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UNITED STATES
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
March 1, 2003 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). 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: 17,998,787 shares
of Common Stock, $.001 par value, as of April 9, 2003.





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TABLE OF CONTENTS



|                                                                                 |                                                                                               |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION                                                    
|                                                                                 | ITEM 1. FINANCIAL STATEMENTS.                                                                
|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                           
|                                                                                 | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II                                                                         
|                                                                                 | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                                                                 | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                                                      
|CERTIFICATIONS PURSUANT TO RULE 13a-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934
|Exhibit 10.1                                                                    
|Exhibit 10.2                                                                    
|Exhibit 10.3                                                                    
|Exhibit 10.4                                                                    
|Exhibit 99.1                                                                    
|Exhibit 99.2                                                                    



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PART I
FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS.

VANS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(AMOUNTS IN THOUSANDS)

|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |         |         |  |  | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------ | ------- | -------- | ------- | ------- | ------- |  |  | 
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         | MARCH 1, |         | MAY 31,
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         | 2003     |         | 2002   
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        
|ASSETS                                                                                                                                                   |                                                                                                                                   |                            |         |        |         |          |         |        
|Current assets:                                                                                                                                          |                                                                                                                                   |                            |         |        |         |          |         |        
|                                                                                                                                                         | Cash                                                                                                                              |                            | $       | 53,162 |         |          | $       | 28,447  |        
|                                                                                                                                                         | Marketable debt securities                                                                                                        |                            |         |       |         |          |         | 27,544  |        
|                                                                                                                                                         | Accounts receivable, net of allowance for doubtful accounts of $2,414
and $1,718 at March 1, 2003, and May 31, 2002, respectively |                            |         | 41,934 |         |          |         | 28,024  |        
|                                                                                                                                                         | Inventories                                                                                                                       |                            |         | 50,123 |         |          |         | 48,835  |        
|                                                                                                                                                         | Deferred tax assets                                                                                                               |                            |         | 9,394  |         |          |         | 9,260   |        
|                                                                                                                                                         | Prepaid and other expenses                                                                                                        |                            |         | 10,279 |         |          |         | 14,957  |        
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        
|                                                                                                                                                         |                                                                                                                                   | Total current assets       |         |        | 164,892 |          |         |         | 157,067 | 
|Property, plant and equipment, net of accumulated depreciation of $34,832
and $27,471 at March 1, 2003, and May 31, 2002, respectively                   |                                                                                                                                   |                            | 25,414  |        |         |          | 41,127  |        
|Intangible assets , net of accumulated amortization of $1,211 and $643
at March 1, 2003, and May 31, 2002, respectively                                  |                                                                                                                                   |                            | 15,657  |        |         |          | 15,926  |        
|Goodwill                                                                                                                                                 |                                                                                                                                   |                            | 34,988  |        |         |          | 33,752  |        
|Other assets                                                                                                                                             |                                                                                                                                   |                            | 8,601   |        |         |          | 8,855   |        
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        
|                                                                                                                                                         |                                                                                                                                   | Total Assets               |         | $      | 249,552 |          |         | $       | 256,727 | 
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                     |                                                                                                                                   |                            |         |        |         |          |         |        
|Current liabilities:                                                                                                                                     |                                                                                                                                   |                            |         |        |         |          |         |        
|                                                                                                                                                         | Accounts payable                                                                                                                  |                            | $       | 23,879 |         |          | $       | 22,029  |        
|                                                                                                                                                         | Accrued liabilities                                                                                                               |                            |         | 10,480 |         |          |         | 10,197  |        
|                                                                                                                                                         | Income taxes payable                                                                                                              |                            |         | 653    |         |          |         | 2,946   |        
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        
|                                                                                                                                                         |                                                                                                                                   | Total current liabilities  |         |        | 35,012  |          |         |         | 35,172  | 
|Deferred tax liabilities                                                                                                                                 |                                                                                                                                   |                            | 10,927  |        |         |          | 10,480  |        
|Long-term debt                                                                                                                                           |                                                                                                                                   |                            | 2,897   |        |         |          | 3,192   |        
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        
|                                                                                                                                                         |                                                                                                                                   | Total Liabilities          |         |        | 48,836  |          |         |         | 48,844  | 
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        
|Minority interest                                                                                                                                        |                                                                                                                                   |                            | 1,976   |        |         |          | 3,576   |        
|Stockholders equity:                                                                                                                                    |                                                                                                                                   |                            |         |        |         |          |         |        
|Common stock, $.001 par value, 40,000 shares authorized,
17,920 and 18,302 shares issued and outstanding
at March 1, 2003 and May 31, 2002, respectively |                                                                                                                                   |                            | 18      |        |         |          | 18      |        
|Accumulated other comprehensive income (loss)                                                                                                            |                                                                                                                                   |                            | 1,497   |        |         |          | (2,344  | )      
|Additional paid-in capital                                                                                                                               |                                                                                                                                   |                            | 187,505 |        |         |          | 189,462 |        
|Retained earnings                                                                                                                                        |                                                                                                                                   |                            | 9,720   |        |         |          | 17,171  |        
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        
|                                                                                                                                                         |                                                                                                                                   | Total Stockholders Equity |         |        | 198,740 |          |         |         | 204,307 | 
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        
|Total Liabilities and Stockholders Equity                                                                                                               |                                                                                                                                   | $                          | 249,552 |        |         | $        | 256,727 |        
|                                                                                                                                                         |                                                                                                                                   |                            |         |        |         |          |         |        

See accompanying notes to condensed consolidated financial statements.

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VANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)

|                                       |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |         |        | 
|-------------------------------------- | ---------------------------------------- | ----------------------------- | ------- | -------------------- | ------ | ----------------------- | ------ | -------- | ------ | -------- | ------- | ------- | ------ | - | ------- | ------- | ------ | 
|                                       |                                          |                               |         | THIRTEEN WEEKS ENDED |        | THIRTY-NINE WEEKS ENDED
|                                       |                                          |                               |         |                      |        |                        
|                                       |                                          |                               |         | MARCH 1,             |        | MARCH 2,                |        | MARCH 1, |        | MARCH 2,
|                                       |                                          |                               |         | 2003                 |        | 2002                    |        | 2003     |        | 2002    
|                                       |                                          |                               |         |                      |        |                         |        |         
|Retail sales                           |                                          | $                             | 29,666  |                      |        | $                       | 30,328 |          |        | $        | 88,645  |         |        | $ | 87,064  |        
|National sales                         |                                          |                               | 22,566  |                      |        |                         | 24,686 |          |        |          | 97,378  |         |        |   | 103,933 |        
|International sales                    |                                          |                               | 29,832  |                      |        |                         | 27,137 |          |        |          | 81,280  |         |        |   | 77,547  |        
|                                       |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        
|                                       | Net sales                                |                               |         | 82,064               |        |                         |        | 82,151   |        |          |         | 267,303 |        |   |         | 268,544 |       
|Cost of sales                          |                                          |                               | 43,028  |                      |        |                         | 44,414 |          |        |          | 147,118 |         |        |   | 142,208 |        
|                                       |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        
|                                       | Gross profit                             |                               |         | 39,036               |        |                         |        | 37,737   |        |          |         | 120,185 |        |   |         | 126,336 |       
|Operating Expenses:                    |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        
|                                       | Retail                                   |                               |         | 17,371               |        |                         |        | 15,670   |        |          |         | 52,066  |        |   |         | 44,232  |       
|                                       | Marketing, advertising and promotion     |                               |         | 6,317                |        |                         |        | 8,284    |        |          |         | 22,796  |        |   |         | 26,640  |       
|                                       | Selling, distribution and administrative |                               |         | 14,825               |        |                         |        | 13,079   |        |          |         | 40,714  |        |   |         | 36,965  |       
|                                       | Impairment Charges                       |                               |         | 15,338               |        |                         |        |         |        |          |         | 15,338  |        |   |         |        |       
|                                       | Amortization of intangibles              |                               |         | 203                  |        |                         |        | 62       |        |          |         | 568     |        |   |         | 152     |       
|                                       |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        
|Total operating expenses               |                                          |                               | 54,054  |                      |        |                         | 37,095 |          |        |          | 131,482 |         |        |   | 107,989 |        
|Income (loss) from operations          |                                          |                               | (15,018 | )                    |        |                         | 642    |          |        |          | (11,297 | )       |        |   | 18,347  |        
|Interest income, net                   |                                          |                               | 254     |                      |        |                         | 234    |          |        |          | 679     |         |        |   | 944     |        
|Other (expense), net                   |                                          |                               | (775    | )                    |        |                         | (159   | )        |        |          | (1,035  | )       |        |   | (251    | )      
|                                       |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        
|Income (loss) before taxes             |                                          |                               | (15,539 | )                    |        |                         | 717    |          |        |          | (11,653 | )       |        |   | 19,040  |        
|Income tax (benefit) expense           |                                          |                               | (5,965  | )                    |        |                         | 215    |          |        |          | (4,799  | )       |        |   | 5,712   |        
|Minority share of income (loss)        |                                          |                               | (368    | )                    |        |                         | 19     |          |        |          | 597     |         |        |   | 990     |        
|                                       |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        
|Net income (loss)                      |                                          | $                             | (9,206  | )                    |        | $                       | 483    |          |        | $        | (7,451  | )       |        | $ | 12,338  |        
|                                       |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        
|Earnings (loss) per share information: |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        
|                                       | Basic:                                   |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |         |       
|                                       |                                          | Weighted average shares       |         |                      | 17,920 |                         |        |          | 17,695 |          |         |         | 17,999 |   |         |         | 17,681 | 
|                                       |                                          | Net earnings (loss) per share |         | $                    | (0.51  | )                       |        | $        | 0.03   |          |         | $       | (0.41  | ) |         | $       | 0.70   | 
|                                       |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        
|                                       | Diluted:                                 |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |         |       
|                                       |                                          | Weighted average shares       |         |                      | 17,920 |                         |        |          | 18,310 |          |         |         | 17,999 |   |         |         | 18,403 | 
|                                       |                                          | Net earnings (loss) per share |         | $                    | (0.51  | )                       |        | $        | 0.03   |          |         | $       | (0.41  | ) |         | $       | 0.67   | 
|                                       |                                          |                               |         |                      |        |                         |        |          |        |          |         |         |        |   |         |        

See accompanying notes to condensed consolidated financial statements.

