##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


(Mark One)

|      |  |                                                                                                                                            
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|[X]   |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended
November 29, 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                          |  | 33-0272893         
|(State or Other Jurisdiction      |  | (I.R.S. Employer   
|of Incorporation or Organization) |  | Identification No.)

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days. YES
[X]    NO [   ]

Indicate the number of shares outstanding of each of the registrants
classes of common stock, as of the latest practicable date:17,935,109 shares of
Common Stock, $.001 par value, as of January 7, 2004.





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TABLE OF CONTENTS



|                             |                                                                    |  |  |  |  |  |  | 
|---------------------------- | ------------------------------------------------------------------ |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | ITEM 1. FINANCIAL STATEMENTS                                      
|                             | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|                             | ITEM 4. CONTROLS AND PROCEDURES                                   
|PART II OTHER INFORMATION   
|                             | ITEM 1. LEGAL PROCEEDINGS                                         
|                             | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS       
|                             | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                          
|SIGNATURES                  
|EXHIBIT 10.1                
|EXHIBIT 10.2                
|EXHIBIT 31.1                
|EXHIBIT 31.2                
|EXHIBIT 32.1                
|EXHIBIT 32.2                



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PART I
FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS.

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

|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |         |         |  |  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------ | ------ | ------- | ------------ | ------- | ------- | ------- |  |  | 
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         | NOVEMBER 29, |         | MAY 31,
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         | 2003         |         | 2003   
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |        
|                                                                                                                                                              |                                                                                                                                       |                            |                                      | ASSETS |         |              |         |         |         |  |  | 
|Current assets:                                                                                                                                               |                                                                                                                                       |                            |                                      |        |         |              |         |        
|                                                                                                                                                              | Cash and cash equivalents                                                                                                             |                            | $                                    | 63,872 |         |              | $       | 52,844  |        
|                                                                                                                                                              | Accounts receivable, net of allowance for doubtful accounts of $2,569
and $2,297 at November 29, 2003, and May 31, 2003, respectively |                            |                                      | 34,306 |         |              |         | 25,596  |        
|                                                                                                                                                              | Inventories                                                                                                                           |                            |                                      | 42,554 |         |              |         | 63,955  |        
|                                                                                                                                                              | Deferred income taxes                                                                                                                 |                            |                                      | 2,603  |         |              |         | 3,055   |        
|                                                                                                                                                              | Prepaid expenses and other                                                                                                            |                            |                                      | 10,658 |         |              |         | 11,617  |        
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |        
|                                                                                                                                                              |                                                                                                                                       | Total current assets       |                                      |        | 153,993 |              |         |         | 157,067 | 
|                                                                                                                                                              | Property, plant and equipment, net                                                                                                    |                            |                                      | 24,432 |         |              |         | 25,120  |        
|                                                                                                                                                              | Trademarks and patents, net of accumulated amortization of $1,637
and $1,378 at November 29, 2003, and May 31, 2003, respectively     |                            |                                      | 15,286 |         |              |         | 15,533  |        
|                                                                                                                                                              | Goodwill                                                                                                                              |                            |                                      | 32,089 |         |              |         | 31,702  |        
|                                                                                                                                                              | Other assets                                                                                                                          |                            |                                      | 3,680  |         |              |         | 8,362   |        
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |        
|                                                                                                                                                              |                                                                                                                                       | Total assets               |                                      | $      | 229,480 |              |         | $       | 237,784 | 
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |         |        
|                                                                                                                                                              |                                                                                                                                       |                            | LIABILITIES AND STOCKHOLDERS EQUITY |        |         |              |         |         |         |  | 
|Current liabilities:                                                                                                                                          |                                                                                                                                       |                            |                                      |        |         |              |         |        
|                                                                                                                                                              | Accounts payable                                                                                                                      |                            | $                                    | 16,193 |         |              | $       | 24,484  |        
|                                                                                                                                                              | Lease termination liabilities                                                                                                         |                            |                                      | 3,836  |         |              |         | 8,338   |        
|                                                                                                                                                              | Accrued liabilities                                                                                                                   |                            |                                      | 14,780 |         |              |         | 13,307  |        
|                                                                                                                                                              | Income taxes payable                                                                                                                  |                            |                                      | 6,927  |         |              |         | 3,296   |        
|                                                                                                                                                              | Liabilities held in connection with disposal activities                                                                               |                            |                                      | 108    |         |              |         | 1,543   |        
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |        
|                                                                                                                                                              |                                                                                                                                       | Total current liabilities  |                                      |        | 41,844  |              |         |         | 50,968  | 
|Deferred income taxes                                                                                                                                         |                                                                                                                                       |                            | 2,186                                |        |         |              | 2,383   |        
|Long-term debt                                                                                                                                                |                                                                                                                                       |                            | 1,614                                |        |         |              | 2,523   |        
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |        
|                                                                                                                                                              |                                                                                                                                       | Total liabilities          |                                      |        | 45,644  |              |         |         | 55,874  | 
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |        
|Minority interest                                                                                                                                             |                                                                                                                                       |                            | 2,404                                |        |         |              | 1,735   |        
|Stockholders equity:                                                                                                                                         |                                                                                                                                       |                            |                                      |        |         |              |         |        
|Common stock, $.001 par value, 40,000 shares authorized, 17,872 and 17,826
shares issued and outstanding at November 29, 2003, and May 31, 2003,
respectively |                                                                                                                                       |                            | 18                                   |        |         |              | 18      |        
|Additional paid-in capital                                                                                                                                    |                                                                                                                                       |                            | 188,470                              |        |         |              | 188,275 |        
|Deferred compensation                                                                                                                                         |                                                                                                                                       |                            | (835                                 | )      |         |              | (976    | )      
|Retained deficit                                                                                                                                              |                                                                                                                                       |                            | (12,917                              | )      |         |              | (12,856 | )      
|Accumulated other comprehensive income                                                                                                                        |                                                                                                                                       |                            | 6,696                                |        |         |              | 5,714   |        
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |        
|                                                                                                                                                              |                                                                                                                                       | Total stockholders equity |                                      |        | 181,432 |              |         |         | 180,175 | 
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |        
|Total liabilities and stockholders equity                                                                                                                    |                                                                                                                                       | $                          | 229,480                              |        |         | $            | 237,784 |        
|                                                                                                                                                              |                                                                                                                                       |                            |                                      |        |         |              |         |         |        

