##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

| |     |                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------
| | [X] | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
quarterly period ended September 1, 2001 or

| |       |                                                                                                                                                              
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | [   ] | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
transition period from  ________________ to ________________

Commission File Number 0-19402

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

|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|DELAWARE
(State or Other Jurisdiction
of Incorporation or Organization) |  | 33-0272893
(I.R.S. Employer
Identification No.)

15700 Shoemaker Avenue
Santa Fe Springs, California 90670-5515
(Address of Principal Executive Offices) (Zip Code)

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

Not applicable
(Former Name, Former Address and Formal Fiscal Year,
if Changed Since Last Report)

Indicate by check mark whether the 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 report(s), and (2) has been subject to
such filing requirements for the past 90 days. YES [X]   NO [   ]

Indicate the number of shares outstanding of each of the registrants
classes of common stock, as of the latest practicable date:
17,782,844 shares of Common Stock, $.001 par value, as of
October 15, 2001.





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TABLE OF CONTENTS



|             |                                                                                               |                                                                        |  |  |  |  |  | 
|------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- |  |  |  |  |  | 
|PART I      
|             | ITEM 1. FINANCIAL STATEMENTS.                                                                
|             |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                                 
|             |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
|             |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                       
|             |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                  
|             | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|             | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II     
|             | ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE                                            
|             | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES  
|EXHIBIT 10.1
|EXHIBIT 10.2




PART I
FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS.




VANS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 1, 2001 (UNAUDITED) AND MAY 31, 2001

|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |            |             | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ----------- | ------------ | ----------- | ------- | ----------- | ---------- | ----------- | 
|                                                                                                                                                                          |                                                                                                                                               |                            |             | SEPTEMBER 1, |             | MAY 31,
|                                                                                                                                                                          |                                                                                                                                               |                            |             | 2001         |             | 2001   
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |        
|ASSETS                                                                                                                                                                   
|                                                                                                                                                                         
|                                                                                                                                                                         
|                                                                                                                                                                         
|                                                                                                                                                                         
|Current assets:                                                                                                                                                           |                                                                                                                                               |                            |             |              |             |         |             |           
|                                                                                                                                                                          | Cash and cash equivalents                                                                                                                     |                            | $           | 48,048,018   |             |         | $           | 59,747,584 |            
|                                                                                                                                                                          | Accounts receivable, net of allowance for doubtful accounts of
$1,878,803 and $2,078,600 at September 1, 2001, and May 31, 2001,
respectively |                            |             | 58,722,114   |             |         |             | 38,133,438 |            
|                                                                                                                                                                          | Inventories                                                                                                                                   |                            |             | 58,744,872   |             |         |             | 52,827,863 |            
|                                                                                                                                                                          | Deferred tax assets                                                                                                                           |                            |             | 3,801,865    |             |         |             | 3,681,825  |            
|                                                                                                                                                                          | Prepaid expenses                                                                                                                              |                            |             | 14,439,103   |             |         |             | 14,564,517 |            
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |           
|                                                                                                                                                                          |                                                                                                                                               | Total current assets       |             |              | 183,755,972 |         |             |            | 168,955,227 | 
|                                                                                                                                                                          | Property, plant and equipment, net                                                                                                            |                            |             | 37,817,768   |             |         |             | 34,048,020 |            
|                                                                                                                                                                          | Trademarks
and patents, net of accumulated amortization of $418,842 and
$377,549 at September 1, 2001 and May 31, 2001, respectively          |                            |             | 2,179,623    |             |         |             | 2,139,437  |            
|                                                                                                                                                                          | Goodwill                                                                                                                                      |                            |             | 23,018,188   |             |         |             | 23,018,188 |            
|                                                                                                                                                                          | Other assets                                                                                                                                  |                            |             | 8,522,190    |             |         |             | 8,798,793  |            
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |           
|                                                                                                                                                                          |                                                                                                                                               | Total Assets               |             | $            | 255,293,741 |         |             | $          | 236,959,665 | 
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                     
|                                                                                                                                                                         
|                                                                                                                                                                         
|                                                                                                                                                                         
|                                                                                                                                                                         
|Current liabilities:                                                                                                                                                      |                                                                                                                                               |                            |             |              |             |         |             |           
|                                                                                                                                                                          | Short-term borrowings                                                                                                                         |                            | $           | 5,883,307    |             |         | $           | 7,876,515  |            
|                                                                                                                                                                          | Accounts payable                                                                                                                              |                            |             | 11,122,017   |             |         |             | 13,130,377 |            
|                                                                                                                                                                          | Accrued payroll and related expenses                                                                                                          |                            |             | 7,360,838    |             |         |             | 8,450,569  |            
|                                                                                                                                                                          | Accrued interest                                                                                                                              |                            |             | 227,244      |             |         |             | 257,176    |            
|                                                                                                                                                                          | Restructuring costs                                                                                                                           |                            |             | 124,014      |             |         |             | 124,014    |            
|                                                                                                                                                                          | Income taxes payable                                                                                                                          |                            |             | 8,884,573    |             |         |             | 7,305,817  |            
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |           
|                                                                                                                                                                          |                                                                                                                                               | Total current liabilities  |             |              | 33,601,993  |         |             |            | 37,144,468  | 
|Deferred tax liabilities                                                                                                                                                  |                                                                                                                                               |                            | 4,113,207   |              |             |         | 4,113,207   |           
|Long-term debt                                                                                                                                                            |                                                                                                                                               |                            | 3,462,698   |              |             |         | 2,347,972   |           
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |           
|                                                                                                                                                                          |                                                                                                                                               | Total Liabilities          |             |              | 41,177,898  |         |             |            | 43,605,647  | 
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |           
|Minority interest                                                                                                                                                         |                                                                                                                                               |                            | 2,937,496   |              |             |         | 2,876,157   |           
|Stockholders equity:                                                                                                                                                     |                                                                                                                                               |                            |             |              |             |         |             |           
|Preferred stock, $.001 par value, 5,000,000 shares authorized,
1,500,000 shares designated as Series A Participating Preferred
Stock, none issued and outstanding         |                                                                                                                                               |                            |            |              |             |         |            |           
|Common stock, $.001 par value, 20,000,000 shares authorized,
17,725,124 and 17,256,149 shares issued and outstanding at
September 1, 2001, and May 31, 2001, respectively |                                                                                                                                               |                            | 17,725      |              |             |         | 17,256      |           
|Accumulated other comprehensive loss                                                                                                                                      |                                                                                                                                               |                            | (789,292    | )            |             |         | (540,883    | )         
|Additional paid-in capital                                                                                                                                                |                                                                                                                                               |                            | 180,840,017 |              |             |         | 171,234,630 |           
|Retained earnings                                                                                                                                                         |                                                                                                                                               |                            | 31,109,897  |              |             |         | 19,766,858  |           
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |           
|                                                                                                                                                                          |                                                                                                                                               | Total Stockholders Equity |             |              | 211,178,347 |         |             |            | 190,477,861 | 
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |           
|Total Liabilities and Stockholders Equity                                                                                                                                |                                                                                                                                               | $                          | 255,293,741 |              |             | $       | 236,959,665 |           
|                                                                                                                                                                          |                                                                                                                                               |                            |             |              |             |         |             |           

See accompanying notes to condensed consolidated financial statements.