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VANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(AMOUNTS IN THOUSANDS)

|                                                                                                   |                                                                             |                            |        |                         |         |          |         |       |        |  
|-------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------- | ------ | ----------------------- | ------- | -------- | ------- | ----- | ------ | -
|                                                                                                   |                                                                             |                            |        | THIRTY-NINE WEEKS ENDED
|                                                                                                   |                                                                             |                            |        |                        
|                                                                                                   |                                                                             |                            |        | MARCH 1,                |         | MARCH 2,
|                                                                                                   |                                                                             |                            |        | 2003                    |         | 2002    
|                                                                                                   |                                                                             |                            |        |                        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |                                                                             |                            |        |                         |         |          |         |      
|Net income (loss)                                                                                  |                                                                             | $                          | (7,451 | )                       |         | $        | 12,338  |      
|Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities: |                                                                             |                            |        |                         |         |          |         |      
|                                                                                                   | Depreciation and amortization                                               |                            |        | 8,219                   |         |          |         | 5,915 |       
|                                                                                                   | Impairment charges                                                          |                            |        | 15,338                  |         |          |         |      |       
|                                                                                                   | Net loss on sale of property, plant and equipment                           |                            |        | 32                      |         |          |         | 53    |       
|                                                                                                   | Net (gain) on sale of investment                                            |                            |        |                        |         |          |         | (40   | )     
|                                                                                                   | Minority share of income                                                    |                            |        | 597                     |         |          |         | 990   |       
|                                                                                                   | Provision for losses on accounts receivable                                 |                            |        | 1,034                   |         |          |         | 331   |       
|                                                                                                   | Changes in assets and liabilities, net of
effects of business acquisitions: |                            |        |                         |         |          |         |       |       
|                                                                                                   |                                                                             | Accounts receivable        |        |                         | (14,788 | )        |         |       | (9,815 | )
|                                                                                                   |                                                                             | Inventories                |        |                         | (304    | )        |         |       | (3,854 | )
|                                                                                                   |                                                                             | Deferred income taxes      |        |                         | 313     |          |         |       | 385    |  
|                                                                                                   |                                                                             | Prepaid and other expenses |        |                         | 4,678   |          |         |       | (1,616 | )
|                                                                                                   |                                                                             | Other assets               |        |                         | (150    | )        |         |       | (1,744 | )
|                                                                                                   |                                                                             | Accounts payable           |        |                         | 1,266   |          |         |       | (4,197 | )
|                                                                                                   |                                                                             | Accrued liabilities        |        |                         | 283     |          |         |       | (1,688 | )
|                                                                                                   |                                                                             | Income taxes payable       |        |                         | (2,294  | )        |         |       | 1,199  |  
|                                                                                                   |                                                                             |                            |        |                         |         |          |         |      
|Net cash provided by (used in) operating activities                                                |                                                                             |                            | 6,773  |                         |         |          | (1,743  | )    
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                              |                                                                             |                            |        |                         |         |          |         |      
|Purchases of property, plant and equipment                                                         |                                                                             |                            | (7,396 | )                       |         |          | (16,298 | )    
|Investments in other companies                                                                     |                                                                             |                            | (1,244 | )                       |         |          | (5,510  | )    
|Purchases of marketable and debt securities                                                        |                                                                             |                            | (1,006 | )                       |         |          | (35,690 | )    
|Maturities of marketable and debt securities                                                       |                                                                             |                            | 3,514  |                         |         |          | 587     |      
|Sales of marketable and debt securities                                                            |                                                                             |                            | 25,036 |                         |         |          | 12,873  |      
|Proceeds from sale of property, plant and equipment                                                |                                                                             |                            | 29     |                         |         |          | 6       |      
|Proceeds from sale of investment                                                                   |                                                                             |                            | 169    |                         |         |          | 109     |      
|                                                                                                   |                                                                             |                            |        |                         |         |          |         |      
|Net cash provided by (used in) investing activities                                                |                                                                             |                            | 19,102 |                         |         |          | (43,923 | )    
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                              |                                                                             |                            |        |                         |         |          |         |      
|Proceeds from (payments on) long term debt                                                         |                                                                             |                            | (295   | )                       |         |          | 78      |      
|Consolidated subsidiary dividends paid to minority shareholders                                    |                                                                             |                            | (1,112 | )                       |         |          | (1,101  | )    
|Proceeds from issuance of common stock                                                             |                                                                             |                            | 227    |                         |         |          | 9,891   |      
|Payment for repurchase of common stock                                                             |                                                                             |                            | (2,184 | )                       |         |          | (601    | )    
|                                                                                                   |                                                                             |                            |        |                         |         |          |         |      
|Net cash provided by (used in) financing activities                                                |                                                                             |                            | (3,364 | )                       |         |          | 8,267   |      
|Effect of exchange rate changes on cash and cash equivalents                                       |                                                                             |                            | 2,204  |                         |         |          | 631     |      
|Net increase (decrease) in cash and cash equivalents                                               |                                                                             |                            | 24,715 |                         |         |          | (36,768 | )    
|                                                                                                   |                                                                             |                            |        |                         |         |          |         |      
|Cash and cash equivalents, beginning of period                                                     |                                                                             |                            | 28,447 |                         |         |          | 59,748  |      
|                                                                                                   |                                                                             |                            |        |                         |         |          |         |      
|Cash and cash equivalents, end of period                                                           |                                                                             | $                          | 53,162 |                         |         | $        | 22,980  |      
|                                                                                                   |                                                                             |                            |        |                         |         |          |         |      
|SUPPLEMENTAL CASH FLOW INFORMATION  AMOUNTS PAID FOR:                                             |                                                                             |                            |        |                         |         |          |         |      
|                                                                                                   | Interest                                                                    |                            | $      | 294                     |         |          | $       | 109   |       
|                                                                                                   | Income taxes paid (refund)                                                  |                            | $      | (2,222                  | )       |          | $       | 4,901 |       

See accompanying notes to condensed consolidated financial statements.

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VANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  Basis of Presentation



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.
Certain amounts in the prior period financial statements have been
reclassified to conform to the current period presentation.

2.  Use of Estimates



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and
accompanying notes. Significant estimates made in preparing the consolidated
financial statements include, among others, allowances for doubtful accounts,
inventory reserves, long-lived asset valuations, deferred income tax asset
valuation allowances, litigation and other contingencies. To the extent there
are material differences between managements estimates and actual results,
future results of operations may be affected.

3.  Recent Accounting Pronouncements



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective June 1, 2002, we adopted Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144), which addresses the impairment for all
tangible assets. The adoption of SFAS 144 had no financial impact to our
consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement 13 and Technical Corrections (SFAS 145), which became effective
for us in Fiscal 2003. SFAS 145 eliminates the classification of debt
extinguishment activity as extraordinary items; eliminates inconsistencies in
lease modification treatment; and makes various technical corrections or
clarifications of other existing authoritative pronouncements. The adoption
of SFAS 145 had no financial impact to our consolidated financial statements.                                                                                                                                                                      
|
| | In July 2002, the FASB issued SFAS No. 146, Accounting For Costs Associated
With Exit or Disposal Activities (SFAS 146), which addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). SFAS 146 is effective
for exit or disposal activities that are initiated after December 31, 2002.
The adoption of SFAS 146 had no financial impact to our consolidated
financial statements.                                                                                                                                                                
|
| | In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure (SFAS 148), which permits two
additional transition methods for companies that elect to adopt the
fair-value-based method of accounting for stock-based employee compensation.
The statement also expands the disclosure requirements for stock-based
compensation. The provisions of this statement apply to financial statements
for fiscal years ending after December 15, 2002. The statement is not
expected to have a material impact on our consolidated financial statements.                                                                                                                                                                                     
|
| | In January 2003, the FASB issued FIN No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN 45). FIN 45 requires a company to recognize a
liability for the obligations it has undertaken in issuing a guarantee. This
liability would be recorded at the inception of a guarantee and would be
measured at fair value. The measurement provisions of this statement apply
prospectively to guarantees issued or modified after December 31, 2002. The
disclosure provisions of the statement apply to financial statements for
periods ending after December 15, 2002. We adopted this statement in the
quarter ended March 1, 2003, and it did not have an impact on our
consolidated financial statements.
|
| | In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities (FIN 46). FIN 46 requires a company to consolidate a
variable interest entity if it is designated as the primary beneficiary of
that entity even if the company does not have a majority of voting interests.
A variable interest entity is generally defined as an entity which has
insufficient equity to finance its activities or the owners of the entity
lack the risk and rewards of ownership. The provisions of this statement
apply at inception for any entity created after January 31, 2003. For an
entity created before February 1, 2003, the provisions of                                                                                                                           

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | this Interpretation must be applied at the beginning of the first interim or
annual period beginning after June 15, 2003. We will adopt the provisions of
FIN 46 in the quarter ending November 29, 2003, for existing entities that
are within the scope of this Interpretation. The statement also has
disclosure requirements, some of which are required to be included in
financial statements issued after January 31, 2003. On a preliminary basis,
we do not believe FIN 46 will have an impact on our consolidated financial
statements.

4.  Inventory



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | As of March 1, 2003, and May 31, 2002, inventories are substantially
comprised of finished goods.

5.  Earnings (Loss) Per Share



| |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Basic earnings (loss) 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. The reconciliations of basic to diluted weighted average shares are
as follows (in thousands):

|                                                      |  |                      |        |                         |  |          |        |          |  |  |        |  |  |  |        | 
|----------------------------------------------------- |  | -------------------- | ------ | ----------------------- |  | -------- | ------ | -------- |  |  | ------ |  |  |  | ------ | 
|                                                      |  | THIRTEEN WEEKS ENDED |        | THIRTY-NINE WEEKS ENDED
|                                                      |  |                      |        |                        
|                                                      |  | MARCH 1,             |        | MARCH 2,                |  | MARCH 1, |        | MARCH 2,
|                                                      |  | 2003                 |        | 2002                    |  | 2003     |        | 2002    
|                                                      |  |                      |        |                         |  |          |        |         
|Weighted average
shares used in
basic computation     |  |                      | 17,920 |                         |  |          | 17,695 |          |  |  | 17,999 |  |  |  | 17,681 | 
|Restricted stock
Grant                                |  |                      |       |                         |  |          | 100    |          |  |  |       |  |  |  | 105    | 
|Dilutive stock
options                                |  |                      |       |                         |  |          | 515    |          |  |  |       |  |  |  | 617    | 
|                                                      |  |                      |        |                         |  |          |        |          |  |  |        |  |  |  |        | 
|Weighted average
shares used for
dilutive
computation |  |                      | 17,920 |                         |  |          | 18,310 |          |  |  | 17,999 |  |  |  | 18,403 | 
|                                                      |  |                      |        |                         |  |          |        |          |  |  |        |  |  |  |        | 

The following shares were excluded from the computation of diluted earnings
(loss) per share as their effect would have been anti-dilutive (in thousands):

|                        |  |                      |       |                         |  |          |     |          |  |  |       |  |  |  |     | 
|----------------------- |  | -------------------- | ----- | ----------------------- |  | -------- | --- | -------- |  |  | ----- |  |  |  | --- | 
|                        |  | THIRTEEN WEEKS ENDED |       | THIRTY-NINE WEEKS ENDED
|                        |  |                      |       |                        
|                        |  | MARCH 1,             |       | MARCH 2,                |  | MARCH 1, |     | MARCH 2,
|                        |  | 2003                 |       | 2002                    |  | 2003     |     | 2002    
|                        |  |                      |       |                         |  |          |     |         
|Restricted stock
grants |  |                      | 79    |                         |  |          |    |          |  |  | 84    |  |  |  |    | 
|Stock options           |  |                      | 2,150 |                         |  |          | 329 |          |  |  | 2,142 |  |  |  | 346 | 

6.  Income Taxes



| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

7.  Segment Disclosures



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our reportable segments are based on our three distinct product sales
channels: retail, national and international. The retail segment consists
of our U.S. retail operations, which include our domestic retail stores and
skateparks. The national segment consists of all domestic operations outside
of our retail operations, which includes our domestic wholesale business, the
VANS Warped Tour® and the VANS High Cascade Snowboard Camp®. The
international segment includes our international wholesale business and our
European retail operations. The Unallocated category below represents
items necessary to reconcile to the consolidated financial statements, which
generally include corporate activities and operating costs not directly
attributable to any one segment. Our chief operating decision-maker
evaluates the performance of our segments based on gross margin and direct