See accompanying notes to condensed consolidated financial statements.

2



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

|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |         |        |  
|---------------------------------------------------------------------------------- | ---------------------------------------- | -------------------------------------------------- | ------ | -------------------- | ------ | ---------------------- | ------ | ------------ | ------ | ------------ | ------- | ------- | ------ | - | ------- | ------- | ------ | -
|                                                                                   |                                          |                                                    |        | THIRTEEN WEEKS ENDED |        | TWENTY-SIX WEEKS ENDED
|                                                                                   |                                          |                                                    |        |                      |        |                       
|                                                                                   |                                          |                                                    |        | NOVEMBER 29,         |        | NOVEMBER 30,           |        | NOVEMBER 29, |        | NOVEMBER 30,
|                                                                                   |                                          |                                                    |        | 2003                 |        | 2002                   |        | 2003         |        | 2002        
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |             
|Retail sales                                                                       |                                          | $                                                  | 23,681 |                      |        | $                      | 21,872 |              |        | $            | 60,478  |         |        | $ | 56,274  |        
|National sales                                                                     |                                          |                                                    | 23,872 |                      |        |                        | 19,243 |              |        |              | 77,763  |         |        |   | 74,812  |        
|International sales                                                                |                                          |                                                    | 17,630 |                      |        |                        | 18,388 |              |        |              | 55,629  |         |        |   | 51,448  |        
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|                                                                                   | Net sales                                |                                                    |        | 65,183               |        |                        |        | 59,503       |        |              |         | 193,870 |        |   |         | 182,534 |       
|Cost of sales                                                                      |                                          |                                                    | 33,737 |                      |        |                        | 31,240 |              |        |              | 103,659 |         |        |   | 103,300 |        
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|                                                                                   | Gross profit                             |                                                    |        | 31,446               |        |                        |        | 28,263       |        |              |         | 90,211  |        |   |         | 79,234  |       
|Operating Expenses:                                                                |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|                                                                                   | Retail                                   |                                                    |        | 15,439               |        |                        |        | 15,681       |        |              |         | 32,078  |        |   |         | 32,044  |       
|                                                                                   | Marketing, advertising and promotion     |                                                    |        | 5,851                |        |                        |        | 5,702        |        |              |         | 15,695  |        |   |         | 16,365  |       
|                                                                                   | Selling, distribution and administrative |                                                    |        | 13,526               |        |                        |        | 11,147       |        |              |         | 29,879  |        |   |         | 25,889  |       
|                                                                                   | Lease termination costs                  |                                                    |        | 1,921                |        |                        |        |             |        |              |         | 3,892   |        |   |         |        |       
|                                                                                   | Amortization of intangible assets        |                                                    |        | 92                   |        |                        |        | 177          |        |              |         | 258     |        |   |         | 365     |       
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|Total operating expenses                                                           |                                          |                                                    | 36,829 |                      |        |                        | 32,707 |              |        |              | 81,802  |         |        |   | 74,663  |        
|Income (loss) from operations                                                      |                                          |                                                    | (5,383 | )                    |        |                        | (4,444 | )            |        |              | 8,409   |         |        |   | 4,571   |        
|Interest (income), net                                                             |                                          |                                                    | (126   | )                    |        |                        | (157   | )            |        |              | (185    | )       |        |   | (425    | )      
|Other (income) expense, net                                                        |                                          |                                                    | 453    |                      |        |                        | (502   | )            |        |              | 376     |         |        |   | 260     |        
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|Income (loss) from continuing operations before income
taxes and minority interest |                                          |                                                    | (5,710 | )                    |        |                        | (3,785 | )            |        |              | 8,218   |         |        |   | 4,736   |        
|Income tax (benefit) expense                                                       |                                          |                                                    | 399    |                      |        |                        | (1,075 | )            |        |              | 1,708   |         |        |   | 1,506   |        
|Minority interest                                                                  |                                          |                                                    | 417    |                      |        |                        | 594    |              |        |              | 1,483   |         |        |   | 965     |        
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|Income (loss) from continuing operations                                           |                                          |                                                    | (6,526 | )                    |        |                        | (3,304 | )            |        |              | 5,027   |         |        |   | 2,265   |        
|Loss from discontinued operations, net of tax                                      |                                          |                                                    | (163   | )                    |        |                        | (362   | )            |        |              | (5,088  | )       |        |   | (510    | )      
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|Net income (loss)                                                                  |                                          | $                                                  | (6,689 | )                    |        | $                      | (3,666 | )            |        | $            | (61     | )       |        | $ | 1,755   |        
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|Earnings (loss) per share information:                                             |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|                                                                                   | Basic:                                   |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |         |       
|                                                                                   |                                          | Income (loss) from continuing operations           |        | $                    | (0.36  | )                      |        | $            | (0.18  | )            |         | $       | 0.28   |   |         | $       | 0.13   |  
|                                                                                   |                                          | Loss from discontinued operations                  |        |                      | (0.01  | )                      |        |              | (0.02  | )            |         |         | (0.28  | ) |         |         | (0.03  | )
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|                                                                                   |                                          | Net income (loss)                                  |        | $                    | (0.37  | )                      |        | $            | (0.20  | )            |         | $       | 0.00   |   |         | $       | 0.10   |  
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|                                                                                   |                                          | Basic weighted average common shares outstanding   |        |                      | 17,852 |                        |        |              | 17,910 |              |         |         | 17,840 |   |         |         | 18,038 |  
|                                                                                   | Diluted:                                 |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |         |       
|                                                                                   |                                          | Income (loss) from continuing operations           |        | $                    | (0.36  | )                      |        | $            | (0.18  | )            |         | $       | 0.28   |   |         | $       | 0.13   |  
|                                                                                   |                                          | Loss from discontinued operations                  |        |                      | (0.01  | )                      |        |              | (0.02  | )            |         |         | (0.28  | ) |         |         | (0.03  | )
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|                                                                                   |                                          | Net income (loss)                                  |        | $                    | (0.37  | )                      |        | $            | (0.20  | )            |         | $       | 0.00   |   |         | $       | 0.10   |  
|                                                                                   |                                          |                                                    |        |                      |        |                        |        |              |        |              |         |         |        |   |         |        
|                                                                                   |                                          | Diluted weighted average common shares outstanding |        |                      | 17,852 |                        |        |              | 17,910 |              |         |         | 17,840 |   |         |         | 18,184 |  