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VANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
THIRTEEN WEEKS ENDED SEPTEMBER 1, 2001 AND AUGUST 26, 2000
(unaudited)

|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |            |            | 
|---------------------------------------------------- | ------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | ----------- | -------------------- | ---------- | ---------- | ----------- | ---------- | ---------- | 
|                                                     |                                                                                       |                                                                                                                                   |             | THIRTEEN WEEKS ENDED
|                                                     |                                                                                       |                                                                                                                                   |             |                     
|                                                     |                                                                                       |                                                                                                                                   |             | SEPTEMBER 1,         |            | AUGUST 26,
|                                                     |                                                                                       |                                                                                                                                   |             | 2001                 |            | 2000      
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |           
|Net sales                                            |                                                                                       | $                                                                                                                                 | 118,060,016 |                      |            | $          | 100,579,686 |           
|Cost of sales                                        |                                                                                       |                                                                                                                                   | 62,721,367  |                      |            |            | 56,434,413  |           
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|                                                     |                                                                                       | Gross profit                                                                                                                      |             |                      | 55,338,649 |            |             |            | 44,145,273 | 
|Operating expenses:                                  |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|                                                     | Selling and distribution                                                              |                                                                                                                                   |             | 23,227,427           |            |            |             | 19,371,386 |           
|                                                     | Marketing, advertising and promotion                                                  |                                                                                                                                   |             | 11,270,583           |            |            |             | 8,015,787  |           
|                                                     | General and administrative                                                            |                                                                                                                                   |             | 4,268,675            |            |            |             | 3,701,522  |           
|                                                     | Provision for doubtful accounts                                                       |                                                                                                                                   |             | 151,308              |            |            |             | 231,869    |           
|                                                     | Amortization of intangibles                                                           |                                                                                                                                   |             | 41,292               |            |            |             | 371,462    |           
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|                                                     |                                                                                       | Total operating expenses                                                                                                          |             |                      | 38,959,285 |            |             |            | 31,692,026 | 
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|                                                     |                                                                                       | Earnings from operations                                                                                                          |             |                      | 16,379,364 |            |             |            | 12,453,247 | 
|Interest income                                      |                                                                                       |                                                                                                                                   | 517,720     |                      |            |            | 24,059      |           
|Interest and debt expense                            |                                                                                       |                                                                                                                                   | (382,486    | )                    |            |            | (751,268    | )         
|Other income, net                                    |                                                                                       |                                                                                                                                   | 102,861     |                      |            |            | 355,444     |           
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|                                                     |                                                                                       | Earnings before income taxes, minority interest in income of consolidated
Subsidiaries and cumulative effect of accounting change |             |                      | 16,617,459 |            |             |            | 12,081,482 | 
|Income tax expense                                   |                                                                                       |                                                                                                                                   | 4,985,237   |                      |            |            | 4,107,703   |           
|Minority share of income                             |                                                                                       |                                                                                                                                   | 289,183     |                      |            |            | 461,236     |           
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|Income before cumulative effect of accounting change |                                                                                       |                                                                                                                                   | 11,343,039  |                      |            |            | 7,512,543   |           
|Cumulative effect of accounting change               |                                                                                       |                                                                                                                                   |            |                      |            |            | 441,406     |           
|Net income                                           |                                                                                       |                                                                                                                                   | 11,343,039  |                      |            |            | 7,071,137   |           
|Other comprehensive expense, net of tax:             |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|                                                     | Unrealized gain on securities                                                         |                                                                                                                                   |             |                     |            |            |             | 85,805     |           
|                                                     | Loss on derivative instruments qualifying as  cash flow hedges, net of
tax of $88,532 |                                                                                                                                   |             | (206,573             | )          |            |             |           |           
|                                                     | Foreign currency translation adjustments                                              |                                                                                                                                   |             | (41,837              | )          |            |             | (6,239     | )         
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|Comprehensive net earnings                           |                                                                                       | $                                                                                                                                 | 11,094,629  |                      |            | $          | 7,150,703   |           
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|Earnings per share information:                      |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|Basic:                                               |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|Weighted average shares                              |                                                                                       |                                                                                                                                   | 17,658,108  |                      |            |            | 13,749,700  |           
|                                                     | Income before cumulative effect of accounting change                                  |                                                                                                                                   |             | 0.64                 |            |            |             | 0.54       |           
|                                                     | Cumulative effect of accounting change                                                |                                                                                                                                   |             |                     |            |            |             | (0.03      | )         
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|Net earnings per share                               |                                                                                       | $                                                                                                                                 | 0.64        |                      |            | $          | 0.51        |           
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|Diluted:                                             |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|Weighted average shares                              |                                                                                       |                                                                                                                                   | 18,641,340  |                      |            |            | 14,709,046  |           
|                                                     | Income before cumulative effect of accounting change                                  |                                                                                                                                   |             | 0.61                 |            |            |             | 0.51       |           
|                                                     | Cumulative effect of accounting change                                                |                                                                                                                                   |             |                     |            |            |             | (0.03      | )         
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           
|Net earnings per share                               |                                                                                       | $                                                                                                                                 | 0.61        |                      |            | $          | 0.48        |           
|                                                     |                                                                                       |                                                                                                                                   |             |                      |            |            |             |           

See accompanying notes to condensed consolidated financial statements

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VANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED SEPTEMBER 1, 2001 AND AUGUST 26, 2000
(unaudited)