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| |                                                       
| | ------------------------------------------------------
| | operating profit, excluding such unallocated amounts. 
|
| | Summary information by segment follows (in thousands):

|                               |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |         |         |  
|------------------------------ | ------------- | ------------- | ------- | -------------------- | ------- | ----------------------- | ------ | -------- | ------ | -------- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                               |               |               |         | THIRTEEN WEEKS ENDED |         | THIRTY-NINE WEEKS ENDED
|                               |               |               |         |                      |         |                        
|                               |               |               |         | MARCH 1,             |         | MARCH 2,                |        | MARCH 1, |        | MARCH 2,
|                               |               |               |         | 2003                 |         | 2002                    |        | 2003     |        | 2002    
|                               |               |               |         |                      |         |                         |        |          |        |         
|Net sales:                     |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |        
|                               | Retail        |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |         |        
|                               |               | Skateparks    |         | $                    | 5,122   |                         |        | $        | 6,030  |          |         | $       | 15,371  |   |         | $       | 15,601  |  
|                               |               | Retail stores |         |                      | 24,544  |                         |        |          | 24,298 |          |         |         | 73,274  |   |         |         | 71,463  |  
|                               | National      |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |         |        
|                               |               | Wholesale     |         |                      | 22,498  |                         |        |          | 24,593 |          |         |         | 86,954  |   |         |         | 101,933 |  
|                               |               | Other         |         |                      | 68      |                         |        |          | 93     |          |         |         | 10,424  |   |         |         | 2,000   |  
|                               | International |               |         | 29,832               |         |                         |        | 27,137   |        |          |         | 81,280  |         |   |         | 77,547  |        
|                               | Unallocated   |               |         |                     |         |                         |        |         |        |          |         |        |         |   |         |        |        
|                               |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |        
|Total net sales                |               | $             | 82,064  |                      |         | $                       | 82,151 |          |        | $        | 267,303 |         |         | $ | 268,544 |        
|                               |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |        
|Gross profit:                  |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |        
|                               | Retail        |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |         |        
|                               |               | Skateparks    |         | $                    | 3,499   |                         |        | $        | 4,424  |          |         | $       | 10,948  |   |         | $       | 11,806  |  
|                               |               | Retail stores |         |                      | 12,005  |                         |        |          | 12,546 |          |         |         | 38,619  |   |         |         | 39,402  |  
|                               | National      |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |         |        
|                               |               | Wholesale     |         |                      | 8,253   |                         |        |          | 9,505  |          |         |         | 31,685  |   |         |         | 40,351  |  
|                               |               | Other         |         |                      | (151    | )                       |        |          | (37    | )        |         |         | 427     |   |         |         | 429     |  
|                               | International |               |         | 15,430               |         |                         |        | 11,299   |        |          |         | 38,506  |         |   |         | 34,348  |        
|                               | Unallocated   |               |         |                     |         |                         |        |         |        |          |         |        |         |   |         |        |        
|                               |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |        
|Total net sales                |               | $             | 39,036  |                      |         | $                       | 37,737 |          |        | $        | 120,185 |         |         | $ | 126,336 |        
|                               |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |        
|Income (loss) from operations: |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |        
|                               | Retail        |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |         |        
|                               |               | Skateparks    |         | $                    | (13,472 | )                       |        | $        | 232    |          |         | $       | (15,202 | ) |         | $       | 678     |  
|                               |               | Retail stores |         |                      | (3,733  | )                       |        |          | 1,068  |          |         |         | (2,635  | ) |         |         | 6,298   |  
|                               | National      |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |         |        
|                               |               | Wholesale     |         |                      | 4,076   |                         |        |          | 6,923  |          |         |         | 19,692  |   |         |         | 31,579  |  
|                               |               | Other         |         |                      | (288    | )                       |        |          | (171   | )        |         |         | (1      | ) |         |         | (6      | )
|                               | International |               |         | 8,928                |         |                         |        | 5,774    |        |          |         | 22,520  |         |   |         | 19,655  |        
|                               | Unallocated   |               |         | (10,529              | )       |                         |        | (13,184  | )      |          |         | (35,671 | )       |   |         | (39,857 | )      
|                               |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |        
|Total net sales                |               | $             | (15,018 | )                    |         | $                       | 642    |          |        | $        | (11,297 | )       |         | $ | 18,347  |        
|                               |               |               |         |                      |         |                         |        |          |        |          |         |         |         |   |         |        

Included in skatepark and retail stores income (loss) from operations for the
thirteen and thirty-nine weeks ended March 1, 2003, are impairment charges of
$12.5 million and $2.9 million, respectively.

8.  Goodwill and Identifiable Intangible Assets



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective June 1, 2001, we adopted SFAS Nos. 141 and 142 on Business
Combinations and Goodwill and Other Intangible Assets, which require that
we prospectively cease amortization of goodwill and intangible assets with
indefinite lives and instead conduct periodic tests of such assets for
impairment. The following table summarizes our identifiable intangible assets
and goodwill balances as of March 1, 2003 and May 31, 2002 (in thousands):

|                                           |                        |  |   |               |  |              |   |          |   |              |   |       |  |  |   |      |   | 
|------------------------------------------ | ---------------------- |  | - | ------------- |  | ------------ | - | -------- | - | ------------ | - | ----- |  |  | - | ---- | - | 
|                                           |                        |  |   | MARCH 1, 2003 |  | MAY 31, 2002
|                                           |                        |  |   |               |  |             
|                                           |                        |  |   | Gross         |  | Gross        |   |          |   |              |   |       |  | 
|                                           |                        |  |   | Carrying      |  | Accumulated  |   | Carrying |   | Accumulated 
|                                           |                        |  |   | Amount        |  | Amortization |   | Amount   |   | Amortization
|                                           |                        |  |   |               |  |              |   |          |   |             
|Intangible assets subject to
amortization: |                        |  |   |               |  |              |   |          |   |              |   |       |  |  |   |     
|                                           | Trademarks and patents |  | $ | 5,097         |  |              | $ | (850     | ) |              | $ | 4,798 |  |  | $ | (605 | )

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| |       |       |  |               |       |              |  |          |        |              |  |     |       |  |  |     |      |  
| | ----- | ----- |  | ------------- | ----- | ------------ |  | -------- | ------ | ------------ |  | --- | ----- |  |  | --- | ---- | -
| |       |       |  | MARCH 1, 2003 |       | MAY 31, 2002
| |       |       |  |               |       |             
| |       |       |  | Gross         |       | Gross        |  |          |        |              |  |     |       | 
| |       |       |  | Carrying      |       | Accumulated  |  | Carrying |        | Accumulated 
| |       |       |  | Amount        |       | Amortization |  | Amount   |        | Amortization
| |       |       |  |               |       |              |  |          |        |             
| | Other |       |  | 886           |       |              |  | (361     | )      |              |  | 886 |       |  |  | (38 | )   
| |       |       |  |               |       |              |  |          |        |              |  |     |       |  |  |    
| |       | Total |  | $             | 5,983 |              |  | $        | (1,211 | )            |  | $   | 5,684 |  |  | $   | (643 | )
| |       |       |  |               |       |              |  |          |        |              |  |     |       |  |  |    

|                                               |            |       |   |          |        |          |   |        |        | 
|---------------------------------------------- | ---------- | ----- | - | -------- | ------ | -------- | - | ------ | ------ | 
|                                               |            |       |   | Carrying |        | Carrying
|                                               |            |       |   | Amount   |        | Amount  
|                                               |            |       |   |          |        |         
|Intangible assets not subject to
amortization: |            |       |   |          |        |          |   |       
|                                               | Goodwill   |       | $ | 34,988   |        |          | $ | 33,752 |       
|                                               | Trademarks |       |   | 10,885   |        |          |   | 10,885 |       
|                                               |            |       |   |          |        |          |   |       
|                                               |            | Total |   | $        | 45,873 |          |   | $      | 44,637 | 
|                                               |            |       |   |          |        |          |   |       

Goodwill is comprised of $12.7 million associated with the
acquisition of our predecessor company; $6.0 million associated with the
acquisition of Mosa Extreme Sports, Inc., now known as Pro-Tec, Inc.
(Pro-Tec); $5.8 million related to the acquisition of Global Accessories
Limited (now known as Vans Inc. Limited), our U.K. distributor; $4.6 million
associated with our snowboot and bindings business; $4.9 million associated
with our acquisition of a majority interest in the VANS Warped
Tour®; and $1.0 million associated with the acquisition of
Compagnie Sunspot SA ("Sunspot"), our sales agent for France.

Amortization expense for intangible assets subject to amortization was $203 and
$62 for the thirteen-week periods ended March 1, 2003, and March 2, 2002,
respectively, and $568 and $152 for the thirty-nine week periods ended March 1,
2003, and March 2, 2002, respectively. Future estimated amortization expense
for the remainder of Fiscal 2003, the next four years and thereafter is as
follows (in thousands):

|                            |            |   |       |       | 
|--------------------------- | ---------- | - | ----- | ----- | 
|FISCAL YEAR ENDING MAY 31,: |            |   |       |      
|2003                        |            | $ | 174   |      
|2004                        |            |   | 443   |      
|2005                        |            |   | 442   |      
|2006                        |            |   | 442   |      
|2007                        |            |   | 435   |      
|                            | Thereafter |   |       | 2,836 | 
|                            |            |   |       |      
|                            |            | $ | 4,772 |      
|                            |            |   |       |      

9.  Impairment of Long-lived Assets



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a result of continuing negative trends which have affected our skatepark
and domestic retail business, we performed an assessment as of March 1, 2003,
of the net carrying value of long-lived assets associated with our skateparks
and domestic retail stores to determine whether these assets are fully
recoverable. This assessment was performed in accordance with SFAS 144. As
a result of this assessment, we have recorded impairment charges aggregating
$15.3 million to write down the long-lived assets associated with 10 of our
skateparks and some or all of the long-lived assets associated with certain
of our retail stores to net realizable value. $12.5 million of this charge
was recorded to fully write down the net carrying value of long-lived assets
associated with the skateparks. The remaining $2.9 million of this charge
was recorded to write down the net carrying value of long-lived assets
associated with 17 of our 166 retail stores. Net realizable values were
determined based upon discounted projected future cash flows for each
skatepark and each retail store. The discount rate applied was based upon
our weighted average cost of capital adjusted for the risks associated with
these operations. See the discussion under the caption Third Quarter
Impairment Charges and Receivable Concession in Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations.

10.  Derivatives and Hedging



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are exposed to foreign currency risk primarily through our wholly-owned
subsidiaries, Vans Europe BV (VEBV), whose functional currency is the euro,
and Vans Inc. Limited (VIL), whose functional currency is the British
sterling. The currency risk is created because our subsidiaries purchases of
inventory are priced and settled in U.S. dollars. To hedge this risk, our
subsidiaries enter into cash flow hedges of forecasted inventory purchases,
thereby fixing the cost of the product and the associated gross margins in
their functional currency. As of March 1, 2003, our subsidiaries hedged
approximately 80% of forecasted purchases through the end of Fiscal 2003.

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Gains and losses on cash flow hedges of forecasted transactions are recorded
in other comprehensive income if the hedge accounting requirements set forth
in FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, are met. Such gains and losses recorded in other comprehensive
income are 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. dollar payable is recognized. All of
the existing gains or losses included in accumulated other comprehensive
income are expected to be reclassified into earnings within the next six
months.

11. Comprehensive Income (Loss)



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Other comprehensive income (loss) refers to revenue, expenses, gains and
losses that are recorded as an element of stockholders equity but are
excluded from net income. Other comprehensive income is comprised of: (i)
unrealized gains and losses on derivative instruments qualifying as cash flow
hedges; and (ii) foreign currency translation adjustments. The components of
total comprehensive income (loss) for the thirteen and thirty-nine week
periods ended March 1, 2003, and March 2, 2002 were as follows (in
thousands):

|                                   |                                               |                                       |        |                      |      |                         |      |          |     |          |        |       |      |   |        |        |     | 
|---------------------------------- | --------------------------------------------- | ------------------------------------- | ------ | -------------------- | ---- | ----------------------- | ---- | -------- | --- | -------- | ------ | ----- | ---- | - | ------ | ------ | --- | 
|                                   |                                               |                                       |        | THIRTEEN WEEKS ENDED |      | THIRTY-NINE WEEKS ENDED
|                                   |                                               |                                       |        |                      |      |                        
|                                   |                                               |                                       |        | MARCH 1,             |      | MARCH 2,                |      | MARCH 1, |     | MARCH 2,
|                                   |                                               |                                       |        | 2003                 |      | 2002                    |      | 2003     |     | 2002    
|                                   |                                               |                                       |        |                      |      |                         |      |          |     |         
|Net income (loss)                  |                                               | $                                     | (9,206 | )                    |      | $                       | 483  |          |     | $        | (7,451 | )     |      | $ | 12,338 |       
|Other comprehensive income (loss): |                                               |                                       |        |                      |      |                         |      |          |     |          |        |       |      |   |        |       
|                                   | Derivatives qualifying as hedges,
net of tax: |                                       |        |                      |      |                         |      |          |     |          |        |       |      |   |        |        |    
|                                   |                                               | Net derivative gain (loss)            |        |                      | (481 | )                       |      |          | 131 |          |        |       | (936 | ) |        |        | 154 | 
|                                   |                                               | Reclassifications to (income) expense |        |                      | 205  |                         |      |          | (38 | )        |        |       | 351  |   |        |        | 7   | 
|                                   | Foreign currency translation
adjustments      |                                       |        | 2,293                |      |                         |      | (1,173   | )   |          |        | 4,426 |      |   |        | (3,169 | )  
|                                   |                                               |                                       |        |                      |      |                         |      |          |     |          |        |       |      |   |        |       
|Total comprehensive income (loss)  |                                               | $                                     | (7,189 | )                    |      | $                       | (597 | )        |     | $        | (3,610 | )     |      | $ | 9,330  |       
|                                   |                                               |                                       |        |                      |      |                         |      |          |     |          |        |       |      |   |        |       



| |                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In connection with our implementation of new euro-based systems in Europe, we
recalculated the cumulative foreign currency translation adjustment and
recorded a charge to other comprehensive income aggregating to $1,694 during
the quarter ended December 1, 2001, and relating to prior periods dating back
to fiscal 1999.

