<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 20, 1998
VANS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware
----------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-19402 33-0272893
------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
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)
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER MATTERS
On May 20, 1998, the Registrant announced its intention to (i) close
its Vista, California manufacturing facility as of August 6, 1998, and (ii)
restructure its European operations by terminating certain distributor
agreements for key countries and entering into sales agency agreements for such
countries. The Registrant disclosed that it would take a one-time, after-tax
charge of approximately $11.5 million, or $0.82 per share, in the fourth quarter
ending May 31, 1998 ("Q4 1998") in connection with the foregoing initiatives.
The Registrant also previewed results for Q4 1998, indicating that,
due to the ongoing uncertain retail environment for footwear and the economic
slowdown in Japan, net income before the above-referenced charge are expected to
be at break-even to slightly positive. The Registrant noted, however, that
backlog for the first quarter of fiscal 1999 is at its highest level in the
Registrants history.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c.) Exhibits
99.1 News Release of the Registrant, dated May 20, 1998
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VANS, INC.
(Registrant)
Date: May 21, 1998 By /s/ Craig E. Gosselin
-----------------------------------
Craig E. Gosselin
Vice President and General Counsel
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
- ------- --------
<S> <C> <C>
99.1 News Release of the Registrant, dated May 20, 1998 4
</TABLE>
4
<PAGE> 1
APPROVED: GARY H. SCHOENFELD
CHIEF EXECUTIVE OFFICER
and President
(800) 826-7800 (ext. 8545)
FOR IMMEDIATE RELEASE Contact: Christine DiSanto/Jim Cappuccio
PRESS: MIRIAM ADLER
Morgen-Walke Associates
(212) 850-5600
VANS, INC. ANNOUNCES STRATEGIC RESTRUCTURING
-- COMPANY WILL CLOSE VISTA, CALIFORNIA MANUFACTURING FACILITY --
--COMPANY TO TAKE AFTER-TAX CHARGE OF $0.82 PER SHARE
IN THE FOURTH QUARTER OF FISCAL 1998--
--PREVIEWS FOURTH QUARTER NET INCOME BEFORE CHARGES AT BREAK-EVEN TO
SLIGHTLY POSITIVE--
--ANNOUNCES RECORD BACKLOG WITH DOMESTIC ORDERS UP MORE THAN 40% FOR FIRST
QUARTER OF 1999--
Santa Fe Springs, California, May 20, 1998 - Vans, Inc. (Nasdaq:VANS)
today announced two strategic initiatives designed to increase long-term
profitability and further the growth of the Company's domestic and international
business. The Company stated that it has established new sourcing arrangements
for the manufacture of its classic vulcanized footwear and, as a result, will be
closing its facility in Vista, California. Vans also announced that it is
terminating several of its European distributor agreements, entering into sales
agency agreements for certain key territories and establishing a third-party
distribution center in Holland. As a result of these two initiatives, Vans will
incur a total one-time, after-tax charge of approximately $11.5 million, or
$0.82 per share, in the fourth quarter ending May 31, 1998. The Company also
stated that, largely due to the previously discussed uncertain retail
environment for athletic footwear and the economic slowdown in Japan, net income
before charges for the fourth quarter are expected to be at break-even to
slightly positive; however, first quarter backlog is at its highest level in the
Company's 32-year history, with domestic bookings up more than 40%.(1)
Gary H. Schoenfeld, President and Chief Executive Officer stated,
"Three years ago, we set in motion the strategy to change from a manufacturing
to a marketing company. That strategy has proved to be successful and this is
the last major step in closing the loop. While we realize this restructuring has
a significant accounting charge to book value, it has a minor effect in terms of
cash."
-more-
5
<PAGE> 2
In regard to current business trends, Mr. Schoenfeld said, "Our brand
continues to be strong and our retail stores continue to perform well on track
for a record eighth straight quarter of double-digit comp store sales increases.