See accompanying notes to condensed consolidated financial statements

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

|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |       |        |        |  
|------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------- | ------------------------------------------ | ---------------------------------------------------- | ----- | ---------------------- | ------ | ------------ | ----- | ------ | ------ | -
|                                                                                                                   |                                                                             |                                            |                                                      |       | TWENTY-SIX WEEKS ENDED
|                                                                                                                   |                                                                             |                                            |                                                      |       |                       
|                                                                                                                   |                                                                             |                                            |                                                      |       | NOVEMBER 29,           |        | NOVEMBER 30,
|                                                                                                                   |                                                                             |                                            |                                                      |       | 2003                   |        | 2002        
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |             
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                              |                                                                             |                                            |                                                      |       |                        |        |              |      
|Income from continuing operations                                                                                  |                                                                             | $                                          | 5,027                                                |       |                        | $      | 2,265        |      
|Adjustments to reconcile income from continuing operations
to net cash provided by (used in) operating activities: |                                                                             |                                            |                                                      |       |                        |        |              |      
|                                                                                                                   | Depreciation and amortization                                               |                                            |                                                      | 3,873 |                        |        |              | 5,039 |       
|                                                                                                                   | Stock-based compensation expense                                            |                                            |                                                      | 141   |                        |        |              | 139   |       
|                                                                                                                   | Net loss on disposal of equipment                                           |                                            |                                                      | 22    |                        |        |              | 26    |       
|                                                                                                                   | Non-cash lease termination costs                                            |                                            |                                                      | (177  | )                      |        |              |      |       
|                                                                                                                   | Minority share of income                                                    |                                            |                                                      | 1,483 |                        |        |              | 965   |       
|                                                                                                                   | Provision for losses on accounts receivable                                 |                                            |                                                      | 309   |                        |        |              | 661   |       
|                                                                                                                   | Changes in assets and liabilities, net of effects of business acquisitions: |                                            |                                                      |       |                        |        |              |       |       
|                                                                                                                   |                                                                             | Accounts receivable                        |                                                      |       | (8,828                 | )      |              |       | (3,551 | )     
|                                                                                                                   |                                                                             | Inventories                                |                                                      |       | 21,581                 |        |              |       | 3,557  |       
|                                                                                                                   |                                                                             | Deferred income taxes                      |                                                      |       | 255                    |        |              |       | 1,016  |       
|                                                                                                                   |                                                                             | Prepaid expenses                           |                                                      |       | 959                    |        |              |       | 5,708  |       
|                                                                                                                   |                                                                             | Other assets                               |                                                      |       | (432                   | )      |              |       | (24    | )     
|                                                                                                                   |                                                                             | Accounts payable                           |                                                      |       | (8,291                 | )      |              |       | (5,306 | )     
|                                                                                                                   |                                                                             | Accrued liabilities                        |                                                      |       | 1,796                  |        |              |       | (3,124 | )     
|                                                                                                                   |                                                                             | Lease termination liabilities              |                                                      |       | (4,502                 | )      |              |       |       |       
|                                                                                                                   |                                                                             | Income taxes payable                       |                                                      |       | 3,631                  |        |              |       | 3,855  |       
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |      
|                                                                                                                   |                                                                             | Net cash provided by continuing operations |                                                      |       | 16,847                 |        |              |       | 11,226 |       
