security Agreement, dated as of March 29, 1996, by and between
the Registrant, and Ssangyong (U.S.A.), Inc.

(13)10.34 Security Agreement, dated as of March 29, 1996, by and between
Vans Footwear International, Inc. and Ssangyong (U.S.A.), Inc.

(13)10.35 Trademark Security Agreement and Collateral Assignment of
Trademarks, dated as of March 29, 1996, by and among the
Registrant, Cigna and Teachers

(11)10.36 Security Agreement, dated as of March 29, 1996, by and among the
Registrant, Cigna and Teachers

(16)10.37 Employment Agreement, dated as of February 14, 1996, by and
between Kyle B. Wescoat and the Registrant

(19)10.38 Employment Agreement, dated as of January 22, 1996, by and
between Robert H. Camarena and the Registrant

(16)10.39 Separation and Consulting Agreement, dated as of January 2, 1996,
by and between Joseph C. Gaspers and the Registrant
</TABLE>

<PAGE> 26

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C>
(16)10.40 UCC-2 Termination Statement terminating the security interest of
Cigna and Teachers in certain assets of the Registrant

(16)10.41 Release of Grant of Security Interest in the Registrant's
Trademarks executed by Cigna and Teachers

(16)10.42 Employment Agreement, dated July 1, 1996, by and between the
Registrant and John T. Dickinson

(16)10.43 Employment Agreement, dated July 1, 1996, by and between the
Registrant and Charles C. Kupfer

(16)10.44 Standard Industrial/Commercial Single Tenant Lease Gross, dated
August 15, 1996, by and between the Registrant and CAPCO, Inc.

(16)10.45 Standard Industrial/Commercial Single Tenant Lease - Net, dated
July 22, 1996, by and between the Registrant and Orange
Engineering & Machine, Inc.

(16)10.46 Trust Under Vans, Inc. Deferred Compensation Plan, dated as of
June 3, 1996

(18) 10.46.1 Amendment to Trust under Vans, Inc. Deferred Compensation Plan

(16)10.47 Deferred Compensation Agreement for Walter Schoenfeld, dated as
of June 1, 1996

(18) 10.47.1 First Amendment to Deferred Compensation Agreement for Walter
Schoenfeld

(1) 10.48 Standard Industrial Sublease, dated March 25, 1997, by and
between the Registrant and Frank Zamarripa Inc.

(17) 10.49 Lease between Wohl Venture One, LLC, a Delaware limited liability
company, and the Registrant

(17) 10.50 Construction Agreement between Wohl Venture One, LLC, a Delaware
limited liability company, and the Registrant

(17) 10.51 Separation Agreement, dated as of September 5, 1996, by and
between Marc A. Gold and the Registrant

(18) 10.52 Employment Agreement, dated December 4, 1996, by and between the
Registrant and Jay E. Wilson

(18) 10.53 Employment Agreement, dated December 17, 1996, by and between the
Registrant and Casey G. Waid

(19) 10.54 Tour Title Sponsorship Agreement, dated January 1, 1997, by and
between the Registrant and C.C.R.L., LLC, a California limited
liability company

(19) 10.55 Amended and Restated Operating Agreement, dated January 1, 1997,
by and among the Registrant, Gendler, Codikow & Carroll, Kevin
Lyman Production Services, and Creative Artists Agency (the
"Operating Agreement")

(19) 10.56 Side Letter to the Operating Agreement

(19) 10.57 Employment Agreement, dated February 1, 1997, by and between the
Registrant and John Walker

(20) 10.58 Share Sale and Purchase Option Agreement, dated November 20,
1996, by and among the Registrant and the shareholders of Global
Accessories Limited
</TABLE>

<PAGE> 27

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
<S> <C>
(1) 10.59 Employment Agreement, dated July 22, 1997, by and between the
Registrant and Ralph Serna

(1) 10.60 Investor Rights Agreement, dated July 8, 1997, by and between the
Registrant and the Zone Network, Inc.

(1) 10.61 Purchase and Sale Agreement, dated August 18, 1997, by and
between the Registrant and Triple Crown, Inc.

(1) 10.62 Letter of Intent, dated August 4, 1997, by and between the
Registrant and Board Wild LLC

(1) 22 List of Subsidiaries

23.1 Consent of Independent Auditors is set forth at page F-19
of this report

(1) 27 Financial Data Schedule
</TABLE>

- -----------

(1) Filed herewith.