|                                                                                |                                                                             |                                      |                                           |           |              |             |            |           |             |             |  
|------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------ | ----------------------------------------- | --------- | ------------ | ----------- | ---------- | --------- | ----------- | ----------- | -
|                                                                                |                                                                             |                                      |                                           |           | SEPTEMBER 1, |             | AUGUST 26,
|                                                                                |                                                                             |                                      |                                           |           | 2001         |             | 2000      
|                                                                                |                                                                             |                                      |                                           |           |              |             |           
|CASH FLOWS FROM OPERATING ACTIVITIES:                                           |                                                                             |                                      |                                           |           |              |             |            |          
|Net earnings                                                                    |                                                                             | $                                    | 11,343,039                                |           |              | $           | 7,071,137  |          
|Adjustments to reconcile net earnings to net cash used in operating activities: |                                                                             |                                      |                                           |           |              |             |            |          
|                                                                                | Depreciation and amortization                                               |                                      |                                           | 1,779,092 |              |             |            | 1,782,488 |            
|                                                                                | Net loss on sale of equipment                                               |                                      |                                           | 44,265    |              |             |            | 108       |            
|                                                                                | Minority share of income                                                    |                                      |                                           | 289,182   |              |             |            | 461,236   |            
|                                                                                | Provision for losses on accounts receivable and sales returns               |                                      |                                           | 151,308   |              |             |            | 436,376   |            
|                                                                                | Changes in assets and liabilities, net of effects of business acquisitions: |                                      |                                           |           |              |             |            |           |            
|                                                                                |                                                                             | Accounts receivable                  |                                           |           | (21,019,848  | )           |            |           | (21,271,481 | )          
|                                                                                |                                                                             | Inventories                          |                                           |           | (6,123,353   | )           |            |           | (11,240,672 | )          
|                                                                                |                                                                             | Deferred income taxes                |                                           |           | (120,040     | )           |            |           | 82,946      |            
|                                                                                |                                                                             | Prepaid expenses                     |                                           |           | 125,414      |             |            |           | 2,304,968   |            
|                                                                                |                                                                             | Other assets                         |                                           |           | 160,036      |             |            |           | (256,282    | )          
|                                                                                |                                                                             | Accounts payable                     |                                           |           | (2,214,933   | )           |            |           | 637,817     |            
|                                                                                |                                                                             | Accrued payroll and related expenses |                                           |           | (1,119,662   | )           |            |           | (866,870    | )          
|                                                                                |                                                                             | Income taxes payable                 |                                           |           | 1,578,756    |             |            |           | 3,610,665   |            
|                                                                                |                                                                             |                                      |                                           |           |              |             |            |          
|                                                                                |                                                                             |                                      | Net cash used in operating activities     |           |              | (15,126,744 | )          |           |             | (17,247,564 | )
|                                                                                |                                                                             |                                      |                                           |           |              |             |            |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                           |                                                                             |                                      |                                           |           |              |             |            |          
|Purchases of property, plant and equipment                                      |                                                                             |                                      | (5,538,877                                | )         |              |             | (4,227,435 | )        
|Proceeds from sale of (investments in) other companies                          |                                                                             |                                      |                                          |           |              |             | (275,411   | )        
|Proceeds from sale of property, plant and equipment                             |                                                                             |                                      | 2,970                                     |           |              |             | 8,800      |          
|                                                                                |                                                                             |                                      |                                           |           |              |             |            |          
|                                                                                |                                                                             |                                      | Net cash used in investing activities     |           |              | (5,535,907  | )          |           |             | (4,494,046  | )
|                                                                                |                                                                             |                                      |                                           |           |              |             |            |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                           |                                                                             |                                      |                                           |           |              |             |            |          
|Proceeds from short term borrowings                                             |                                                                             |                                      | (1,974,025                                | )         |              |             | 10,389,472 |          
|Payments on capital lease obligations                                           |                                                                             |                                      |                                          |           |              |             | (15,005    | )        
|Proceeds from long term debt                                                    |                                                                             |                                      | 1,114,726                                 |           |              |             | 5,078,965  |          
|Consolidated subsidiary dividends paid to minority shareholders                 |                                                                             |                                      | (227,843                                  | )         |              |             | (182,828   | )        
|Proceeds from issuance of common stock                                          |                                                                             |                                      | 9,605,856                                 |           |              |             | 550,903    |          
|                                                                                |                                                                             |                                      |                                           |           |              |             |            |          
|                                                                                |                                                                             |                                      | Net cash provided by financing activities |           |              | 8,518,714   |            |           |             | 15,821,507  |  
|Effect of exchange rate changes on cash and cash equivalents                    |                                                                             |                                      | 444,371                                   |           |              |             | (6,239     | )        
|                                                                                |                                                                             |                                      |                                           |           |              |             |            |          
|                                                                                |                                                                             |                                      | Net decrease in cash and cash equivalents |           |              | (11,699,566 | )          |           |             | (5,926,342  | )
|Cash and cash equivalents, beginning of period                                  |                                                                             |                                      | 59,747,584                                |           |              |             | 15,516,337 |          
|                                                                                |                                                                             |                                      |                                           |           |              |             |            |          
|Cash and cash equivalents, end of period                                        |                                                                             | $                                    | 48,048,018                                |           |              | $           | 9,589,995  |          
|                                                                                |                                                                             |                                      |                                           |           |              |             |            |          
|SUPPLEMENTAL CASH FLOW INFORMATION  AMOUNTS PAID FOR:                          |                                                                             |                                      |                                           |           |              |             |            |          
|                                                                                |                                                                             | Interest                             |                                           | $         | 31,281       |             |            | $         | 553,997     |            
|                                                                                |                                                                             | Income taxes                         |                                           | $         | 3,425,100    |             |            | $         | 263,331     |            

See accompanying notes to condensed consolidated financial statements

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VANS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|1. |  | The condensed consolidated financial statements included herein are
unaudited and reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the results of the
interim periods presented. The results of operations for the current
interim periods are not necessarily indicative of results to be expected
for the current year.                                                                                                                 
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The condensed consolidated statement of earnings an comprehensive earnings and
condensed consolidated statement of cash flows for the thirteen weeks ended
August 26, 2000 have been restated to reflect the cumulative effect of a
change in accounting method for recognizing revenue on certain transactions,
which was effective June 1, 2000. Additionally, certain amounts in the prior
period financial statements have been reclassified to conform to the current
period presentation.
|  
|2. |  | Inventories are comprised of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                |  |              |            |         |  |   |            |  
|--------------- |  | ------------ | ---------- | ------- |  | - | ---------- | -
|                |  | SEPTEMBER 1, |            | MAY 31,
|                |  | 2001         |            | 2001   
|                |  |              |            |        
|Work-in-process |  | $            |           |         |  | $ | 129,145    |  
|Finished goods  |  |              | 59,437,141 |         |  |   | 53,390,197 |  
|Less: reserve   |  |              | (692,269   | )       |  |   | (691,479   | )
|                |  |              |            |         |  |   |            |  
|                |  | $            | 58,744,872 |         |  | $ | 52,827,863 |  
|                |  |              |            |         |  |   |            |  



|3. |  | Basic earnings per share represents net earnings divided by the
weighted-average number of common shares outstanding for the period.
Diluted earnings per share represents net earnings divided by the
weighted-average number of shares outstanding, inclusive of all
potentially dilutive common shares. During the thirteen week period ended
September 1, 2001, and August 26, 2000, the difference between the
weighted average number of shares used in the basic computation compared
to that used in the diluted computation was due to the dilutive impact of
all dilutive stock options.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

The reconciliations of basic to diluted weighted average shares are as
follows:

|                                                      |  |                      |            |            |  |  |            | 
|----------------------------------------------------- |  | -------------------- | ---------- | ---------- |  |  | ---------- | 
|                                                      |  | THIRTEEN WEEKS ENDED
|                                                      |  |                     
|                                                      |  | SEPTEMBER 1,         |            | AUGUST 26,
|                                                      |  | 2001                 |            | 2000      
|                                                      |  |                      |            |           
|Weighted average shares
used in basic computation     |  |                      | 17,658,108 |            |  |  | 13,749,700 | 
|Dilutive stock options                                |  |                      | 983,232    |            |  |  | 959,346    | 
|                                                      |  |                      |            |            |  |  |            | 
|Weighted average shares
used for dilutive computation |  |                      | 18,641,340 |            |  |  | 14,709,046 | 
|                                                      |  |                      |            |            |  |  |            | 



|   |  | For the thirteen week periods ended September 1, 2001 and August 26, 2000,
20,000 and 107,000 shares, respectively, relating to the possible exercise of
outstanding stock options were not included in the computation of diluted
earnings per share as their effect would have been anti-dilutive.                                                                                                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|4. |  | Income taxes for the interim periods were computed using the effective
tax rate estimated to be applicable for the full fiscal year, which is
subject to ongoing review and evaluation by management.                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|5. |  | In Q4 Fiscal 1998, we provided $8,212,000 for restructuring related to
the closure of our Vista, California manufacturing facility (the Vista
Facility) and the restructuring of our European operations. The estimated
provision includes approximately $2,949,000 for two terminated
international agreements and related costs, $2,184,000 for estimated loss
on sale of plant equipment, $1,433,000 in terminated raw material
contracts, $893,000 for involuntary termination benefits for approximately
300 employees, and $753,000 for costs to close the Vista Facility and
prepare the site for a new tenant.
|  
|   |  | During Q1 Fiscal 2002, we did not incur any cash expenditures related to the
termination of two of our international distributors in Europe or the closure
of the Vista Facility. We expect to make the remaining cash expenditures in
January 2002 and January 2003.                                                                                                                                                                                                                                                                                                                                                   