|                                                                                                                   |                                                                             | Net cash used in discontinued operations   |                                                      |       | (6,816                 | )      |              |       | (131   | )     
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |      
|                                                                                                                   |                                                                             | Net cash provided by operating activities  |                                                      |       | 10,031                 |        |              |       | 11,095 |       
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |      
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                              |                                                                             |                                            |                                                      |       |                        |        |              |      
|Purchases of property, plant and equipment                                                                         |                                                                             |                                            | (2,839                                               | )     |                        |        | (6,372       | )    
|Investments in other companies                                                                                     |                                                                             |                                            | (497                                                 | )     |                        |        | (1,043       | )    
|Purchases of marketable debt securities                                                                            |                                                                             |                                            |                                                     |       |                        |        | (1,006       | )    
|Maturities of marketable debt securities                                                                           |                                                                             |                                            |                                                     |       |                        |        | 2,746        |      
|Sales of marketable debt securities                                                                                |                                                                             |                                            |                                                     |       |                        |        | 22,232       |      
|Proceeds from repayment of note receivable                                                                         |                                                                             |                                            | 5,103                                                |       |                        |        | 18           |      
|Proceeds from sale of investments                                                                                  |                                                                             |                                            |                                                     |       |                        |        | 75           |      
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |      
|                                                                                                                   |                                                                             |                                            | Net cash provided by investing activities            |       |                        | 1,767  |              |       |        | 16,650 |  
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |      
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                              |                                                                             |                                            |                                                      |       |                        |        |              |      
|Payments on long term debt                                                                                         |                                                                             |                                            | (909                                                 | )     |                        |        | (178         | )    
|Consolidated subsidiary dividends paid to minority shareholders                                                    |                                                                             |                                            | (814                                                 | )     |                        |        | (734         | )    
|Proceeds from issuance of common stock                                                                             |                                                                             |                                            | 195                                                  |       |                        |        | 18           |      
|Repurchases of common stock                                                                                        |                                                                             |                                            |                                                     |       |                        |        | (2,184       | )    
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |      
|                                                                                                                   |                                                                             |                                            | Net cash used in financing activities                |       |                        | (1,528 | )            |       |        | (3,078 | )
|Effect of exchange rate changes on cash and cash equivalents                                                       |                                                                             |                                            | 758                                                  |       |                        |        | 956          |      
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |      
|                                                                                                                   |                                                                             |                                            | Net increase (decrease) in cash and cash equivalents |       |                        | 11,028 |              |       |        | 25,623 |  
|Cash and cash equivalents, beginning of period                                                                     |                                                                             |                                            | 52,844                                               |       |                        |        | 28,447       |      
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |      
|Cash and cash equivalents, end of period                                                                           |                                                                             | $                                          | 63,872                                               |       |                        | $      | 54,070       |      
|                                                                                                                   |                                                                             |                                            |                                                      |       |                        |        |              |      
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                                                |                                                                             |                                            |                                                      |       |                        |        |              |      
|                                                                                                                   |                                                                             | Interest paid                              |                                                      | $     | 130                    |        |              | $     | 215    |       
|                                                                                                                   |                                                                             | Income taxes paid (refund)                 |                                                      | $     | (1,964                 | )      |              | $     | (3,012 | )     