We are also extremely pleased with the more than 40% increase in domestic
bookings for the first quarter, which is our biggest quarter, and stands at an
all-time high.(2) For the current quarter, the inventory overhang and
promotional pricing of athletic footwear is limiting our at-once business
causing a decline in wholesale sales versus last year. Yet, as we look toward
Back to School and fiscal 1999, we are confident in our future as evidenced by
our backlog and believe that this current problem for the industry is getting
close to being back in balance."(3)
Mr. Schoenfeld continued, "It is difficult to close a factory that
affects the jobs of 300 people, yet Vista has been a detractor from the
Company's overall gross margin performance especially with the precipitous drop
of orders from Japan which has forced our domestic production levels to decline
by more than 50% over the past six months. Shifting to third-party sourcing will
enable us to reduce our cost of goods, resulting in both improved gross margins
and better pricing of our classic canvas and suede footwear. In addition, this
action will allow us to even better manage our inventory and more closely match
third-party production to customer orders."(4)
The Company's Vista, California manufacturing facility is scheduled
to close on August 6, 1998, and production of vulcanized footwear will be moved
to Mexico and Spain. Vans will incur a one-time, after-tax charge of
approximately $7.1 million, or $0.51 per share, in the fourth quarter of fiscal
1998 associated with the write-down of property, plant and equipment, raw
materials, finished goods and other miscellaneous expenses related to the
closing of the Vista facility. The Company stated that the shift to third-party
manufacturing is expected to result in a more than 15% reduction in the cost of
goods for its vulcanized footwear.(5)
Vans also announced that it is reorganizing its European operations,
which will provide the Company with more direct control over distribution and
marketing. Effective in June 1998, Vans is terminating its distribution
agreements for Italy, France, Germany and Austria, and contracting with sales
agents for those territories. The Company intends to convert its remaining
European distribution agreements to similar relationships over the next 12
months.(6) In connection with this initiative, Vans will also contract with a
central distribution facility in Holland. The new European sales operations will
be managed by Stephen Murray, the Company's recently appointed Senior Vice
President of International, and Robert H. Camarena, Vice President of
Operations. Vans will incur a one-time, after-tax charge of approximately $4.4
million, or $0.31 per share, associated with the termination of existing
distributor agreements, as well as initial start-up costs for its centralized
European distribution.
"We continue to see the European market as an important part of the
Company's long-term growth. With the addition of Steve Murray to our team and
the scheduled opening of our first two outlet stores in England and Spain, we
are now properly positioned to take a more active role in further
-more-
6
<PAGE> 3
building this part of our business," Mr. Schoenfeld said. "As the Euro launches
next January, and with 350 million people in a geographical area more
concentrated than the U.S., it is clear to us that the winners are going to be
those who concentrate on the overall potential of this region. Our plan is to
centralize operations and logistics and increase our Pan-European marketing,
while at the same time maintaining the continuity of localized sales and
customer service."
Mr. Schoenfeld concluded, "We feel strongly that we are taking the
right steps to maximize profits and enhance shareholder value going forward.
Through efficient product sourcing now for all categories as well as economies
of scale achieved through leaner operations and direct distribution in the
international marketplace, we believe we can boost our future sales and profits
and more fully capitalize on the growing worldwide potential for our brand and
our Company."(7)
Vans, Inc. is a branded manufacturer, wholesaler and retailer of
active-casual footwear, clothing and accessories and performance footwear for
enthusiast sports. Products are sold through a network of independent and
national retailers, internationally through distributors for 80 countries and
Company subsidiaries in the United Kingdom, Mexico, Brazil and Argentina, and
through 98 Company-owned stores and factory outlets.
# # #
Footnotes 1, 2 and 3: These are forward-looking statements regarding the
Company's future sales and earnings. Actual sales and earnings for the Company
may be impacted by a number of factors including, but not limited to: (i) the
occurrence of downward trends in the U.S. economy, foreign economies and the
footwear industry, or the occurrence of events that adversely affect the world
economy in general; (ii) changes in the fashion preferences of the Company's
target customers and the Company's ability to anticipate and respond to such
changes; (iii) increasing competition in all lines of the Company's business
from both large, well-established companies with significant financial resources
and brand recognition, and smaller niche competitors who market exclusively to
the Company's target customers; and (iv) the cancellation of orders which could
alter bookings numbers.
Footnotes 4 and 5: These are forward-looking statements regarding the expected
results of sourcing the Company's vulcanized footwear from foreign countries.
The Company's actual results could vary significantly. Important factors which
could impact actual results include, but are not limited to: (i) the quality of
product produced in foreign factories; (ii) the fluctuation of foreign
currencies in relation to the U.S. dollar; and (iii) the political and economic
stability of the foreign countries from which the Company sources product.
Footnote 6: This is a forward-looking statement regarding the Company's
intention to restructure the balance of its European distributor relationships.
The Company's actual results in this regard could vary significantly. Important
factors which could impact actual results include, but are not limited to: (i)
negotiating, where applicable, the termination of existing distribution
agreements on terms acceptable to the Company; and (ii) structuring new sales
agency agreements on terms acceptable to the Company.
Footnote 7: See Footnotes 1, 2 and 3 above.
For a further discussion of many of the factors outlined in the above footnotes,
and others, please see the Company's Annual Report on Form 10-K for the year
ended May 31, 1997, which is filed with the Securities and Exchange Commission.
7