5



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|6. |  | Our operations are classified into three distinct sales channels: retail,
wholesale and international. We evaluate performance based on channel
revenues and consolidated operating income. Discrete financial information
for each sales channel is not yet available so we do not classify our
sales channels as reportable segments. Revenues for each sales channel
are summarized as follows:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|              |  |                      |             |            |  |   |             | 
|------------- |  | -------------------- | ----------- | ---------- |  | - | ----------- | 
|              |  | THIRTEEN WEEKS ENDED
|              |  |                     
|              |  | SEPTEMBER 1,         |             | AUGUST 26,
|              |  | 2001                 |             | 2000      
|              |  |                      |             |           
|Retail        |  | $                    | 33,601,000  |            |  | $ | 25,991,000  | 
|Wholesale     |  |                      | 53,172,000  |            |  |   | 46,737,000  | 
|International |  |                      | 31,287,000  |            |  |   | 27,852,000  | 
|              |  |                      |             |            |  |   |             | 
|              |  | $                    | 118,060,000 |            |  | $ | 100,580,000 | 
|              |  |                      |             |            |  |   |             | 

We do not have any individual customers representing more than 10% of sales.



|7. |  | Effective June 1, 2001, we adopted Statements of Financial Accounting
Standards Board Standards Nos. 141 and 142 on Business Combinations and
Goodwill and Other Intangible Assets which require that we prospectively
cease amortization of goodwill and instead conduct periodic tests of
goodwill for impairment. The following table shows, on a pro-forma basis,
what earnings and earnings per share would have been if the new accounting
standards had been applied for the periods indicated.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                |          |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |   |      |      | 
|------------------------------- | -------- | ---------------------- | ---------------------- | - | --------------- | ---- | ------------------ | - | ---- | ---- | ---------- | - | ---- | ---- | --------- | - | ---- | ---- | 
|                                |          |                        |                        |   | QUARTER ENDED   |      | YEAR ENDED MAY 31,
|                                |          |                        |                        |   |                 |      |                   
|                                |          |                        |                        |   | AUGUST 26, 2000 |      | 2001               |   | 2000 |      | 1999      
|                                |          |                        |                        |   |                 |      |                    |   |      |      |           
|Net earnings                    |          | $                      | 7,071,000              |   |                 | $    | 14,990,000         |   |      | $    | 12,087,000 |   |      | $    | 8,725,000 |  
|Add back: goodwill amortization |          |                        | 335,000                |   |                 |      | 1,514,000          |   |      |      | 1,310,000  |   |      |      | 1,207,000 |  
|                                |          |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |  
|Pro forma net earnings          |          | $                      | 7,406,000              |   |                 | $    | 16,504,000         |   |      | $    | 13,397,000 |   |      | $    | 9,932,000 |  
|                                |          |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |  
|Per share information:          |          |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |  
|                                | Basic:   |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |   |     
|                                |          | Net earnings           |                        | $ | 0.51            |      |                    | $ | 1.06 |      |            | $ | 0.89 |      |           | $ | 0.66 |     
|                                |          | Goodwill amortization  |                        |   | 0.03            |      |                    |   | 0.11 |      |            |   | 0.09 |      |           |   | 0.09 |     
|                                |          |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |  
|                                |          | Pro forma net earnings |                        | $ | 0.54            |      |                    | $ | 1.17 |      |            | $ | 0.98 |      |           | $ | 0.75 |     
|                                |          |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |  
|                                | Diluted: |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |   |     
|                                |          | Net earnings           |                        | $ | 0.48            |      |                    | $ | 0.99 |      |            | $ | 0.84 |      |           | $ | 0.64 |     
|                                |          | Goodwill amortization  |                        |   | 0.02            |      |                    |   | 0.10 |      |            |   | 0.09 |      |           |   | 0.09 |     
|                                |          |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |  
|                                |          |                        | Pro forma net earnings |   | $               | 0.50 |                    |   | $    | 1.09 |            |   | $    | 0.93 |           |   | $    | 0.73 | 
|                                |          |                        |                        |   |                 |      |                    |   |      |      |            |   |      |      |           |  



|8. |  | Financial Accounting Standards Board Standards Nos. 141 and 142 on
Business Combinations and Goodwill and Other Intangible Assets also
require that we disclose the following information related to our
intangible assets still subject to amortization and our goodwill.
Amortized intangible assets balance as of September 1, 2001:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       |  |          |           |              |  |          |         |     |  |   |           | 
|---------------------- |  | -------- | --------- | ------------ |  | -------- | ------- | --- |  | - | --------- | 
|                       |  | GROSS    |           |              |  |          |         | NET
|                       |  | CARRYING |           | ACCUMULATED  |  | CARRYING
|                       |  | AMOUNT   |           | AMORTIZATION |  | AMOUNT  
|                       |  |          |           |              |  |         
|Trademarks and patents |  | $        | 2,598,465 |              |  | $        | 418,842 |     |  | $ | 2,179,623 | 
|                       |  |          |           |              |  |          |         |     |  |   |           | 



| |  | The weighted average amortization period for the intangible assets is
approximately 16 years. The estimated amortization expense for these
trademarks and patents for each of the five succeeding fiscal years is
estimated to be $170,000 per year.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Changes in the carrying amount of goodwill for the period ended
September 1, 2001 are summarized as follows:                                                                                                                                        

|                                |  |   |            | 
|------------------------------- |  | - | ---------- | 
|Balance as of May 31, 2001      |  | $ | 23,018,188 | 
|Goodwill acquired               |  |   |           | 
|Impairment losses               |  |   |           | 
|                                |  |   |            | 
|Balance as of September 1, 2001 |  | $ | 23,018,188 | 
|                                |  |   |            | 



|9. |  | Effective June 1, 2001, we adopted Statement of Financial Accounting
Standards No. 133 Accounting for Derivative Instruments and Hedging
Activities which requires us to recognize all derivatives as either
assets or liabilities in the statements of financial position and measure
those instruments at fair value. Derivatives that are not hedges must be
adjusted to fair value through
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6