See accompanying notes to condensed consolidated financial statements

4



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VANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Vans is a leading global action sports and lifestyle company that
merchandises, designs, sources and distributes VANS-branded active-casual and
performance footwear, apparel and accessories. Action sports, including
skateboarding, snowboarding, surfing, wakeboarding, BMX 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 action sports culture. We have implemented a unique marketing
plan to reach our customers through multiple points of contact which include
owning and operating action sports entertainment events and venues, such as the
VANS Triple Crown Series, VANS skateparks and the VANS High Cascade Snowboard
Camp®, sponsoring professional and amateur athletes and the VANS Warped Tour®,
as well as advertising in targeted print and television media.

We operate retail stores in the U.S. and Europe, and design, market and
distribute active-casual footwear, apparel and accessories, performance
footwear for action sports, snowboard boots, conventional snowboard boot
bindings under our AGENCY brand, step-in snowboard boot bindings under our
SWITCH® brand, and outerwear worldwide. We also offer the PRO-TEC® line of
protective helmets and pads through our wholly-owned subsidiary, Pro-tec, Inc.

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 period are not
necessarily indicative of results to be expected for the current year.

The accompanying unaudited condensed consolidated financial statements do
not include certain footnotes and financial presentations as permitted by
accounting principles generally accepted in the United States for interim
purposes. Therefore, these financial statements should be read in conjunction
with the our audited consolidated financial statements and notes thereto for
the year ended May 31, 2003, included in our Annual Report on Form 10-K which
is filed with the Securities and Exchange Commission.

As discussed further in Note 5, in Fiscal 2003 we made the decision to
substantially exit the skatepark business. The results of operations for
skateparks that have ceased operations are presented as discontinued operations
in the accompanying unaudited condensed consolidated financial statements.

Use of Estimates

The consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States. In
preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities. We regularly evaluate the estimates and assumptions related to
allowances for doubtful accounts, sales returns and allowances, inventory
reserves, goodwill and intangible asset valuations, long-lived asset
valuations, deferred income tax valuation allowances, litigation and other
contingencies. We base our estimates on historical experience and on various
other factors that we believe to be reasonable under the circumstances, which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. To the extent
there are material differences between the estimates and actual results, future
results of operations will be affected.

Revenue Recognition

Retail sales consist solely of sales through our U.S. retail stores and
skatepark sessions and concessions. National sales include all U.S. sales
except sales through our U.S. retail stores. International sales include all
foreign sales as well as sales through the seven European stores we operated
through the end of the second quarter of Fiscal 2004.

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Retail revenue is recognized at the point of sale. Wholesale revenue is
recognized when title passes and the risks and rewards of ownership have
transferred to the customer. Title generally passes upon the delivery of
product to the customer or the customers agent. Royalty revenue is recognized
as it is earned, based on the terms of the underlying royalty agreement.
Skatepark, event and other revenues are recognized when the related goods or
services have been delivered to the customer and we are substantially free from
future obligation, provided that the fundamental criteria for revenue
recognition have been met. Concurrent with the recording of revenues, provision
is made for estimated returns and allowances.

Cash Equivalents

Cash and cash equivalents consist of cash and short-term investments with
original maturities of ninety days or less.

Inventories

Inventories are substantially comprised of finished goods and are valued
at the lower of cost or market (net realizable value). Cost is determined using
the first-in, first-out (FIFO) method. We provide inventory allowances based
on estimates of excess and obsolete inventories. Such allowances are permanent
reductions in the carrying value of the inventory.

Goodwill and Long-Lived Assets

In accordance with Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Intangible Assets, we test goodwill for impairment at
the reporting unit level (operating segment or one level below an operating
segment) on an annual basis or more frequently if we believe indicators of
impairment exist. The performance of the test involves a two-step process. The
first step of the impairment test involves comparing the fair value of our
reporting units with the reporting units carrying amount, including goodwill.
We generally determine the fair value of our reporting units using a weighted
average of the income approach and the market approach. If the carrying amount
of our reporting units exceeds the reporting units fair value, we perform the
second step of the goodwill impairment test to determine the amount of any
impairment loss. The second step of the goodwill impairment test involves
comparing the implied fair value of our reporting units goodwill with the
carrying amount of that goodwill.