12. Purchase Acquisitions



| | On June 11, 2002, we acquired 100% of the outstanding capital stock of Sunspot
for cash consideration of $2.9 million. Of the total purchase price paid, $1.9
million was allocated to identifiable acquired assets and liabilities and the
remaining $1.0 million was allocated to goodwill. In addition, we are required
to pay additional cash consideration in connection with this acquisition based
on the level of sales achieved by the acquired sales agent over each of the
next five years in the period from the acquisition date through June 11, 2007.
Although the amount of additional consideration to be paid cannot yet be
determined, we currently estimate that $1.5 million will be paid in the current
fiscal year and an aggregate of $9.0 million will be paid through June 11,
2007. Any such additional consideration will be allocated to goodwill.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | In February 2002, we acquired a 70% interest in the VANS Warped Tour®, a
traveling lifestyle, music and sports festival that visits top young adult
markets throughout North America, for $5.2 million. On April 15, 2002, we
acquired 100% of the outstanding capital stock of Pro-Tec for $14.8 million.
Pro-Tec manufactures and distributes PRO-TEC brand helmets, protective gear
and pads for sports such as skateboarding, snowboarding and BMX riding. The
results of operations for the VANS Warped Tour® and Pro-Tec have been
included in our consolidated financial statements since the respective dates
of acquisition.                                                                                                                                                                                                                                          



| |                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In connection with the acquisition of Pro-Tec, if specified future
performance targets are achieved during the fiscal years ending May 31, 2003
and 2004, the aggregate consideration for this acquisition will be increased
by up to $5.0 million. Such additional consideration, if earned, will be
paid either in cash or unrestricted shares of our common stock and will be
allocated to goodwill.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Selected unaudited pro forma combined results of operations for the thirteen
and thirty-nine week periods ended March 2, 2002, assuming the acquisitions of Sunspot, Pro-Tec and
the VANS Warped Tour occurred on June 1, 2001, compared to our
actual results for the thirteen and thirty-nine week periods ended March 1,
2003, are presented below (in thousands). Pro forma results for the thirteen and thirty-nine week
periods ended March 1, 2003 did not differ materially from actual results for these periods.

|             |  |   |        |  |                      |   |                         |  |               |   |               |  |  |   |         |  |  |  | 
|------------ |  | - | ------ |  | -------------------- | - | ----------------------- |  | ------------- | - | ------------- |  |  | - | ------- |  |  |  | 
|             |  |   |        |  | THIRTEEN WEEKS ENDED |   | THIRTY-NINE WEEKS ENDED
|             |  |   |        |  |                      |   |                        
|             |  |   |        |  | MARCH 1, 2003        |   | MARCH 2, 2002           |  | MARCH 1, 2003 |   | MARCH 2, 2002
|             |  |   |        |  | (ACTUAL)             |   | (PRO FORMA)             |  | (ACTUAL)      |   | (PRO FORMA)  
|             |  |   |        |  |                      |   |                         |  |               |   |              
|Net sales    |  | $ | 82,064 |  |                      | $ | 84,549                  |  |               | $ | 267,303       |  |  | $ | 287,814 | 
|Gross profit |  | $ | 39,036 |  |                      | $ | 39,103                  |  |               | $ | 120,185       |  |  | $ | 134,031 | 

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|                       |          |                             |                                |   |                      |        |                         |   |               |        |               |   |       |        |         |   |      |        | 
|---------------------- | -------- | --------------------------- | ------------------------------ | - | -------------------- | ------ | ----------------------- | - | ------------- | ------ | ------------- | - | ----- | ------ | ------- | - | ---- | ------ | 
|                       |          |                             |                                |   | THIRTEEN WEEKS ENDED |        | THIRTY-NINE WEEKS ENDED
|                       |          |                             |                                |   |                      |        |                        
|                       |          |                             |                                |   | MARCH 1, 2003        |        | MARCH 2, 2002           |   | MARCH 1, 2003 |        | MARCH 2, 2002
|                       |          |                             |                                |   | (ACTUAL)             |        | (PRO FORMA)             |   | (ACTUAL)      |        | (PRO FORMA)  
|                       |          |                             |                                |   |                      |        |                         |   |               |        |              
|Operating expenses     |          | $                           | 54,054                         |   |                      | $      | 37,992                  |   |               | $      | 131,482       |   |       | $      | 111,147 |  
|Net income (loss)      |          | $                           | (9,206                         | ) |                      | $      | 915                     |   |               | $      | (7,451        | ) |       | $      | 15,700  |  
|Per share information: |          |                             |                                |   |                      |        |                         |   |               |        |               |   |       |        |         |  
|                       | Basic:   |                             |                                |   |                      |        |                         |   |               |        |               |   |       |        |         |   |     
|                       |          | Net income (loss)
per share |                                | $ | (0.51                | )      |                         | $ | 0.05          |        |               | $ | (0.41 | )      |         | $ | 0.86 |       
|                       |          |                             | Weighted average
common shares |   |                      | 17,920 |                         |   |               | 18,284 |               |   |       | 17,999 |         |   |      | 18,270 | 
|                       | Diluted: |                             |                                |   |                      |        |                         |   |               |        |               |   |       |        |         |   |     
|                       |          | Net income (loss)
per share |                                | $ | (0.51                | )      |                         | $ | 0.05          |        |               | $ | (0.41 | )      |         | $ | 0.83 |       
|                       |          |                             | Weighted average
common shares |   |                      | 17,920 |                         |   |               | 18,898 |               |   |       | 17,999 |         |   |      | 18,992 | 

13.  Revolving Credit Facility



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Through March 1, 2003, we maintained an unsecured revolving credit facility
pursuant to a credit agreement with several lenders in an amount not to
exceed $45.0 million. The credit agreement permitted us to draw upon the
credit facility for general corporate purposes, capital expenditures,
acquisitions and stock repurchases and would have expired on April 30, 2004.
We had the option to pay interest on revolving credit facility advances at a
rate equal to either LIBOR plus a margin, or the base rate plus a margin. At
March 1, 2003, no amounts were outstanding under the revolving credit
facility. Subsequent to March 1, 2003, we reached agreement with the lenders
to terminate the credit agreement and replace it with a $20.0 million secured
revolving credit facility. Under the new facility, we will be able to obtain
advances for the issuance of commercial letters of credit and standby letters
of credit. The new facility will be secured by a security interest in a
certificate of deposit held with the lending institution, and advances under
the facility will bear interest at a rate equal to either the prime rate or
LIBOR plus .20%. The new facility will mature on May 1, 2004 and is subject
to the completion of loan documents. The loan agreement for the new facility
will contain less restrictive affirmative and negative covenants than the
credit agreement for the prior facility.

14.  Commitments and Contingencies



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Vans, Inc. vs. Scott Brabson and Jay Rosendahl, in Arbitration before
JAMS. The allegations we have made in this case and the companion lawsuit
pending in Los Angeles Superior Court are described in our Annual Report on
Form 10-K for Fiscal 2002. Updated disclosures regarding this case describing
the arbitrators award of $8.0 million to us are contained in two Forms 8-K
we filed with the SEC on February 3, 2003 and February 25, 2003,
respectively. No amounts have been recorded in the accompanying consolidated
financial statements in connection with the arbitrators award.                                                                                                                                                                                                                                                                                          
|
| | On March 10, 2003, Brabson filed for bankruptcy protection under the
Federal Bankruptcy laws. We believe that Brabsons obligations to us are not
dischargeable under such laws and we will file a motion seeking an order from
the bankruptcy judge to that effect.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | On March 18, 2003, the bankruptcy judge in Rosendahls bankruptcy case
granted our motion to lift the stay in that case to allow us to finalize the
arbitrators award against Rosendahl. We will now file a motion requesting
an order from the bankruptcy judge declaring that Rosendahls obligations to
us are non-dischargeable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | Gordana Brabson vs. Vans, Inc. et. al, Superior Court of California, County
of Santa Barbara, case No. 01110315. This lawsuit was filed against Vans, two
of Vans executive officers, and certain other individuals and entities on
December 6, 2002, in connection with the above-mentioned litigation (the
Brabson and Rosendahl case). Mrs. Brabson alleges causes of action for
invasion of privacy, trespass, and intentional infliction of emotional
distress relating to the investigation conducted in connection with that
litigation. She seeks an unspecified amount of compensatory, special and
punitive damages. We recently brought a so-called SLAPP motion to dismiss
this case on the grounds that it was designed to inhibit our ability to
pursue our remedies in the Brabson and Rosendahl case. The court denied this
motion and we are proceeding with discovery.
|
| | From time to time, the Company is involved in legal proceedings arising in
the ordinary course of business. Management does not expect that any of the
legal proceedings in which the Company is currently involved will have a
material adverse impact on future results of operations or liquidity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | At March 1, 2003, we had letters of credit outstanding totaling $10.7
million. These letters of credit were issued for the purchase of inventory.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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

FORWARD-LOOKING STATEMENTS

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 the
text and 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, 2002, and in our press release
dated March 20, 2003. Additionally, the recent outbreak of the severe acute
respiratory syndrome (SARS) virus in southern China and Hong Kong could
impact our ability to source products. Most of the factories that we contract
with are located in southern China and our Asian offices are located in Hong
Kong. Any significant interruption in our ability to send personnel to those
areas to inspect and develop product or samples, or a high absenteeism rate at
the factories or at our offices, could have an adverse effect on our ability to
finalize, manufacture and ship our products.

OVERVIEW OF OUR BUSINESS

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 the youth lifestyle and for participants
in 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 and
California lifestyle. 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, 11 VANS skateparks and the VANS High Cascade Snowboard Camp®,
sponsoring numerous professional and amateur athletes and the VANS Warped
Tour®, as well as advertising in targeted print and television media.

Over the past 18 months our business has been adversely impacted by a
number of factors, including the trend toward sales of classic styles of many
athletic brands which has taken market share from us at mid-tier price points;
the underperformance of our U.S. retail stores, although, commencing in Q3
Fiscal 2003, we began to experience some relative improvements in certain
segments of our retail business; and a decline in sales in certain
international markets, particularly Mexico and South America. Additionally,
increased competition from large, free public skateparks, located in close
proximity to our skateparks, has adversely impacted attendance and revenues at
our skateparks and led us to write down the net carrying value of the
long-lived assets of all of our skateparks, as discussed below.