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##### Table of Contents





| |  | income. Derivatives that are hedges, depending on the nature of the hedge,
are adjusted to fair value and reported in other comprehensive income until
the hedge is recognized in earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Management believes it is prudent to limit the variability caused by foreign
currency risk. We are exposed to foreign currency risk through our
wholly-owned subsidiary, Vans Far East Limited (VFEL), whose functional
currency is the euro. The currency risk is created because VFELs purchases
of inventory are in U.S. dollars and its revenue is in euros. To hedge this
risk, VFEL enters into cash flow hedges based on forecasted purchases,
therefore fixing the cost of the product in euros and the associated gross
margins. As of September 1, 2001, we hedged our forecasted purchases through
November 2001. The following tables show the net effect of the transactions:

|                                                                       |  |                   |          |          |  |                  |         |       |  |   |         | 
|---------------------------------------------------------------------- |  | ----------------- | -------- | -------- |  | ---------------- | ------- | ----- |  | - | ------- | 
|                                                                       |  |                   |          |          |  | OTHER            |         | OTHER
|                                                                       |  | DERIVATIVE        |          | (INCOME) |  | COMPREHENSIVE   
|                                                                       |  | ASSET (LIABILITY) |          | EXPENSE  |  | (INCOME) EXPENSE
|                                                                       |  |                   |          |          |  |                 
|Changes in fair value of
derivatives designated
as cash flow hedges    |  | $                 | (231,171 | )        |  | $                |        |       |  | $ | 231,171 | 
|Ineffective portion of hedge                                           |  |                   | 16,709   |          |  |                  | (16,709 | )     |  |   |        | 
|Changes in fair value of
derivatives de-designated
as cash flow hedges |  |                   | (401,568 | )        |  |                  | 337,634 |       |  |   | 63,934  | 
|                                                                       |  |                   |          |          |  |                  |         |       |  |   |         | 
|Balance as of September 1, 2001                                        |  | $                 | (616,030 | )        |  | $                | 320,925 |       |  | $ | 295,105 | 
|                                                                       |  |                   |          |          |  |                  |         |       |  |   |         | 



| |  | Gains or losses recorded in other comprehensive income will be reclassified
to cost of goods sold when the product is sold and the revenue recognized. A
portion of the hedge is de-designated when the forecasted purchase occurs and
the U.S. dollars payable is recognized. All of the existing gains or losses
included in other comprehensive income are expected to be reclassified into
earnings within the next 12 months.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Additionally, we hold derivative foreign currency forward contracts
denominated in the Argentinean peso. Such contracts do not meet the cash flow
hedge criteria of FAS No. 133. Accordingly, the change in the fair value of
these derivative instruments of $96,000 during the thirteen week period ended
September 1, 2001 has been recorded as an increase in other income, net.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

The following discussion contains forward-looking statements about our
revenues, earnings, spending, margins, orders, products, plans, strategies and
objectives that involve risk and uncertainties. Forward-looking statements
include any statement that may predict, forecast or imply future results, and
may contain words like believe, anticipate, expect, estimate,
project, or words similar to those. Our 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 in
footnotes accompanying certain forward-looking statements, as well as those
discussed under the caption Risk Factors on page 14 of our Annual Report on
Form 10-K for the year ended May 31, 2001.

OVERVIEW

Vans is a leading global sports and lifestyle company that merchandises,
designs, sources and distributes VANS-branded active-casual and performance
footwear, apparel and accessories for Core Sports. Core Sports, including
skateboarding, snowboarding, surfing, wakeboarding, BMX riding and motocross,
are generally recognized for the fun, creativity and individual achievement
experienced while attempting various tricks or maneuvers within these sports.
Our focus has been proprietary branding with the goal of creating a leadership
position for our brand and a strong emotional connection with our customers.
Our VANS brand targets 10 to 24 year old participants, enthusiasts and
emulators of the Core Sports culture. We have implemented a unique marketing
plan to reach our customers through multiple points of contact which include
owning and operating Core Sports entertainment events and venues, such as the
VANS Triple Crown Series, VANS skateparks and the VANS High Cascade Snowboard
Camp, sponsoring over 600 professional and amateur athletes and the VANS Warped
Tour®, as well as advertising in targeted print and television media. As a
result of the successful implementation of our brand-building and marketing
strategy, along with the development of our new management team, we have
achieved substantial growth over the past six fiscal years.

7



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##### Table of Contents



RESULTS OF OPERATIONS

The following table sets forth our operating results, expressed as a
percentage of net sales, for the periods indicated.

|                                                           |                                      |                                                                                                                                   |                          |      |               |      |            |      |      |      |  |  |  |  | 
|---------------------------------------------------------- | ------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ---- | ------------- | ---- | ---------- | ---- | ---- | ---- |  |  |  |  | 
|                                                           |                                      |                                                                                                                                   |                          |      | QUARTER ENDED
|                                                           |                                      |                                                                                                                                   |                          |      |              
|                                                           |                                      |                                                                                                                                   |                          |      | SEPTEMBER 1,  |      | AUGUST 26, |      |      |      | 
|                                                           |                                      |                                                                                                                                   |                          |      | 2001          |      | 2000       |      |      |      | 
|                                                           |                                      |                                                                                                                                   |                          |      |               |      |            |      |      |      | 
|Net sales                                                  |                                      |                                                                                                                                   | 100.0                    | %    |               |      | 100.0      | %   
|Cost of sales                                              |                                      |                                                                                                                                   | 53.1                     |      |               |      | 56.1       |     
|                                                           |                                      |                                                                                                                                   |                          |      |               |      |            |     
|Gross profit                                               |                                      |                                                                                                                                   | 46.9                     |      |               |      | 43.9       |     
|Operating expenses:                                        |                                      |                                                                                                                                   |                          |      |               |      |            |     
|                                                           | Selling and distribution             |                                                                                                                                   |                          | 19.7 |               |      |            | 19.3 |     
|                                                           | Marketing, advertising and promotion |                                                                                                                                   |                          | 9.6  |               |      |            | 8.0  |     
|                                                           | General and administrative           |                                                                                                                                   |                          | 3.6  |               |      |            | 3.7  |     
|                                                           | Provision for doubtful accounts      |                                                                                                                                   |                          | 0.1  |               |      |            | 0.2  |     
|                                                           | Amortization of intangibles          |                                                                                                                                   |                          | 0.0  |               |      |            | 0.3  |     
|                                                           |                                      |                                                                                                                                   |                          |      |               |      |            |     
|                                                           |                                      |                                                                                                                                   | Total operating expenses |      |               | 33.0 |            |      |      | 31.5 | 
|                                                           |                                      |                                                                                                                                   |                          |      |               |      |            |     
|                                                           |                                      | Earnings from operations                                                                                                          |                          |      | 13.9          |      |            |      | 12.4 |     
|Interest income                                            |                                      |                                                                                                                                   | 0.4                      |      |               |      | 0.0        |     
|Interest and debt expense                                  |                                      |                                                                                                                                   | (0.3                     | )    |               |      | (0.7       | )   
|Other income, net                                          |                                      |                                                                                                                                   | 0.1                      |      |               |      | 0.3        |     
|                                                           |                                      |                                                                                                                                   |                          |      |               |      |            |     
|                                                           |                                      | Earnings before income taxes, minority interest in income
of consolidated subsidiaries and cumulative effect of
accounting change |                          |      | 14.1          |      |            |      | 12.0 |     
|Income tax expense                                         |                                      |                                                                                                                                   | 4.3                      |      |               |      | 4.1        |     
|Minority share of income                                   |                                      |                                                                                                                                   | 0.2                      |      |               |      | 0.5        |     
|                                                           |                                      |                                                                                                                                   |                          |      |               |      |            |     
|Net earnings before cumulative effect of accounting change |                                      |                                                                                                                                   | 9.6                      | %    |               |      | 7.4        | %   
|                                                           |                                      |                                                                                                                                   |                          |      |               |      |            |     

QUARTERLY PERIOD ENDED SEPTEMBER 1, 2001 (Q1 FISCAL 2002), AS COMPARED TO
QUARTERLY PERIOD ENDED AUGUST 26, 2000 (Q1 FISCAL 2001)

Net Sales

Net sales for Q1 Fiscal 2002 increased 17.4% to $118,060,000 from
$100,580,000 for Q1 Fiscal 2001. The sales increase was driven by increased
sales through all three of our sales channels, as discussed below.