We account for long-lived assets in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present. Reviews are performed to
determine whether the carrying value of assets is impaired, based on comparison
to undiscounted expected future cash flows. If this comparison indicates that
there is impairment, the impaired asset is written down to fair value, which is
typically calculated using discounted expected future cash flows using a
discount rate based upon our weighted average cost of capital adjusted for
risks associated with the related operations. Impairment is based on the excess
of the carrying amount over the fair value of those assets.

Other Assets

At May 31, 2003, other assets included a note receivable of $5.1 million,
for which payment was received in July 2003.

Contingent Consideration

In connection with certain of our acquisitions, if designated future
performance goals are satisfied, the aggregate consideration for these
acquisitions will be increased. Such additional consideration, if earned, will
be paid in the form of cash or unrestricted shares of our common stock, and
will be accounted for in accordance with SFAS No. 141, Business Combinations
(SFAS 141) which superceded Accounting Principles Board (APB) Opinion No.
16, Business Combinations, as of July 1, 2001, and Emerging Issues Task Force
(EITF) Issue No. 95-8, Accounting for Contingent Consideration Paid to the
Shareholders of an Acquired Enterprise in a Purchase Business Combination. Any
additional consideration paid will be allocated to goodwill, which will be
periodically reviewed for impairment. See Note 3.

Income Taxes

We utilize the liability method of accounting for income taxes as set
forth in SFAS No. 109, Accounting for Income Taxes. Under the liability
method, deferred taxes are determined based on the temporary differences
between the financial statement and tax
bases of assets and liabilities using enacted tax rates. A valuation
allowance is recorded when it is more likely than not that some of the deferred
tax assets will not be realized.

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Income taxes for the interim periods were computed using the effective tax
rate estimated to be applicable in each jurisdiction for the full fiscal year,
which is subject to ongoing review and evaluation by management.

Stock-Based Compensation

We account for stock-based awards to employees in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and have
adopted the disclosure-only alternative of SFAS No. 123, Accounting for
Stock-Based Compensation (SFAS 123).

In accordance with the requirements of the disclosure-only alternative of
SFAS 123, set forth below are the assumptions used and pro forma statement of
operations data giving effect to valuing stock-based awards to employees using
the Black-Scholes option pricing model instead of the guidelines provided by
APB 25. Among other factors, the Black-Scholes model considers the expected
life of the option and the expected volatility of our stock price in arriving
at an option valuation.

The per share fair value of stock options granted in connection with stock
option plans has been estimated with the following weighted average
assumptions:

|                         |  |             |      |             |  |  |      |  
|------------------------ |  | ----------- | ---- | ----------- |  |  | ---- | -
|                         |  | FISCAL 2004 |      | FISCAL 2003
|                         |  |             |      |            
|Expected life (in years) |  |             | 5    |             |  |  | 5    |  
|Volatility               |  |             | 0.74 |             |  |  | 0.75 |  
|Risk-free interest rate  |  |             | 2.9  | %           |  |  | 2.3  | %
|Dividend yield           |  |             | 0.0  | %           |  |  | 0.0  | %

The results of applying the requirements of the disclosure-only
alternative to SFAS 123 to our stock-based awards to employees would
approximate the following (in thousands, except per share data):