THIRD QUARTER IMPAIRMENT CHARGES AND RECEIVABLE CONCESSION

During Q3 Fiscal 2003, the negative trends which have affected our
skatepark business and U.S. retail stores for the past year continued. For
the quarter, comparable skatepark revenues decreased 34.5% and comparable store
sales for our U.S. retail stores decreased 8.4%, following declines of 32.5%
and 10.4%, respectively, for Q2 Fiscal 2003 and 35.0% and 5.6%, respectively,
for Q1 Fiscal 2003. With respect to our skateparks, we retained a consultant
in Q2 Fiscal 2003 to review our skatepark business. This consultant presented
his findings to our Board of Directors in January 2003. The consultants study
showed that, in order to produce break-even cash flows at the parks, we would
need to introduce new pricing concepts, significantly increase skate session
attendance, reduce operating expenses, and increase the retail performance in
the parks. We began testing new pricing strategies in several of the parks in
January 2003. As of the end of Q3 Fiscal 2003, the pricing strategies had
produced little or no improvement in our skatepark business. As a result of
that, the continued deterioration in skatepark revenues, and the continued
decline in comparable store sales for our U.S. stores, as of the end of Q3
Fiscal 2003 we conducted the tests required by SFAS 144 to determine whether
the long-lived assets associated with certain of our skateparks and U.S. retail
stores were fully recoverable.

Our analyses indicated that the long-lived assets associated with 10
skateparks are not fully recoverable, the long-lived assets associated with 11
retail stores are not fully recoverable, and the long-lived assets associated
with six retail stores are only partially recoverable.

Additionally, during the quarter, we executed two new five-year license
agreements with our licensee for Japan. In connection

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with the negotiations for those agreements, we agreed to concede a $375,000
receivable relating to a bag and backpack license agreement that we were not
renewing (the License Receivable).

As a result of the above, we incurred the pre-tax non-cash impairment
charges and conceded the License Receivable as follows:

|                                                  |  |                     |  |                       
|------------------------------------------------- |  | ------------------- |  | ----------------------
|                                                  |  | PRE-TAX AMOUNT OF   |  |                       
|                                                  |  | NON-CASH CHARGES OR |  | LINE ITEM OF STATEMENT
|ITEM                                              |  | CONCESSION          |  | OF OPERATIONS IMPACTED
|                                                  |  |                     |  |                       
| Write-down of skatepark long-lived assets       |  | $12.5 million       |  | Impairment Charges    
|                                                  |  |                     |  |                       
| Write-down of retail store long-lived assets    |  | $2.9 million        |  | Impairment Charges    
|                                                  |  |                     |  |                       
| Concession of receivable from Japanese licensee |  | $375,000            |  | International Sales   

We have retained a firm to assist us in negotiating rent concessions or
lease terminations for our skateparks. We expect such negotiations to result
in cash charges in future quarters as we reach agreements with the landlords.
The amount of such charges and the timing thereof cannot be determined by us at
this time. We expect any cash payments we make in connection with such charges
to be funded by existing cash and cash from operations.

CRITICAL ACCOUNTING POLICIES

Our financial condition and results of operations are impacted by the
methods, assumptions and estimates used in the application of critical
accounting policies. Changes in the estimates or other judgements of matters
inherently uncertain that are included within these accounting policies could
result in a significant change to the information presented in the financial
statements. We believe our most critical accounting policies relate to:

Revenue Recognition.We recognize product, skatepark, royalty, event and
other revenue upon concluding that all of the fundamental criteria for revenue
recognition have been met. We record wholesale revenues when title passes and
the risks and rewards of ownership have passed to the customer. Retail store
revenues are recorded at the time of sale. As part of our revenue recognition
policy, we record estimated returns and miscellaneous claims from customers as
reductions to revenues at the time revenues are recorded. We base our
estimates on historical rates of product returns and claims as well as specific
identification of outstanding claims and returns not yet received from
customers. Actual returns and claims in any future period are inherently
uncertain and thus may differ from our estimates.

Accounts Receivable.We provide allowances for doubtful accounts based on
a number of factors including historical experience and past due status as well
as individual customer circumstances such as ability to pay, bankruptcy, credit
ratings and payment history. If actual market conditions are less favorable
than those projected by us, additional provisions for doubtful accounts may be
required.

Inventory.Inventories are valued at the lower of cost or market. Finished
goods inventories are valued using the first-in, first-out method (FIFO). We
write-down our inventories for estimated obsolescence or unmarketable inventory
equal to the difference between the cost of inventory and the estimated market
value based upon assumptions about future demand and market conditions. If
actual market conditions are less favorable than those projected by us,
additional inventory write-downs may be required.

Impairment Losses on Property, Plant and Equipment.We evaluate the
carrying value of assets for impairment when the assets experience a negative
event (i.e., significant downturn in operations, losses from operating units,
natural disaster, etc.). When these events are identified, we review the last
two years of operations, for example, on a store-by-store basis and, if there
are losses, we estimate future undiscounted cash flows. If the projected
undiscounted cash flows do not exceed the carrying value of the assets, we
write-down the assets to fair value based on discounted projected future cash
flows. The most significant assumptions we use in this analysis are those made
in estimating future discounted cash flows. In estimating cash flows, we
generally use the financial assumptions in our current budget and our strategic
plan and modify them on a store-by-store basis if other factors should be

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considered. The discount rate applied is based upon our weighted average
cost of capital adjusted for the risks associated with the operations being
analyzed. As described in Note 9 to the Condensed Consolidated Financial
Statements and above under the caption Third Quarter Impairment Charges and
Receivable Concession, we recorded impairment charges aggregating $15.3
million in Q3 Fiscal 2003 to write down the long-lived assets associated with
10 of our skateparks and some or all of the long-lived assets of 17 of our 166
retail stores to net realizable value. Although we believe the assumptions
made regarding our long-lived assets are reasonable given our current operating
performance, any change in market conditions could result in additional
impairment losses.

Impairment losses on Goodwill.Goodwill is tested for impairment annually as of
March 31 at the reporting unit level unless a change in circumstances indicates
more frequent impairment analysis is required. The impairment, if any, is
measured in part based on the estimated fair value of the reporting units with
the recorded goodwill. Fair value is determined by using a combination of
techniques, such as the traditional present value approach, the expected cash
flow approach, and the multiple of earnings approach. The most significant
assumptions we use in this analysis are those made in estimating future cash
flows. In estimating future cash flows, we generally use the financial
assumptions in our current budget and our strategic plan, subject to
modification as considered necessary, including sales and expense growth rates
and the discount rate we estimate to represent our cost of funds. Goodwill is
comprised of $12.7 million associated with the acquisition of our
predecessor company; $6.0 million associated with the acquisition of Mosa
Extreme Sports, Inc., now known as Pro-Tec, Inc. (Pro-Tec); $5.8 million
related to the acquisition of Global Accessories Limited (now known as Vans
Inc. Limited), our U.K. distributor; $4.6 million associated with our snowboot
and bindings business; $4.9 million associated with our acquisition of a
majority interest in the VANS Warped Tour®; and $1.0 million associated with our acquisition
of Compagnie Sunspot SA, our sales agent for France.

RESULTS OF OPERATIONS

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

|                                |                                          |                            |       |                      |       |                         |      |          |     |          |      |       |      |   |      |       |     | 
|------------------------------- | ---------------------------------------- | -------------------------- | ----- | -------------------- | ----- | ----------------------- | ---- | -------- | --- | -------- | ---- | ----- | ---- | - | ---- | ----- | --- | 
|                                |                                          |                            |       | THIRTEEN WEEKS ENDED |       | THIRTY-NINE WEEKS ENDED
|                                |                                          |                            |       |                      |       |                        
|                                |                                          |                            |       | MARCH 1,             |       | MARCH 2,                |      | MARCH 1, |     | MARCH 2,
|                                |                                          |                            |       | 2003                 |       | 2002                    |      | 2003     |     | 2002    
|                                |                                          |                            |       |                      |       |                         |      |          |     |         
|Retail sales                    |                                          |                            | 36.1  |                      |       |                         | 36.9 |          |     |          | 33.2 |       |      |   | 32.4 |      
|National sales                  |                                          |                            | 27.5  |                      |       |                         | 30.0 |          |     |          | 36.4 |       |      |   | 38.7 |      
|International sales             |                                          |                            | 36.4  |                      |       |                         | 33.0 |          |     |          | 30.4 |       |      |   | 28.9 |      
|                                |                                          |                            |       |                      |       |                         |      |          |     |          |      |       |      |   |      |      
|                                | Net sales                                |                            |       | 100.0                | %     |                         |      | 100.0    | %   |          |      | 100.0 | %    |   |      | 100.0 | %  
|Cost of sales                   |                                          |                            | 52.4  |                      |       |                         | 54.1 |          |     |          | 55.0 |       |      |   | 53.0 |      
|                                |                                          |                            |       |                      |       |                         |      |          |     |          |      |       |      |   |      |      
|                                | Gross profit                             |                            |       | 47.6                 |       |                         |      | 45.9     |     |          |      | 45.0  |      |   |      | 47.0  |    
|Operating expenses:             |                                          |                            |       |                      |       |                         |      |          |     |          |      |       |      |   |      |      
|                                | Retail                                   |                            |       | 21.2                 |       |                         |      | 19.1     |     |          |      | 19.5  |      |   |      | 16.5  |    
|                                | Marketing, advertising and promotion     |                            |       | 7.7                  |       |                         |      | 10.1     |     |          |      | 8.5   |      |   |      | 9.9   |    
|                                | Selling, distribution and
administrative |                            |       | 18.1                 |       |                         |      | 15.9     |     |          |      | 15.2  |      |   |      | 13.8  |    
|                                | Impairment charges                       |                            |       | 18.7                 |       |                         |      | 0.0      |     |          |      | 5.7   |      |   |      | 0.0   |    
|                                | Amortization of intangibles              |                            |       | 0.2                  |       |                         |      | 0.1      |     |          |      | 0.2   |      |   |      | 0.1   |    
|                                |                                          |                            |       |                      |       |                         |      |          |     |          |      |       |      |   |      |      
|Total operating expenses        |                                          |                            | 65.9  |                      |       |                         | 45.2 |          |     |          | 49.2 |       |      |   | 40.2 |      
|                                |                                          |                            |       |                      |       |                         |      |          |     |          |      |       |      |   |      |      
|Income (loss) from operations   |                                          |                            | (18.3 | )                    |       |                         | 0.8  |          |     |          | (4.2 | )     |      |   | 6.8  |      
|Interest income, net            |                                          |                            | 0.3   |                      |       |                         | 0.3  |          |     |          | 0.3  |       |      |   | 0.4  |      
|Other (expense), net            |                                          |                            | (0.9  | )                    |       |                         | (0.2 | )        |     |          | (0.4 | )     |      |   | (0.1 | )    
|                                |                                          |                            |       |                      |       |                         |      |          |     |          |      |       |      |   |      |      
|                                |                                          | Income (loss) before taxes |       |                      | (18.9 | )                       |      |          | 0.9 |          |      |       | (4.4 | ) |      |       | 7.1 | 
|Income tax (benefit) expense    |                                          |                            | (7.3  | )                    |       |                         | 0.3  |          |     |          | (1.8 | )     |      |   | 2.1  |      
|Minority share of income (loss) |                                          |                            | (0.4  | )                    |       |                         | 0.0  |          |     |          | 0.2  |       |      |   | 0.4  |      
|                                |                                          |                            |       |                      |       |                         |      |          |     |          |      |       |      |   |      |      
|Net income (loss)               |                                          |                            | (11.2 | )%                   |       |                         | 0.6  | %        |     |          | (2.8 | )%    |      |   | 4.6  | %    
|                                |                                          |                            |       |                      |       |                         |      |          |     |          |      |       |      |   |      |      

QUARTERLY PERIOD ENDED MARCH 1, 2003 (Q3 FISCAL 2003), AS COMPARED TO
QUARTERLY PERIOD ENDED MARCH 2, 2002 (Q3 FISCAL 2002)

Net Sales

Net sales for Q3 Fiscal 2003 decreased slightly to $82.1 million from
$82.2 million for Q3 Fiscal 2002. The sales decrease was the net effect of
decreases in Retail and National sales, partially offset by the increase in
International sales, as discussed below.