Total U.S. sales, including sales through our U.S. retail stores,
increased 19.3% to $86,773,000 for Q1 Fiscal 2002 from $72,728,000 for Q1
Fiscal 2001. Total international sales, including sales through our seven
European stores, increased 12.3% to $31,287,000 for Q1 Fiscal 2002, versus
$27,852,000 for Q1 Fiscal 2001.

The increase in total U.S. sales resulted from (i) a 13.8% increase in
domestic wholesale sales, and (ii) a 29.3% increase in sales through our U.S.
retail stores. The increase in wholesale sales was primarily due to increased
penetration of existing accounts. The increase in U.S. retail store sales was
driven by sales from (i) a net nine new stores versus a year ago, including
three skateparks, and the remodel and re-location of certain stores, and (ii) a
4.7% increase in comparable store sales (excluding revenue from concessions and
skate sessions at our skateparks) which was partially attributable to increases
in sales of hardgoods and womens shoes. The increase in international sales
through VFEL was primarily due to increased sales in Japan, Brazil and the
United Kingdom and an increase in royalties from our distributor and licensee
for Japan, International Trading Corporation (ITC), year-over-year.

Gross Profit

Gross profit increased 25.4% to $55,339,000 in Q1 Fiscal 2002 from
$44,145,000 in Q1 Fiscal 2001. As a percentage of net sales, gross profit
increased to 46.9% for Q1 Fiscal 2002, versus 43.9% for Q1 Fiscal 2001,
primarily due to increased full-price retail store and skatepark revenue (as a
percentage of sales), an increase in royalties, improved average selling
price and improved inventory management.

Earnings from Operations

Our earnings from operations increased 31.5% to $16,379,000 in Q1 Fiscal
2002, versus $12,453,000 in Q1 Fiscal 2001. As a percentage of sales, earnings
from operations increased to 13.9% for Q1 Fiscal 2002 versus 12.4% last year.
Operating expenses in

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Q1 Fiscal 2002 increased 22.9% to $38,959,000 from $31,692,000 in Q1
Fiscal 2001, due to the increases in selling and distribution, marketing,
advertising and promotion, and general and administrative expenses discussed
below. As a percentage of sales, operating expenses increased to 33.0% versus
31.5% last year.

Selling and distribution. Selling and distribution expenses increased
19.9% to $23,227,000 in Q1 Fiscal 2002 from $19,371,000 in Q1 Fiscal 2001,
primarily due to: (i) increased personnel costs, rent expense and other
operating costs associated with the expansion of our retail division by the net
addition of nine new stores, including three skateparks; and (ii) increased
salaries, sales commissions and distribution costs to support the increase in
sales discussed above.

Marketing, advertising and promotion. Marketing, advertising and promotion
expenses increased 40.6% to $11,271,000 in Q1 Fiscal 2002 from $8,016,000 in Q1
Fiscal 2001. The increase in marketing, advertising and promotion expenses was
primarily due to: (i) increased advertising expenditures related to the
back-to-school selling season; (ii) new product-specific advertising; and (iii)
increased costs associated with the VANS Triple Crown Series. These increases
were partially offset by increased third party sponsorship of our major
entertainment events and venues.

General and administrative. General and administrative expenses increased
15.3% to $4,269,000 in Q1 Fiscal 2002 from $3,702,000 in Q1 Fiscal 2001,
primarily due to: (i) increased professional fees for international tax
consulting; (ii) increased labor and other employee-related expenses to support
our sales growth; and (iii) increased legal expenses related to our ongoing
worldwide efforts to protect and preserve its intellectual property rights and
to defend certain patent litigation with The Burton Corporation.

Provision for doubtful accounts. The amount that was added to the
allowance for doubtful accounts decreased to $151,000 in Q1 Fiscal 2002 from
$232,000 in Q1 Fiscal 2001, primarily due to better-than-expected collection of
past due accounts.

Amortization of intangibles. Effective June 1, 2001, we adopted
Statements of the Financial Accounting Standards Board Standards Nos. 141 and
142 on Business Combinations and Goodwill and Other Intangible Assets which
require that we prospectively cease the amortization of goodwill and instead
conduct periodic tests of goodwill for impairment. As a result, our
amortization of intangibles decreased to $41,000 for Q1 Fiscal 2002 from
$371,000 in Q1 Fiscal 2001. See footnote seven to Notes to Condensed
Consolidated Financial Statements for further discussion.

Interest Income

Interest income increased to $518,000 in Q1 Fiscal 2002, versus $24,000 in
Q1 Fiscal 2001 due to higher cash balances resulting from the cash generated
from our May 2001 public offering. See  Liquidity and Capital Resources.

Interest and Debt Expense

Interest and debt expense decreased to $382,000 for Q1 Fiscal 2002 from
$751,000 in Q1 Fiscal 2001, primarily due to decreased borrowings under our
credit facility and improved interest rates on such borrowings. See
" Liquidity and Capital Resources, Borrowings.

Other Income

Other income primarily consists of royalty payments received from the
non-footwear related licensing of our trademarks, exchange rate gains and
losses and rental income. Other income decreased to $103,000 for Q1 Fiscal 2002
from $355,000 for Q1 Fiscal 2001, primarily due to (i) a net exchange rate loss
of $133,000, primarily related to the Brazilian currency; (ii) a decrease in
non-footwear related royalties; (iii) the loss of rental income due to the sale
of our former facility located in Orange, California in May 2001; and (iv)
timing of the recognition of income from the VANS Warped Tour®. Exchange rate
gains caused by the strengthening of the euro of approximately $338,000 were
offset by changes in the fair value of derivatives purchased to hedge these
transactions. See footnote nine to Notes to Condensed Consolidated Financial
Statements.

Income Tax Expense

Income tax expense increased to $4,985,000 in Q1 Fiscal 2002 from
$4,108,000 in Q1 Fiscal 2001 as a result of the increase in earnings discussed
above, partially offset by the reduction in our estimated effective annual tax
rate to 30% in Q1 Fiscal 2002 from 34.0% for the same period last year. The
decrease in our estimated effective annual tax rate was due to the tax benefit
derived from the operation of VFEL. The estimated effective annual tax rate is
subject to on-going evaluation.

9



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##### Table of Contents



Minority Share of Income

Minority share of income decreased to $289,000 in Q1 Fiscal 2002 from
$461,000 for Q1 Fiscal 2001, primarily due to the acquisition of the remaining
20% of our distributor in the United Kingdom which occurred in October 2000.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

We have historically financed our operations with a combination of cash
flows from operations, borrowings under a credit facility and the sale of
equity securities. In May 2001, we completed an underwritten public offering of
our common stock. In connection with the offering, 2,800,000 shares of our
common stock were sold for net proceeds of $60.1 million. In June 2001, an
additional 420,000 shares were sold for net proceeds of $9.2 million to cover
over-allotments. Most of the proceeds of such offering are being used to open
retail stores and skateparks and for general corporate purposes, including the
repurchase of our common stock pursuant to the share repurchase program we
adopted on September 21, 2001. Certain of the proceeds were used to repay debt.