|                                                                            |  |                      |        |                        |  |              |        |              |  |   |       |   |  |   |       |  
|--------------------------------------------------------------------------- |  | -------------------- | ------ | ---------------------- |  | ------------ | ------ | ------------ |  | - | ----- | - |  | - | ----- | -
|                                                                            |  | THIRTEEN WEEKS ENDED |        | TWENTY-SIX WEEKS ENDED
|                                                                            |  |                      |        |                       
|                                                                            |  | NOVEMBER 29,         |        | NOVEMBER 30,           |  | NOVEMBER 29, |        | NOVEMBER 30,
|                                                                            |  | 2003                 |        | 2002                   |  | 2003         |        | 2002        
|                                                                            |  |                      |        |                        |  |              |        |             
|Net income (loss)  as reported                                             |  | $                    | (6,689 | )                      |  | $            | (3,666 | )            |  | $ | (61   | ) |  | $ | 1,755 |  
|Add: Stock-based compensation expense included
in net income  as reported  |  |                      |       |                        |  |              |       |              |  |   |      |   |  |   |      |  
|Deduct: Stock-based compensation expense
determined under fair value method |  |                      | (454   | )                      |  |              | (261   | )            |  |   | (895  | ) |  |   | (471  | )
|                                                                            |  |                      |        |                        |  |              |        |              |  |   |       |   |  |   |       |  
|Net income (loss)  pro forma                                               |  | $                    | (7,143 | )                      |  | $            | (3,927 | )            |  | $ | (956  | ) |  | $ | 1,284 |  
|                                                                            |  |                      |        |                        |  |              |        |              |  |   |       |   |  |   |       |  
|Basic earnings (loss) per share  as reported                               |  | $                    | (0.37  | )                      |  | $            | (0.20  | )            |  | $ | 0.00  |   |  | $ | 0.10  |  
|                                                                            |  |                      |        |                        |  |              |        |              |  |   |       |   |  |   |       |  
|Basic earnings (loss) per share  pro forma                                 |  | $                    | (0.40  | )                      |  | $            | (0.22  | )            |  | $ | (0.05 | ) |  | $ | 0.07  |  
|                                                                            |  |                      |        |                        |  |              |        |              |  |   |       |   |  |   |       |  
|Diluted earnings (loss) per share  as reported                             |  | $                    | (0.37  | )                      |  | $            | (0.20  | )            |  | $ | 0.00  |   |  | $ | 0.10  |  
|                                                                            |  |                      |        |                        |  |              |        |              |  |   |       |   |  |   |       |  
|Diluted earnings (loss) per share  pro forma                               |  | $                    | (0.40  | )                      |  | $            | (0.22  | )            |  | $ | (0.05 | ) |  | $ | 0.07  |  
|                                                                            |  |                      |        |                        |  |              |        |              |  |   |       |   |  |   |       |  

For pro forma purposes, the estimated fair value of our stock-based awards
to employees is amortized over the vesting period of the underlying
instruments.

Reclassifications

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

Recent Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board (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) (EITF 94-3). SFAS 146 is effective for exit or
disposal activities that are initiated after December 31, 2002. As a
result of the implementation of SFAS 146, the accounting for amounts recorded
in connection with our decision to substantially exit the skatepark business
was materially impacted. Under the

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guidance of EITF 94-3, we would have
recorded as an expense during the year ended May 31, 2003 (the period in which
management committed to an exit plan for the skateparks), an estimate of
certain costs that would be directly incurred in connection with skatepark
closures. The most significant element of these costs is lease termination
charges. With the implementation of SFAS 146, costs associated with exit
activities are to be recorded in the period in which they are incurred. In the
case of lease termination costs, this is the period in which we enter into an
agreement with the landlord. Accordingly, our consolidated results of
operations include lease termination charges in the periods in which we entered
into an agreement. Additionally, other direct costs associated with closing
skateparks will be expensed in future periods as they are incurred.

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 adoption of SFAS 148 had
no material financial impact to our consolidated financial statements. We have
provided the additional disclosures required by SFAS 148 for the thirteen and
twenty-six week periods ended November 29, 2003, and November 30, 2002,
elsewhere in Note 1.

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 that 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 December
15, 2003. We will adopt the provisions of FIN 46 in the quarter ending February
28, 2004, 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. Since we do not currently have any variable interest entities, the
adoption of the provisions of FIN 46 is not expected to have a material impact
on our financial position or results of operations.

2. SUPPLEMENTAL FINANCIAL INFORMATION

Goodwill and Identifiable Intangible Assets

The following table summarizes our identifiable intangible assets and
goodwill balances as of November 29, 2003, and May 31, 2003:

|                                           |                        |       |   |                   |       |              |   |          |        |              |   |       |       |  |   |      |        |  
|------------------------------------------ | ---------------------- | ----- | - | ----------------- | ----- | ------------ | - | -------- | ------ | ------------ | - | ----- | ----- |  | - | ---- | ------ | -
|                                           |                        |       |   | NOVEMBER 29, 2003 |       | MAY 31, 2003
|                                           |                        |       |   |                   |       |             
|                                           |                        |       |   | Gross             |       |              |   |          |        | Gross        |   |       |       | 
|                                           |                        |       |   | Carrying          |       | Accumulated  |   | Carrying |        | Accumulated 
|                                           |                        |       |   | Amount            |       | Amortization |   | Amount   |        | Amortization
|                                           |                        |       |   |                   |       |              |   |          |        |             
|                                           |                        |       |   | (In thousands)   
|Intangible assets subject to amortization: |                        |       |   |                   |       |              |   |          |        |              |   |       |       |  |   |     
|                                           | Trademarks and patents |       | $ | 5,152             |       |              | $ | (1,141   | )      |              | $ | 5,140 |       |  | $ | (938 | )     
|                                           | Other                  |       |   | 886               |       |              |   | (496     | )      |              |   | 886   |       |  |   | (440 | )     
|                                           |                        |       |   |                   |       |              |   |          |        |              |   |       |       |  |   |     
|                                           |                        | Total |   | $                 | 6,038 |              |   | $        | (1,637 | )            |   | $     | 6,026 |  |   | $    | (1,378 | )
|                                           |                        |       |   |                   |       |              |   |          |        |              |   |       |       |  |   |      |       