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Retail.Retail sales, which consist solely of sales through our U.S.
retail stores and skatepark sessions and concessions, decreased slightly to
$29.7 million in Q3 Fiscal 2003 from $30.3 million in Q3 Fiscal 2002.
Comparable store sales (excluding revenue from concessions and skate sessions
at our skateparks) declined by 8.4% year-over-year. The comparable store sales
decrease was primarily related to the sluggish retail market and a
year-over-year decline in average selling price of 2.8% across all of our
stores. Revenues from concessions and skate sessions at our skateparks
declined 21.4%, or $580,000, year-over-year. The decline in skatepark revenue
was largely attributable to ongoing competition from free skateparks operated
by local municipalities in nearly all of our skatepark markets. As discussed
above, the continuing decline in skatepark revenue led to the impairment
charges we recorded in Q3 Fiscal 2003.

National.National sales, which include all U.S. sales except sales
through our U.S. retail stores, decreased 8.6% to $22.6 million in Q3 Fiscal
2003 from $24.7 million in Q3 Fiscal 2002. Excluding revenue from sales of
protective gear products by Pro-Tec, which was acquired in the fourth quarter
of fiscal year 2002, national sales were down 17.0% to $20.5 million. The
decline in our national sales was due to weakness across all of our product
lines.

International.International sales, which include sales through our seven
European retail stores, increased 9.9% to $29.8 million in Q3 Fiscal 2003 from
$27.1 million in Q3 Fiscal 2002. This increase was the result of increased
sales in Europe of approximately $5.7 million, partially offset by decreased
sales in Mexico of approximately $900,000, decreased sales in Asia of
approximately $800,000, decreased royalty payments from our licensee for Japan
of approximately $500,000, decreased sales in Canada of approximately $400,000
and the deconsolidation of our South American joint ventures, which provided
approximately $400,000 of revenue in Q3 Fiscal 2002.

The $5.7 million sales increase in Europe was primarily due to a $4.3
million favorable variance in exchange rates and a $1.4 million increase in
unit sales and local currency average selling prices. The decreased sales in
Mexico, Asia and Canada were primarily due to weakness in local retail markets.
The decrease in royalty payments from our licensee for Japan was largely
attributable to the concession of the License Receivable discussed above.

Gross Profit

Gross profit increased 3.4% to $39.0 million in Q3 Fiscal 2003 from $37.7
million in Q3 Fiscal 2002. As a percentage of net sales, gross profit increased
to 47.6% for Q3 Fiscal 2003, versus 45.9% for Q3 Fiscal 2002, primarily due to
an increase in international gross profit as a percentage of net sales from
41.6% to 51.7%. The increase in international gross profit was driven
primarily by increased average selling prices in Europe. Domestically, retail
gross profit decreased as a percentage of net sales from 56.0% to 52.3% largely
due to decreased sessions and concessions at our skateparks, and gross profit
from National sales decreased as a percentage of net sales from 38.4% to 35.9%
due to continued downward pricing pressure and the tough promotional
environment in the U.S.

Loss from Operations

We incurred a loss from operations of $15.0 million in Q3 Fiscal 2003,
versus earnings from operations of $642,000 in Q3 Fiscal 2002. Primarily as a
result of the impairment charges of $15.3 million discussed above, operating
expenses in Q3 Fiscal 2003 increased 45.7% to $54.1 million from $37.1 million
in Q3 Fiscal 2002. As a percentage of sales, operating expenses increased to
65.9% versus 45.2% last year. The material components of the increase in
operating expenses are discussed below.

Retail.Retail expenses increased 10.9% to $17.4 million in Q3 Fiscal 2003
from $15.7 million in Q3 Fiscal 2002, primarily due to increased costs
associated with the expansion of our retail division by the net addition of 10
new stores and one new skatepark since the same period in the prior year.

Marketing, advertising, and promotion.Marketing, advertising and
promotion expenses decreased 23.7% to $6.3 million in Q3 Fiscal 2003 from $8.3
million in Q3 Fiscal 2002. This decrease was due to $2.7 million of planned
reductions in U.S. media expenditures partially offset by increased
expenditures in Europe of approximately $500,000 as a result of the continued
expansion of our European business and approximately $200,000 in expenditures
by Pro-Tec, which was acquired in the fourth quarter of fiscal year 2002.

Selling, distribution and administrative.Selling, distribution and
administrative expenses increased 13.3% to $14.8 million in Q3 Fiscal 2003 from
$13.1 million in Q3 Fiscal 2002 primarily due to increased costs of
approximately $800,000 as a result of the

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acquisition of Pro-Tec and increased costs of approximately $600,000 as a
result of growth in our European business.

Impairment Charges.Please see the discussion under the caption Third
Quarter Impairment Charges and Receivable Concession.

Interest Income, Net

Interest income, net of interest expense, increased 8.5% to $254,000 in Q3
Fiscal 2003 from $234,000 in Q3 Fiscal 2002. This increase was primarily due to
a decreased level of interest expense incurred by our joint venture in Mexico.

Other (Expense), Net

Other (expense), net, primarily consists of royalty payments received from
the non-footwear related licensing of our trademarks, exchange rate gains and
losses, and rental income. Other (expense), net, increased to $775,000 of
expense for Q3 Fiscal 2003 from $159,000 of expense for Q3 Fiscal 2002,
primarily due to losses generated on unhedged U.S. dollar denominated
transactions within our European business as a result of fluctuations in
foreign currency exchange rates between the U.S. dollar and European
currencies.

Income Tax (Benefit) Expense

We recognized a tax benefit of $6.0 million in Q3 Fiscal 2003 versus an
expense of $215,000 in Q3 Fiscal 2002 as a result of the loss we incurred for
Q3 Fiscal 2003. Our effective tax rate was 38.4% in Q3 Fiscal 2003 and 30.0% in
Q3 Fiscal 2002. The increase in our effective tax rate was due to significant
tax losses generated by our domestic business as a result of the impairment
charges we recorded in Q3 Fiscal 2003 with respect to our skateparks and
certain of our U.S. retail stores.

THIRTY-NINE WEEK PERIOD ENDED MARCH 1, 2003 (FISCAL 2003 NINE MONTHS), AS
COMPARED TO THIRTY-NINE WEEK PERIOD ENDED MARCH 2, 2002 (FISCAL 2002 NINE
MONTHS)

Net Sales

Net sales for the Fiscal 2003 Nine Months decreased slightly to $267.3
million from $268.5 million for the same period last year. The sales decrease
was the net effect of increases in Retail and International sales, offset by a
decrease in National sales, as discussed below.

Retail.Retail sales, which consist solely of sales through our U.S.
retail stores and skatepark sessions and concessions, increased 1.8% to $88.6
million in the Fiscal 2003 Nine Months from $87.1 million in the same period
last year. This increase was primarily the result of the increase in retail
sales we experienced in Q1 Fiscal 2003, and was partially offset by the decline
in retail sales in Q2 Fiscal 2003 and Q3 Fiscal 2003. Comparable store sales
(excluding revenue from concessions and skate sessions at our skateparks)
declined 7.8% year-over-year, primarily due to a year-over-year decline in
average selling price of 5.2% across all of our stores. Comparable revenues
from concessions and skate sessions at our skateparks declined 34.1%, or $2.5
million, year-over-year. As discussed above, the decline in skatepark revenue
was largely attributable to the ongoing competition from free skateparks
operated by local municipalities in nearly all of our skatepark markets.

National.National sales, which include all U.S. sales except sales
through our U.S. retail stores, decreased 6.3% to $97.4 million in the Fiscal
2003 Nine Months from $103.9 million in the same period last year. Excluding
revenue from sales of protective gear by Pro-Tec and
revenue from the VANS Warped Tour®, both of which were acquired in the second
half of fiscal 2002, national sales were down 22.8% to $80.2 million. The
decrease in national sales was primarily due to the decrease in sales in Q2
Fiscal 2003 and Q3 Fiscal 2003 which resulted from weakness across all product
lines.

International.International sales, which include sales through our seven
European stores, increased 4.8% to $81.3 million in the Fiscal 2003 Nine Months
from $77.5 million in the same period a year ago. This increase was primarily
due to increased sales in Europe of $13.7 million, partially offset by reduced
royalty payments from our licensee for Japan of approximately $1.1 million,
decreased sales in Canada of approximately $1.0 million, decreased sales in
Mexico and South America of approximately $2.3 million and $3.9 million,
respectively, and decreased sales in Asia of approximately $1.7 million.

The $13.7 million sales increase in Europe was primarily due to a $7.6
million favorable variance in exchange rates and a $6.0 million increase in
unit sales and local currency average selling prices. The decreased sales in
Asia, Canada and Mexico were

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primarily a result of weakness in local retail markets. The results for
the Fiscal 2003 Nine Months only contain one month of sales for South America
as a result of the deconsolidation of our South American joint ventures, as
described above.

Gross Profit

Gross profit decreased 4.9% to $120.2 million in the Fiscal 2003 Nine
Months from $126.3 million in the same period a year ago. As a percentage of
net sales, gross profit decreased to 45.0% for the Fiscal 2003 Nine Months,
versus 47.0% for the same period a year ago, primarily due to the absence of
margin contribution from the newly acquired VANS Warped Tour in Q1 Fiscal 2003,
the liquidation of certain excess inventory at no margin which was reserved for
in the fourth quarter of Fiscal 2002, reduced royalty payments from our
licensee for Japan, and a decreased number of skate sessions at our skateparks.
The decrease was partially offset by improved gross margins in Q3 Fiscal 2003.

Loss from Operations

We incurred a loss from operations of $11.3 million in the Fiscal 2003
Nine Months, versus earnings from operations of $18.3 million in the same
period a year ago. Primarily as a result of the impairment charges we incurred
in Q3 Fiscal 2003, operating expenses in the Fiscal 2003 Nine Months increased
21.8% to $131.5 million from $108.0 million the same period a year ago. As a
percentage of sales, operating expenses increased to 49.2% versus 40.2% last
year. The significant components of the increase in operating expenses are
discussed below.

Retail.Retail expenses increased 17.7% to $52.1 million in the Fiscal
2003 Nine Months from $44.2 million in the same period a year ago, primarily
due to increased costs associated with the expansion of our retail division by
the net addition of 21 new stores and 4 skateparks since the beginning of
Fiscal 2002.

Marketing, advertising and promotion.Marketing, advertising and promotion
expenses decreased 14.4% to $22.8 million in the Fiscal 2003 Nine Months from
$26.6 million in the same period a year ago, primarily due to a planned
decrease in advertising expenditures.

Selling, distribution and administrative.Selling, distribution and
administrative expenses increased 10.1% to $40.7 million in the Fiscal 2003
Nine Months versus $37.0 million in the same period a year ago primarily due to
increased costs of approximately $2.3 million as a result of the acquisition of
Pro-Tec and increased costs of approximately $2.0 million as a result of growth
in our European business.

Impairment Charges.Please see the discussion under the caption Third
Quarter Impairment Charges and Receivable Concession.

Interest Income, Net

Interest income, net of interest expense, decreased 28.1% to $679,000 in
the Fiscal 2003 Nine Months from $944,000 in the Fiscal 2002 Nine Months. This
decrease was primarily due to lower interest rates on monies invested by us.

Other (Expense), Net

Other (expense), net, primarily consists of royalty payments received from
the non-footwear related licensing of our trademarks, exchange rate gains and
losses, and rental income. Other (expense), net, increased to $1.0 million of
expense for the Fiscal 2003 Nine Months from $251,000 of expense for the same
period a year ago, primarily due to losses generated on unhedged U.S. dollar
denominated transactions within our European business as a result of
fluctuations in foreign currency exchange rates between the U.S. dollar and
European currencies.