We experienced an outflow of cash from operating activities of $15,127,000
for Q1 Fiscal 2002, compared to an outflow of $17,248,000 for the same period a
year ago. Cash used in operations during Q1 Fiscal 2002 primarily resulted from
an increase in net accounts receivable to $58,722,000 at September 1, 2001,
from $38,133,000 at May 31, 2001, an increase in net inventory to $58,745,000
at September 1, 2001, from $52,828,000 at May 31, 2001, a decrease in accounts
payable and a decrease in accrued payroll and related expenses. These cash
outflows were partially offset by earnings and the add-back for depreciation
and amortization. Cash outflows from operations in Q1 Fiscal 2001 primarily
resulted from increases in accounts receivable and inventory and a decrease in
accrued payroll and related expenses, partially offset by our earnings, the
increase in income taxes payable, the decrease in prepaid expenses and the
add-back for depreciation and amortization.

We had a net cash outflow from investing activities of $5,536,000 in Q1
Fiscal 2002, compared to a net cash outflow of $4,494,000 in the same period a
year ago. The cash outflows in Q1 Fiscal 2002 were primarily due to capital
expenditures related to new retail store openings and skateparks. Cash used in
investing activities for Q1 Fiscal 2001 also was primarily related to new
retail store openings and skateparks.

We had a net cash inflow from financing activities of $8,519,000 for Q1
Fiscal 2002, compared to a net cash inflow of $15,822,000 for the same period a
year ago, primarily due to the completion of the sale of our common stock in
the public offering to cover over-allotments, partially offset by the pay-down
of the short-term borrowings under our credit facility. See  Borrowings
below. Cash provided by financing activities in Q1 Fiscal 2001 was primarily
related to long-term and short-term borrowings under our credit facility.

Accounts receivable, net of allowance for doubtful accounts, increased
from $38,133,000 at May 31, 2001, to $58,722,000 at September 1, 2001,
primarily due to an increase in our European and domestic accounts receivable
resulting from the increase in sales discussed above. Inventories increased to
$58,745,000 at September 1, 2001, from $52,828,000 at May 31, 2001, primarily
due to increased sales, an increased number of finished goods held at our
distribution center in Santa Fe Springs, California to support increased
domestic sales and orders, and an increased inventory held for sale at our
retail stores to support the net addition of nine new stores, including three
skateparks.

BORROWINGS

We maintain a $100.0 million unsecured credit facility pursuant to a
credit agreement with several lenders. This credit facility permits us to
utilize the funds thereof for general corporate purposes, capital expenditures,
acquisitions and stock repurchases.

Of the $100.0 million amount of the credit facility, $85.0 million is in
the form of an unsecured revolving line of credit, and $15.0 million is in the
form of an unsecured term loan. The revolving line of credit expires on April
30, 2004. We have the option to pay interest on revolving line of credit
advances at a rate equal to either LIBOR plus a margin, or the base rate plus a
margin. The LIBOR rate margin and the base rate margin are based on our ratio
of Funded Debt to EBITDA, each as defined in the credit agreement.

Of the $15.0 million term loan, approximately $5.0 million was disbursed
at the closing of the credit facility to replace a portion of our former credit
facility used for our 1998 stock repurchase program, which was completed in the
fiscal year ended May 31, 1999, approximately $3.0 million was disbursed in the
second quarter of the fiscal year ended May 31, 2000 for capital expenditures,
and the remaining portion was disbursed in the first quarter of the fiscal year
ending May 31, 2001 for capital expenditures. The term loan was paid off in
full in May 2001 with a portion of the net proceeds of our public offering.

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Under the credit agreement, we must maintain certain financial covenants
and are prohibited from engaging in certain transactions or taking certain
corporate actions, such as the payment of dividends, without the consent of the
lenders. At September 1, 2001, we had no borrowings under the credit facility
and were in compliance with all financial and other covenants under the credit
agreement.

Vans Latinoamericana maintains a note payable to Tavistock Holdings A.G.,
a 49.99% owner of Vans Latinoamericana. The loans evidenced by the note were
made by Tavistock pursuant to a shareholders agreement requiring Tavistock to
provide operating capital, on an as-needed basis, in the form of loans to Vans
Latinoamericana. At September 1, 2001, the aggregate outstanding balance under
the note was $3,106,000.

CAPITAL EXPENDITURES

Our material commitments for capital expenditures are currently primarily
related to the opening and remodeling of retail stores and the opening of
skateparks. In the balance of fiscal year 2002, we plan to open approximately
six to eight full price stores and remodel four to six existing stores. We
estimate the aggregate cost of all these new stores and remodels to be $3.0 to
$4.0 million.

We also intend to open three additional skateparks in the balance of
fiscal 2002 and estimate the aggregate cost of our portion of these projects to
be approximately $5.0 to $6.0 million since the landlords for the skateparks
have agreed to pay a significant portion of the capital costs associated with
the construction of the parks.

CAPITAL RESOURCES

Our cash position, including $35.0 million invested in a money market
mutual fund, was $48,048,000 at September 1, 2001, compared to $59,748,000 at
May 31, 2001. We believe our capital resources, including the availability
under our credit facility and cash flow from operations, will be sufficient to
fund our operations and capital expenditures and anticipated growth plan for
the foreseeable future.*



---

|* |  | Note: This is a forward-looking statement. Our actual cash requirements could
differ materially. Important factors that could cause our need for
additional capital to change include: (i) our rate of growth; (ii) the
number of new skateparks we decide to open which must be financed in
whole, or in part, by us; (iii) our product mix between footwear and
snowboard boots; (iv) our ability to effectively manage our inventory
levels; (v) timing differences in payment for our foreign-sourced product;
(vi) the increased utilization of letters of credit for purchases of
foreign-sourced product; (vii) timing differences in payment for product
which is sourced from countries which have longer shipping lead times,
such as China; and (viii) slowing in the U.S. and global economies which
could materially impact our business.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SEASONALITY

The following table contains unaudited selected quarterly financial data
for the eight quarters ended September 1, 2001 and this data as a percentage of
net sales. In the opinion of management, this unaudited information has been
prepared on the same basis as the audited information and includes all
adjustments necessary to fairly present the information set forth therein.
Results of a particular quarter are not necessarily indicative of the results
for any subsequent quarter.