(2) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the year ended May 31, 1992, and incorporated herein by this reference

(3) Filed as an exhibit to Amendment No. 1 to the Registrant's Annual Report
on Form 10-K for the year ended May 31, 1992, and incorporated herein by
this reference

(4) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended November 28,1993, and incorporated herein by this
reference

(5) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended February 27, 1994, and incorporated herein by this
reference

(6) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the year ended May 31, 1993, and incorporated herein by this reference

(7) Filed as an exhibit to the Registrant's Form 8-A Registration Statement
(SEC File No. 0-19402), and incorporated herein by this reference

(8) Filed as an exhibit to the Registrant's Form 8-K, dated February 15,
1994, and incorporated herein by this reference

(9) Filed as an exhibit to the Registrant's Form 10-K for the year ended May
31, 1994, and incorporated herein by this reference

(10) Filed as an exhibit to Amendment No. 1 to the Registrant's Annual Report
on Form 10-K for the year ended May 31, 1994, and incorporated herein by
this reference

(11) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the year ended May 31, 1995

(12) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended November 25, 1995, and incorporated herein by this
reference

(13) File as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended February 24, 1996, and incorporated herein by this
reference

(14) Filed as an exhibit to the Registrant's Form 8-K, dated October 17,
1995, and incorporated herein by this reference

(15) Filed as an exhibit to the Registrant's Form S-3 Registrant Statement,
filed with the Securities and Exchange Commission on April 5, 1996 (File
No. 333-3272), and incorporated herein by this reference

<PAGE> 28

(16) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the year ended May 31, 1996, and incorporated herein by this reference.

(17) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended August 31, 1996, and incorporated herein by this
reference.

(18) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended November 30, 1996, and incorporated herein by this
reference.

(19) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended November 30, 1996, and incorporated herein by this
reference.

(20) Filed as an exhibit to the Registrant's Form 8-K, dated November 20,
1996, and incorporated herein by this reference

(21) Filed as an exhibit to the Registrant's Form 8-K, dated December 17,
1996, and incorporated herein by this reference.

(22) Filed as an exhibit to Amendment No. 1 to the Registrant's Annual Report
on Form 10-K for the year ended May 31, 1996, and incorporated herein by
this reference.

<PAGE> 29

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

VANS, INC.

(Registrant)

BY: /s/ Gary H. Schoenfeld Date: August 29, 1997
----------------------
Gary H. Schoenfeld
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
on the dates indicated.

/s/ Gary H. Schoenfeld Date: August 29, 1997
- -----------------------------------------
Gary H. Schoenfeld
President, Chief Executive Officer
and Director (Principal Executive Officer)

/s/ Walter E. Schoenfeld Date: August 29, 1997
- -----------------------------------------
Walter E. Schoenfeld
Chairman of the Board and Director

/s/ Kyle B. Wescoat Date: August 29, 1997
- -----------------------------------------
Kyle B. Wescoat

Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

/s/ George E. McCown Date: August 29, 1997
- -----------------------------------------
George E. McCown
Director

/s/ David E. De Leeuw Date: August 29, 1997
- -----------------------------------------
David E. De Leeuw
Director

/s/ Philip H. Schaff, Jr. Date: August 29, 1997
- -----------------------------------------
Philip H. Schaff, Jr.
Director

/s/ Wilbur J. Fix Date: August 29, 1997
- -----------------------------------------
Wilbur J. Fix
Director

/s/ James R. Sulat Date: August 29, 1997
- -----------------------------------------
James R. Sulat
Director

/s/ Kathleen M. Gardarian Date: August 29, 1997
- -----------------------------------------
Kathleen M. Gardarian
Director

/s/ Lisa M. Douglas Date: August 29, 1997
- -----------------------------------------
Lisa M. Douglas
Director

<PAGE> 30

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE
NO.
- ----------- ------------------- ----
<S> <C> <C>
(8) 2.1 Agreement of Merger between the Registrant and Van Doren Rubber,
dated July 31, 1991

(2) 2.1 Certificate of Ownership and Merger (Delaware) of Van Doren
Rubber into the Registrant, dated August 19, 1991

(2) 2.2 Certificate of Ownership (California) of the Registrant and Van
Doren Rubber, dated August 19, 1991

(2) 3.1 Restated Certificate of Incorporation of the Registrant, dated
August 30, 1991

(2) 3.1.1 Certificate of Retirement of Class A and Class B Preferred Stock
of the Registrant, dated August 29, 1991

(2) 3.2 Restated By-laws of the Registrant

(6) 3.2.1 Amendment No. 1 of Restated By-laws of the Registrant

(6) 3.2.2 Amendment No. 2 of Restated By-laws of the Registrant

(8) 3.3 Certificate of Designation of Preferences and Rights of Series A
Junior Participating Preferred Stock of the Registrant

4.1 Reference is made to Exhibits 3.1 and 3.2

(8) 4.2 Specimen Stock Certificate

(2) 4.12 Note Purchase Agreement, dated as of August 21, 1991, between the
Registrant and holders of the Registrant's Senior Notes due
August 1, 1999 (executed composite)

(4) 4.12.3 Amendment No. 2 to the Teachers Note Agreement, dated as of
December 15, 1993, re: Fixed Charge Coverage Ratio

(4) 4.12.4 Amendment No. 2 to the CIGNA Note Agreement, dated as of December
20, 1993, re: Fixed Charge Coverage Ratio

(9) 4.12.5 Amendment No. 3 to the Teachers Note Agreement, dated as of May
13, 1994, re: Fixed Charge Coverage Ratio

(9) 4.12.6 Amendment No. 3 to the CIGNA Note Agreement, dated as of May 23,
1994, re: Fixed Charge Coverage Ratio

(10) 4.12.7 Modification Letter, dated as of July 1, 1995, by and among the
Registrant, Teachers and Cigna, regarding amending the Teachers
and Cigna Note Agreements.