Income Tax (Benefit) Expense

We recognized a tax benefit of $4.8 million in the Fiscal 2003 Nine Months
versus an expense of $5.7 million in the same period a year ago, primarily as a
result of the losses we incurred in Q3 Fiscal 2003. Our effective tax rate was
41.2% in the Fiscal 2003 Nine Months and 30.0% in the same period a year ago.
The increase in our effective tax rate was due to significant tax losses
generated by our domestic business as a result of the impairment charges we
recorded in Q3 Fiscal 2003 with respect to our skateparks and certain of our
U.S. retail stores.

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Liquidity and Capital Resources

Cash Flows

At March 1, 2003, we had $53.2 million of cash and marketable securities.
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, 2.8 million 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 remaining proceeds of the offering are currently
being used for general corporate purposes. Certain of the proceeds were used to
repurchase stock and repay debt.

We experienced an inflow of cash from operating activities of $6.8 million
for the Fiscal 2003 Nine Months, compared to an outflow of $1.7 million for the
same period a year ago. Excluding the impairment charges of $15.3 million, we
had a net cash outflow of $8.6 million during the Fiscal 2003 Nine Months.
This usage of cash resulted primarily from a seasonal increase in accounts
receivable of $14.8 million and a decrease in income taxes payable of $2.3
million, partially offset by the add-back for depreciation and amortization of
$8.2 million and a decrease in prepaids of $4.7 million. Cash used in
operations during the Fiscal 2002 Nine Months was primarily due to an increase
of $9.8 million in accounts receivable, an increase of $3.8 million in
inventories, an increase of $3.4 million in prepaid and other assets and a
decrease in short-term liabilities of $5.9 million. These cash outflows were
partially offset by earnings and the add-back for depreciation and
amortization.

Accounts receivable, net of the allowance for doubtful accounts, increased
from $28.0 million at May 31, 2002, to $41.9 million at March 1, 2003,
primarily due to increased sales in Europe. Inventories increased to $50.1
million at March 1, 2003, from $48.8 million at May 31, 2002, primarily due to
the timing of inventory purchases and shipments.

We had a net cash inflow from investing activities of $19.1 million in the
Fiscal 2003 Nine Months, compared to a net cash outflow of $43.9 million in the
same period a year ago. The net cash inflow was primarily a result of the
liquidation of marketable and debt securities aggregating $28.6 million,
partially offset by capital expenditures of $7.4 million. The liquidation of
marketable and debt securities was driven by our decision to move all invested
funds into investments with maturities of less than ninety days as a result of
flatness in the investment yield curve. The net cash outflow in the Fiscal
2002 Nine Months was primarily due to the purchase of $35.7 million of
marketable and debt securities, capital expenditures of $16.3 million, which
was largely attributable to new retail store and skatepark openings, and our
purchase of a majority interest in the VANS Warped Tour® which was completed in
Q3 Fiscal 2002.

We had a net cash outflow from financing activities of $3.4 million in the
Fiscal 2003 Nine Months, compared to a net cash inflow of $8.3 million for the
same period a year ago. The net cash outflow in the Fiscal 2003 Nine Months was
primarily due to repurchases of our common stock totaling $2.2 million. The net
cash inflow in the Fiscal 2002 Nine Months was primarily due to the completion
of the sale of our common stock in the public offering to cover
over-allotments.

The following table summarizes our contractual payment obligations and
commitments as of March 1, 2003:

|                 |       |   |                                                   |       |      |   |        |        |      |   |        |        |            |   |        |        |  |   |        |        |  |   |        |        |  |   |         |         | 
|---------------- | ----- | - | ------------------------------------------------- | ----- | ---- | - | ------ | ------ | ---- | - | ------ | ------ | ---------- | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ |  | - | ------- | ------- | 
|                 |       |   | PAYMENT OBLIGATIONS BY FISCAL YEAR (IN THOUSANDS)
|                 |       |   |                                                  
|                 |       |   | 2003                                              |       | 2004 |   | 2005   |        | 2006 |   | 2007   |        | THEREAFTER |   | TOTAL 
|                 |       |   |                                                   |       |      |   |        |        |      |   |        |        |            |   |       
|Operating Leases |       | $ | 4,430                                             |       |      | $ | 17,568 |        |      | $ | 17,002 |        |            | $ | 16,225 |        |  | $ | 16,056 |        |  | $ | 52,471 |        |  | $ | 123,752 |        
|Long-term debt   |       |   | 8                                                 |       |      |   | 2,621  |        |      |   | 4      |        |            |   | 5      |        |  |   | 6      |        |  |   | 253    |        |  |   | 2,897   |        
|                 |       |   |                                                   |       |      |   |        |        |      |   |        |        |            |   |        |        |  |   |        |        |  |   |        |        |  |   |         |        
|                 | Total |   | $                                                 | 4,438 |      |   | $      | 20,189 |      |   | $      | 17,006 |            |   | $      | 16,230 |  |   | $      | 16,062 |  |   | $      | 52,724 |  |   | $       | 126,649 | 
|                 |       |   |                                                   |       |      |   |        |        |      |   |        |        |            |   |        |        |  |   |        |        |  |   |        |        |  |   |         |        

At March 1, 2003, we had letters of credit outstanding totaling $10.7
million. These letters of credit were issued for the purchase of inventory.

Borrowings

Through March 1, 2003, we maintained an unsecured revolving credit
facility pursuant to a credit agreement with several lenders in an amount not
to exceed $45.0 million. The credit agreement permitted us to draw upon the
credit facility for general corporate purposes, capital expenditures,
acquisitions and stock repurchases and would have expired on April 30, 2004.
We had the option to pay interest on revolving credit facility advances at a
rate equal to either LIBOR plus a margin, or the base rate plus a margin. At

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March 1, 2003, no amounts were outstanding under the revolving credit
facility. Subsequent to March 1, 2003, we reached agreement with the lenders
to terminate the credit agreement and replace it with a $20.0 million secured
revolving credit facility. Under the new facility, we will be able to obtain
advances for the issuance of commercial letters of credit and standby letters
of credit. The new facility will be secured by a security interest in a
certificate of deposit held with the lending institution, and advances under
the facility will bear interest at a rate equal to either the prime rate or
LIBOR plus .20%. The new facility will mature on May 1, 2004 and is subject to
the completion of loan documents. The loan agreement for the new facility will
contain less restrictive affirmative and negative covenants than the credit
agreement for the prior facility.

Vans Latinoamericana, our subsidiary in Mexico, 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 March 1, 2003, the
aggregate outstanding balance under the note was $2.5 million.

Share Repurchase Program

On September 21, 2001, we adopted a 1.0 million share repurchase program.
As of the date of this report, we have repurchased 555,700 shares under the
program for an aggregate of $3.3 million. We did not repurchase any shares in
Q3 Fiscal 2003, but we purchased an aggregate of 100,000 shares for an
aggregate of $451,679 from March 2, 2003, through April 9, 2003. The average
price we paid for those shares was $4.52.

Capital Expenditures

Our future material commitments for capital expenditures are primarily
related to the opening and remodeling of retail stores, including a planned
opening of a store on Carnaby Street in London in Fiscal 2004. We have opened
six full price stores to date in Fiscal 2003 and currently do not plan to open
any more stores in the balance of Fiscal 2003. We also plan to remodel two
existing stores and relocate two existing stores in the balance of Fiscal 2003.
We estimate the aggregate cost of these openings, remodels and relocations to
be approximately $1.3 million. We recently reached an agreement with the
landlord for our proposed Sacramento skatepark to terminate the lease for the
park and not proceed with construction of the park. The agreement is subject
to the approval of the landlords lender.

Capital Resources

Our liquid asset position at March 1, 2003, consisted of cash and cash
equivalents of $53.2 million. This compares to cash and cash equivalents of
$28.4 million and marketable and debt securities of $27.5 million at May 31,
2002. We believe our capital resources, including the availability under the
new credit facility and cash flow from operations, will be sufficient to fund
our operations and capital expenditures for the foreseeable future.*

NEW ACCOUNTING PRONOUNCEMENTS

Effective June 1, 2002, we adopted Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144), which addresses the impairment for all
tangible assets. The adoption of SFAS 144 had no financial impact to our
consolidated financial statements.

In April 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement 13 and Technical Corrections (SFAS 145), which became
effective for us in fiscal 2003. SFAS 145 eliminates the classification of debt
extinguishment activity as extraordinary items; eliminates inconsistencies in
lease modification treatment; and makes various technical corrections or
clarifications of other existing authoritative pronouncements. The adoption of
SFAS 145 had no financial impact to our consolidated financial statements.

* 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) the amount of cash we spend in connection with
terminations and/or restructuring of leases for our skateparks; (ii) our rate
of growth; (iii) the number of new stores we decide to open and the number of
store remodels we undertake; (iv) the amount of stock we repurchase under our
repurchase program; (v) our ability to effectively manage our inventory levels;
(vi) timing differences in payment for our foreign-sourced product; and (vii)
slowing in the U.S. and global economies which could materially impact our
business.

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In July 2002, the FASB issued SFAS No. 146, Accounting For Costs
Associated With Exit or Disposal Activities (SFAS 146), which addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). SFAS 146 is effective
for exit or disposal activities that are initiated after December 31, 2002. The
adoption of SFAS 146 had no financial impact to our consolidated financial
statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure (SFAS 148), which
permits two additional transition methods for companies that elect to adopt the
fair-value-based method of accounting for stock-based employee compensation.
The statement also expands the disclosure requirements for stock-based
compensation. The provisions of this statement apply to financial statements
for fiscal years ending after December 15, 2002. The statement is not expected
to have a material impact on our consolidated financial statements.

In January 2003, the FASB issued FIN No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN 45). FIN 45 requires a company to recognize a
liability for the obligations it has undertaken in issuing a guarantee. This
liability would be recorded at the inception of a guarantee and would be
measured at fair value. The measurement provisions of this statement apply
prospectively to guarantees issued or modified after December 31, 2002. The
disclosure provisions of the statement apply to financial statements for
periods ending after December 15, 2002. We adopted this statement in the
quarter ended March 1, 2003, and it did not have an impact on our consolidated
financial statements.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities (FIN 46). FIN 46 requires a company to consolidate a
variable interest entity if it is designated as the primary beneficiary of that
entity even if the company does not have a majority of voting interests. A
variable interest entity is generally defined as an entity which has
insufficient equity to finance its activities or the owners of the entity lack
the risk and rewards of ownership. The provisions of this statement apply at
inception for any entity created after January 31, 2003. For an entity created
before February 1, 2003, the provisions of this Interpretation must be applied
at the beginning of the first interim or annual period beginning after June 15,
2003. We will adopt the provisions of FIN 46 in the quarter ending November 29,
2003, for existing entities that are within the scope of this interpretation.
The statement also has disclosure requirements, some of which are required to
be included in financial statements issued after January 31, 2003. On a
preliminary basis, we do not believe FIN 46 will have an impact on our
consolidated financial statements.

SEASONALITY

The following table contains unaudited selected quarterly financial data
for the eight quarters ended March 1, 2003, 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.