QUARTERLY RESULTS
(DOLLARS IN THOUSANDS)

|                              |                                 |  |               |        |               |  |         |        |            |  |              |        |              |  |         |         |              |  |   |        |   |  |   |        |   |  |   |        |   |  |   |         |  
|----------------------------- | ------------------------------- |  | ------------- | ------ | ------------- |  | ------- | ------ | ---------- |  | ------------ | ------ | ------------ |  | ------- | ------- | ------------ |  | - | ------ | - |  | - | ------ | - |  | - | ------ | - |  | - | ------- | -
|                              |                                 |  | QUARTER ENDED |        | QUARTER ENDED
|                              |                                 |  |               |        |              
|                              |                                 |  | NOVEMBER 27,  |        | FEBRUARY 26,  |  | MAY 31, |        | AUGUST 26, |  | NOVEMBER 25, |        | FEBRUARY 24, |  | MAY 31, |         | SEPTEMBER 1,
|                              |                                 |  | 1999          |        | 2000          |  | 2000    |        | 2000       |  | 2000         |        | 2001         |  | 2001    |         | 2001        
|                              |                                 |  |               |        |               |  |         |        |            |  |              |        |              |  |         |         |             
|STATEMENT OF OPERATIONS DATA: |                                 |  |               |        |               |  |         |        |            |  |              |        |              |  |         |         |              |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        
|                              | Net sales                       |  | $             | 58,768 |               |  | $       | 68,812 |            |  | $            | 66,833 |              |  | $       | 100,580 |              |  | $ | 74,520 |   |  | $ | 80,865 |   |  | $ | 85,231 |   |  | $ | 118,060 |  
|                              | Gross profit                    |  |               | 26,168 |               |  |         | 28,632 |            |  |              | 28,550 |              |  |         | 44,145  |              |  |   | 32,452 |   |  |   | 34,299 |   |  |   | 37,519 |   |  |   | 55,338  |  
|                              | Earnings from operations        |  |               | 5,086  |               |  |         | 3,405  |            |  |              | 3,690  |              |  |         | 12,453  |              |  |   | 5,656  |   |  |   | 3,816  |   |  |   | 4,640  |   |  |   | 16,379  |  
|                              | Net earnings                    |  |               | 2,666  |               |  |         | 1,712  |            |  |              | 1,774  |              |  |         | 7,071   |              |  |   | 3,204  |   |  |   | 2,015  |   |  |   | 2,699  |   |  |   | 11,343  |  
|AS A PERCENTAGE OF NET SALES: |                                 |  |               |        |               |  |         |        |            |  |              |        |              |  |         |         |              |  |   |        |   |  |   |        |   |  |   |        |   |  |   |        
|                              | Net sales                       |  |               | 100    | %             |  |         | 100    | %          |  |              | 100    | %            |  |         | 100     | %            |  |   | 100    | % |  |   | 100    | % |  |   | 100    | % |  |   | 100     | %
|                              | Gross profit                    |  |               | 45     |               |  |         | 42     |            |  |              | 43     |              |  |         | 44      |              |  |   | 44     |   |  |   | 42     |   |  |   | 44     |   |  |   | 47      |  
|                              | Earnings from operations        |  |               | 9      |               |  |         | 5      |            |  |              | 6      |              |  |         | 13      |              |  |   | 8      |   |  |   | 5      |   |  |   | 6      |   |  |   | 14      |  
|                              | Net earnings                    |  |               | 5      |               |  |         | 2      |            |  |              | 3      |              |  |         | 7       |              |  |   | 4      |   |  |   | 2      |   |  |   | 3      |   |  |   | 10      |  
|                              | Comparable store sales increase |  |               | 15.3   | %             |  |         | 5.7    | %          |  |              | 7.5    | %            |  |         | 8.6     | %            |  |   | 16.8   | % |  |   | 16.3   | % |  |   | 9.2    | % |  |   | 4.7     | %

Our business is seasonal, with the largest percentage of net income and
U.S. sales realized in the first fiscal quarter (June through August), the
back to school selling months. In addition, because snowboarding is a winter
sport, sales of our snowboard boots and the Switch Autolock binding system have
historically been strongest in the first and second fiscal quarters (June
through November).

In addition to seasonal fluctuations, our 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 our future results will be consistent with past results or the
projections of securities analysts.

EURO CONVERSION

On January 1, 1999, 11 of the 15 member countries of the European Union
established a fixed conversion rate between their existing sovereign currencies
and the euro, and adopted the euro as their common legal currency on that date.
Existing currencies are scheduled to remain legal tender in the participating
countries until January 1, 2002. During the transition period, parties may pay
for goods and services using either the euro or the existing currency, but
retailers are not required to accept the euro as payment. Since we primarily do
business in U.S. dollars, it is currently not anticipated that the euro
conversion will have a material adverse impact on our business or financial
condition. We are aware that the information systems for our stores
in Spain are not currently able to recognize the euro conversion, however,
we believe that an upgrade to our systems will be in place by
January 1, 2002, which will enable our Spain stores to recognize
the euro. We have confirmed that the information systems utilized by our European sales agents
recognize the euro conversion, and all of our European distributors have
represented to us that their systems do the same.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to market risk associated with changes in interest rates
relates primarily to its debt obligations. The revolving line of credit and the
term loan bear interest at a rate equal to either (i) LIBOR plus a margin, or
(ii) a base rate plus a margin. The margins are based on our rate of Funded
Debt to EBITDA, each as defined in the Credit Agreement. See Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources. As of September 1, 2001, we had
no amounts outstanding under the Credit Agreement. However, for each $1.0 million
outstanding annually under the Agreement, a hypothetical increase of
100 basis points in short-term interest rates would result in a reduction of
approximately $10,000 in annual pre-tax earnings. We do not use derivative or
other financial instruments to hedge interest rate risks.

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Foreign Currency Risk

We operate our business and sell our products in a number of countries
throughout the world and, as a result, we are exposed to movements on foreign
currency exchange rates. Although we have most of our products manufactured
outside of the United States on a per order basis, these purchases are made in
U.S. dollars. The major foreign currency exposure for us involves Europe and
Latin America. In particular, recent fluctuations in the value of the euro and
the British pound have negatively impacted our European business.
Additionally, recent weaknesses in Latin American economies, particularly
Argentina, could negatively effect our Latin American business.

In order to protect against the volatility associated with earnings
currency translations, we may, from time to time, utilize forward foreign
exchange contracts and/or foreign currency options with durations of generally
from three to 12 months. As of September 1, 2001, we had $17.0 million
outstanding in foreign exchange forward contracts, which were entered into to
hedge specific transactions denominated in currencies other than the U.S.
dollar.

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PART II

OTHER INFORMATION




ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE

Executive Officer Resignation. Charles A. Ponthier resigned as the
Companys Vice President  National Sales, effective as of August 13, 2001.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits
|--- |  | --------

|     |  |                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------
|10.1 |  | Employment Agreement, dated September 24, 2001, by and between the Registrant and Joyce A. Murdock
|10.2 |  | Employment Agreement, dated August 20, 2001, by and between the Registrant and Scott J. Blechman  



|(b) |  | Reports on Form 8-K. The Company filed one report on Form 8-K during the
quarterly period ended September 1, 2001. The report was dated July 27,
2001, and contained certain Regulation FD disclosure.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 thereunto duly authorized.

|                       |                                                          |                       
|---------------------- | -------------------------------------------------------- | ----------------------
|                       | VANS, INC.
(Registrant)                                 
|                      
|Date: October 16, 2001 | By:                                                      | /s/ Gary H. Schoenfeld
|                       |                                                         
|                       | GARY H. SCHOENFELD
President and Chief Executive Officer

|                       |                                                                                                                     |                         
|---------------------- | ------------------------------------------------------------------------------------------------------------------- | ------------------------
|Date: October 16, 2001 | By:                                                                                                                 | /s/ Andrew J. Greenebaum
|                       |                                                                                                                    
|                       | ANDREW J. GREENEBAUM
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

15