(14) 4.12.8 Modification Letter No. 2 , dated as of August 25, 1995, by and
among the Registrant, Teachers and Cigna
</TABLE>

<PAGE> 31

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE
NO.
- ----------- ------------------- ----
<S> <C> <C>
(15) 4.12.9 Modification Letter No. 3, dated as of March 29, 1996, by and
among the Registrant, Teachers and Cigna

(7) 4.13 Form of Preferred Stock Purchase Rights Certificate

(7) 4.14 Rights Agreement, dated as of February 22, 1994, by and between
the Registrant and Chemical Trust Company of California, as
Rights Agent

(6) 10.1 Management Services Agreement, dated as of February 16, 1988, by
and between Van Doren Rubber Company, Inc., the Registrant's
predecessor ("Van Doren Rubber"), and McCown De Leeuw & Co.

(6) 10.1.1 Amendment to Management Services Agreement, dated as of July 11,
1991, by and between Van Doren Rubber and MDC Management Company
("MDC Management Agreement")

(11)10.1.2 Amendment No. 2 to the MDC Management Agreement

(18) 10.5.6 Amendment No. 6 to the 1991 Long-Term Incentive Plan

(6) 10.2 MDV Holdings, Inc. (now known as Vans, Inc.) Incentive Stock
Option Plan

(6) 10.2.1 Amendment No. 1 to MDV Holdings, Inc. Incentive Stock Option Plan
dated June 28, 1991

(2) 10.3 Standard Industrial Lease-Net, dated as of May 27, 1992, by and
between the Registrant and Golden West Vista Associates (the
"Vista Lease")

(9) 10.3.1 Amendment No. 1 to the Vista Lease

(9) 10.3.2 Letter Agreement modifying Amendment No. 1 to the Vista Lease

(1) 10.4 Employment Agreement, dated as of March 10, 1997, by and between
the Registrant and Craig E. Gosselin, superseding his Employment
Agreement, dated July 1, 1992

(6) 10.5 1991 Long-Term Incentive Plan

(2) 10.5.1 Amendment No. 1 to 1991 Long-Term Incentive Plan

(2) 10.5.2 Amendment No. 2 to 1991 Long-Term Incentive Plan

(9) 10.5.3 Amendment No. 3 to the 1991 Long-Term Incentive Plan

(11)10.5.4 Amendment No. 4 to the 1991 Long-Term Incentive Plan

(11)10.5.5 Amendment No. 5 to the 1991 Long-Term Incentive Plan

(6) 10.6 International Distributor Agreement, dated as of December 7,
1992, by and between W. P. Lavori In Corso s.r.l. and the
Registrant

(6) 10.7 Trademark License Agreement, dated as of December 7, 1992, by and
between W. P. Lavori In Corso s.r.l. and the Registrant (the
"Lavori Trademark Agreement")

(16)10.7.1 Letter of Agreement, dated December 3, 1995, amending the Lavori
Trademark Agreement
</TABLE>

<PAGE> 32

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE
NO.
- ----------- ------------------- ----
<S> <C> <C>
(6) 10.8 Software License Agreement, dated March 31, 1993, by and between
the Registrant and J.D. Edwards Software, Inc., and Addenda
thereto

(6) 10.9 License Agreement for Software Products, dated July 29, 1993, by
and between the Island Pacific Systems Corporation and the
Registrant

(6) 10.10 Software License Agreement, dated as of May 27, 1993, by and
between the Registrant and STR, Inc.

(9) 10.11 Incentive Stock Option Agreement, dated as of September 22, 1993,
by and between the Registrant and Walter E. Schoenfeld, covering
30,000 shares

(9) 10.12 Incentive Stock Option Agreement, dated as of September 22, 1993,
by and between the Registrant and Walter E. Schoenfeld, covering
100,000 shares

(10)10.13 Agency Agreement, dated as of June 15, 1994, by and between the
Registrant and Sung Won International

(1) 10.14 Employment Agreement, dated as of March 10, 1997, by and between
the Registrant and Sari K. Ratsula, superseding her Employment
Agreement, dated June 15, 1994

(1) 10.15 Employment Agreement, dated as of March 10, 1997, by and between
the Registrant and Steven J. Van Doren, superseding his
Employment Agreement, dated June 15, 1994