UNAUDITED QUARTERLY RESULTS
(DOLLARS IN THOUSANDS)



|                              |                                                |  |               |        |              |  |             |         |          |  |   |        |    |  |   |        |   
|----------------------------- | ---------------------------------------------- |  | ------------- | ------ | ------------ |  | ----------- | ------- | -------- |  | - | ------ | -- |  | - | ------ | --
|                              |                                                |  | QUARTER ENDED
|                              |                                                |  |              
|                              |                                                |  | MAY 31,       |        | SEPTEMBER 1, |  | DECEMBER 1, |         | MARCH 3,
|                              |                                                |  | 2001          |        | 2001         |  | 2001        |         | 2002    
|                              |                                                |  |               |        |              |  |             |         |         
|STATEMENT OF
OPERATIONS DATA: |                                                |  |               |        |              |  |             |         |          |  |   |        |    |  |   |       
|                              | Net sales                                      |  | $             | 85,231 |              |  | $           | 118,060 |          |  | $ | 68,333 |    |  | $ | 82,151 |   
|                              | Gross profit                                   |  |               | 37,519 |              |  |             | 55,339  |          |  |   | 33,260 |    |  |   | 37,737 |   
|                              | Earnings (loss)
from operations                |  |               | 4,640  |              |  |             | 16,379  |          |  |   | 1,326  |    |  |   | 641    |   
|                              | Net income (loss)                              |  |               | 2,699  |              |  |             | 11,343  |          |  |   | 512    |    |  |   | 483    |   
|AS A PERCENTAGE OF
NET SALES: |                                                |  |               |        |              |  |             |         |          |  |   |        |    |  |   |       
|                              | Net sales                                      |  |               | 100    | %            |  |             | 100     | %        |  |   | 100    | %  |  |   | 100    | % 
|                              | Gross profit                                   |  |               | 44     |              |  |             | 47      |          |  |   | 49     |    |  |   | 46     |   
|                              | Earnings (loss)
from operations                |  |               | 6      |              |  |             | 14      |          |  |   | 2      |    |  |   | 1      |   
|                              | Net income (loss)                              |  |               | 3      |              |  |             | 10      |          |  |   | 1      |    |  |   | 1      |   
|                              | Year-over-year
comparable store
sales increase |  |               | 9.2    | %            |  |             | 4.7     | %        |  |   | (8.9   | )% |  |   | (5.1   | )%

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                              |                                                |  |               |         |            |  |              |         |          |  |   |        |    |  |   |         |   
|----------------------------- | ---------------------------------------------- |  | ------------- | ------- | ---------- |  | ------------ | ------- | -------- |  | - | ------ | -- |  | - | ------- | --
|                              |                                                |  | QUARTER ENDED
|                              |                                                |  |              
|                              |                                                |  | MAY 31,       |         | AUGUST 31, |  | NOVEMBER 30, |         | MARCH 1,
|                              |                                                |  | 2002(a)       |         | 2002       |  | 2002         |         | 2003(b) 
|                              |                                                |  |               |         |            |  |              |         |         
|STATEMENT OF
OPERATIONS DATA: |                                                |  |               |         |            |  |              |         |          |  |   |        |    |  |   |        
|                              | Net sales                                      |  | $             | 63,807  |            |  | $            | 124,633 |          |  | $ | 60,606 |    |  | $ | 82,064  |   
|                              | Gross profit                                   |  |               | 26,042  |            |  |              | 52,111  |          |  |   | 29,038 |    |  |   | 39,036  |   
|                              | Earnings (loss)
from operations                |  |               | (20,323 | )          |  |              | 8,768   |          |  |   | (5,047 | )  |  |   | (15,018 | ) 
|                              | Net income (loss)                              |  |               | (14,934 | )          |  |              | 5,421   |          |  |   | (3,666 | )  |  |   | (9,206  | ) 
|AS A PERCENTAGE OF
NET SALES: |                                                |  |               |         |            |  |              |         |          |  |   |        |    |  |   |        
|                              | Net sales                                      |  |               | 100     | %          |  |              | 100     | %        |  |   | 100    | %  |  |   | 100     | % 
|                              | Gross profit                                   |  |               | 41      |            |  |              | 42      |          |  |   | 48     |    |  |   | 48      |   
|                              | Earnings (loss)
from operations                |  |               | (32     | )          |  |              | 7       |          |  |   | (8     | )  |  |   | (18     | ) 
|                              | Net income (loss)                              |  |               | (23     | )          |  |              | 4       |          |  |   | (6     | )  |  |   | (11     | ) 
|                              | Year-over-year
comparable store
sales increase |  |               | (7.4    | )%         |  |              | (4.9    | )%       |  |   | (9.3   | )% |  |   | (6.6    | )%



|(a) |  | Included in earnings (loss) from operations and net income (loss) are
impairment charges aggregating $6,579. 
|--- |  | -------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Included in earnings (loss) from operations and net income (loss) are
impairment charges aggregating $15,338.

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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 marketing expenditures and
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.




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 our cash and cash equivalents. At March 1, 2003, we held
$53.2 million in cash and cash equivalents. Cash equivalents consist of highly
liquid investments in federal treasury securities, commercial paper and money
market time deposits with original maturities of three months or less. Due to
the relatively short-term nature of our cash equivalents, cost approximates
fair value. We do not use derivative or other financial instruments to hedge
interest rate risks. A 1% decline in the annual yield on cash and cash
equivalents would decrease our interest income by approximately $532,000.

Foreign Currency Risk

We operate our business and sell our products in a number of countries
throughout the world and, as a consequence, the financial results of our
international operations are exposed to movements in foreign currency exchange
rates between the local currencies of the foreign markets in which we operate
and the U.S dollar. Our foreign currency exposure is generally related to
Europe, Mexico and Japan.

In Fiscal 2002, we were subjected to foreign currency risk in South
America through our involvement in joint venture operations in Brazil,
Argentina and Uruguay. Our South America business was negatively impacted by
weaknesses in South American economies, particularly Argentina. In July 2002,
we made the decision to close our joint venture operations in South America,
and as of July 1, 2002, the entities for these joint venture operations are no
longer consolidated in our balance sheet. At March 1, 2003, our remaining
exposure to foreign currency risk in South America consists of net trade
receivables of $866,000 from these joint ventures. Our ability to collect
these amounts is also subject to our ability to successfully liquidate our assets in South America.

Our primary foreign exchange risk arises from purchases of inventory in
U.S. dollars by our European subsidiaries, whose functional currencies are the
euro and British sterling. To hedge this risk, we utilize forward foreign
exchange contracts and/or foreign currency options with durations of generally
from three to nine months. As of March 1, 2003, we had $5.2 million
outstanding in foreign exchange forward contracts to purchase U.S. dollars,
which were entered into to hedge specific transactions denominated in
currencies other than the respective local currency. $3.2 million of these
forward contracts were to hedge the U.S. dollar against the euro and $2.0
million of these contracts were to hedge the U.S. dollar against the British
sterling. Net unrealized losses on foreign exchange contracts at March 1, 2003
aggregated $1.2 million, all of which is included in accumulated other
comprehensive income and is expected to be reclassified into earnings within
the next six months as the inventory related to the foreign exchange contracts
is sold. During the period from March 2, 2003 through April 9, 2003, we
entered into additional forward contracts aggregating $7.0 million to hedge the
U.S. dollar against the euro. These additional contracts are to hedge a
portion of projected inventory purchases that will occur during the first two
quarters of Fiscal 2004.

Revenues from euro-sourced and sterling-sourced operations aggregated
$45.5 million and $17.3 million, respectively, for the Fiscal 2003 Nine Months.




ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Securities and
Exchange Act of 1934, as amended (the Exchange Act) is recorded, summarized
and processed within time periods specified in the SECs rules and forms. As of
a date within 90 days of the date of this report (the Evaluation Date), we
carried out an evaluation, under the supervision and with the participation of
our management, including our President and Chief

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Executive Officer and our Senior Vice President and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rule 13a-14 under the Exchange Act . Based
upon this evaluation, our President and Chief Executive Officer and our Senior
Vice President and Chief Financial Officer concluded that, as of the Evaluation
Date, our disclosure controls and procedures were effective under Rule 13a-14.

Additionally, our President and Chief Executive Officer and Senior Vice
President and Chief Financial Officer determined, as of a date within 90 days
of the date of this report, that there were no significant changes in our
internal controls or in other factors that could significantly affect our
internal controls subsequent to the date of their evaluation.




PART II
OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

Vans, Inc. vs. Scott Brabson and Jay Rosendahl, in Arbitration before
JAMS. The allegations we have made in this case and the companion lawsuit
pending in Los Angeles Superior Court are described in our Annual Report on
Form 10-K for Fiscal 2002. Updated disclosures regarding this case describing
the arbitrators award of $8.0 million to us are contained in two Forms 8-K we
filed with the SEC on February 3, 2003 and February 25, 2003, respectively.

On March 10, 2003, Brabson filed for bankruptcy protection under the
Federal Bankruptcy laws. We believe that Brabsons obligations to us are not
dischargeable under such laws and we will file a motion seeking an order from
the bankruptcy judge to that effect.

On March 18, 2003, the bankruptcy judge in Rosendahls bankruptcy case
granted our motion to lift the stay in that case to allow us to finalize the
arbitrators award against Rosendahl. We will now file a motion requesting an
order from the bankruptcy judge declaring that Rosendahls obligations to us
are non-dischargeable.

Gordana Brabson vs. Vans, Inc. et. al, Superior Court of California,
County of Santa Barbara, case No. 01110315. This lawsuit was filed against

Vans, two of Vans executive officers, and certain other individuals and
entities on December 6, 2002, in connection with the above-mentioned litigation
(the Brabson and Rosendahl case). Mrs. Brabson alleges causes of action for
invasion of privacy, trespass, and intentional infliction of emotional distress
relating to the investigation conducted in connection with that litigation. She
seeks an unspecified amount of compensatory, special and punitive damages. We
recently brought a so-called SLAPP motion to dismiss this case on the grounds
that it was designed to inhibit our ability to pursue our remedies in the
Brabson and Rosendahl case. The court denied this motion and we are proceeding
with discovery.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



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

|     |  |                                                                                                                                               
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Employment Agreement dated as of January 1, 2003, between Vans, Inc. and Cheryl Van Doren                                                     
|     |  |                                                                                                                                               
|10.2 |  | Employment Agreement dated as of March 19, 2003, between Vans, Inc. and Steven A. Munn.                                                       
|     |  |                                                                                                                                               
|10.3 |  | Third Amendment to Appendix B Payment Schedule, Trust Under Vans, Inc. Deferred
Compensation Plan                                             
|     |  |                                                                                                                                               
|10.4 |  | Third Amendment to Vans, Inc. Deferred Compensation Agreement for Walter E. Schoenfeld                                                        
|     |  |                                                                                                                                               
|99.1 |  | Certification of Gary H. Schoenfeld Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  
|     |  |                                                                                                                                               
|99.2 |  | Certification of Andrew J. Greenebaum Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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|(b) |  | Reports on Form 8-K.
|--- |  | --------------------

We filed the following reports on Form 8-K during the quarterly period
ended March 1, 2003:



| | (i)   |  | Form 8-K filed December 20, 2002 reporting second quarter 2003
earnings (Items 7 and 9).                                                                   
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii)  |  | Form 8-K filed February 3, 2003 reporting the arbitration decision
in the matter of Vans, Inc. vs. Scott Brabson and Jay Rosendahl (Item
5).               
|
| | (iii) |  | Form 8-K filed February 25, 2003 reporting confirmation of the
arbitrators award in the matter of Vans, Inc. vs. Scott Brabson and
Jay Rosendahl (Item 5).

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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: April 11, 2003 |  | By:                     |  | /s/ Scott J. Blechman

SCOTT J. BLECHMAN
Vice President-Finance and Controller
(Authorized Signatory of the Registrant and
Chief Accounting Officer)

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CERTIFICATIONS PURSUANT TO
RULE 13a-14 UNDER THE
SECURITIES EXCHANGE ACT OF 1934

I, Gary H. Schoenfeld, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Vans, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: April 11, 2003

|                                                                                                             
|-------------------------------------------------------------------------------------------------------------
|/s/ Gary H. Schoenfeld
Gary H. Schoenfeld
President and Chief Executive Officer
(Principal Executive Officer)

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CERTIFICATIONS PURSUANT TO
RULE 13a-14 UNDER THE
SECURITIES EXCHANGE ACT OF 1934

I, Andrew Greenebaum, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Vans, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: April 11, 2003

|                                                                                                                             
|-----------------------------------------------------------------------------------------------------------------------------
|/s/ Andrew J. Greenebaum
Andrew J. Greenebaum
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

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