|                                                                  |            |       |   |                |        |          |   |        |        | 
|----------------------------------------------------------------- | ---------- | ----- | - | -------------- | ------ | -------- | - | ------ | ------ | 
|                                                                  |            |       |   | NOVEMBER       |        | MAY     
|                                                                  |            |       |   | 29, 2003       |        | 31, 2003
|                                                                  |            |       |   |                |        |         
|                                                                  |            |       |   | (In thousands)
|Carrying amount of intangible assets not subject to amortization: |            |       |   |                |        |          |   |       
|                                                                  | Goodwill   |       | $ | 32,089         |        |          | $ | 31,702 |       
|                                                                  | Trademarks |       |   | 10,885         |        |          |   | 10,885 |       
|                                                                  |            |       |   |                |        |          |   |       
|                                                                  |            | Total |   | $              | 42,974 |          |   | $      | 42,587 | 
|                                                                  |            |       |   |                |        |          |   |        |       

Goodwill is comprised of $12.7 million associated with the acquisition of
our predecessor company; $6.2 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; $4.9 million associated with our
acquisition of a
majority interest in the VANS Warped Tour®; $2.1 million associated with
the acquisition of Compagnie Sunspot SA (Sunspot),

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our sales agent for
France; and $400,000 associated with the acquisition of certain assets and
liabilities of Max MadHouse GmbH (Max MadHouse), our exclusive sales agent
for Germany, Austria and the Czech Republic.

Amortization expense for intangible assets subject to amortization was
$92,000 and $177,000 for the thirteen week periods ended November 29, 2003, and
November 30, 2002, respectively and $258,000 and $365,000 for the twenty-six
week periods ended November 29, 2003, and November 30, 2002, respectively.
Future estimated amortization expense for the remainder of Fiscal 2004, the
next four years and thereafter is as follows (in thousands):

|                            |            |   |       |       | 
|--------------------------- | ---------- | - | ----- | ----- | 
|FISCAL YEAR ENDING MAY 31,: |            |   |       |      
|2004                        |            | $ | 186   |      
|2005                        |            |   | 446   |      
|2006                        |            |   | 446   |      
|2007                        |            |   | 439   |      
|2008                        |            |   | 366   |      
|                            | Thereafter |   |       | 2,518 | 
|                            |            |   |       |      
|                            |            | $ | 4,401 |      
|                            |            |   |       |      

Computation of Earnings Per Share

Basic earnings per share represents net income divided by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share represents net income 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:

|                                                      |  |                      |        |                        |  |              |        |              |  |  |        |  |  |  |        | 
|----------------------------------------------------- |  | -------------------- | ------ | ---------------------- |  | ------------ | ------ | ------------ |  |  | ------ |  |  |  | ------ | 
|                                                      |  | THIRTEEN WEEKS ENDED |        | TWENTY-SIX WEEKS ENDED
|                                                      |  |                      |        |                       
|                                                      |  | NOVEMBER 29,         |        | NOVEMBER 30,           |  | NOVEMBER 29, |        | NOVEMBER 30,
|                                                      |  | 2003                 |        | 2002                   |  | 2003         |        | 2002        
|                                                      |  |                      |        |                        |  |              |        |             
|                                                      |  | (In thousands)      
|Weighted average shares used in basic computation     |  |                      | 17,852 |                        |  |              | 17,910 |              |  |  | 17,840 |  |  |  | 18,038 | 
|Restricted stock grant                                |  |                      |       |                        |  |              |       |              |  |  |       |  |  |  | 87     | 
|Dilutive stock options                                |  |                      |       |                        |  |              |       |              |  |  |       |  |  |  | 59     | 
|                                                      |  |                      |        |                        |  |              |        |              |  |  |        |  |  |  |        | 
|Weighted average shares used for dilutive computation |  |                      | 17,852 |                        |  |              | 17,910 |              |  |  | 17,840 |  |  |  | 18,184 | 
|                                                      |  |                      |        |                        |  |              |        |              |  |  |        |  |  |  |        | 

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

|                        |  |                      |       |                        |  |              |       |              |  |  |       |  |  |  |       | 
|----------------------- |  | -------------------- | ----- | ---------------------- |  | ------------ | ----- | ------------ |  |  | ----- |  |  |  | ----- | 
|                        |  | THIRTEEN WEEKS ENDED |       | TWENTY-SIX WEEKS ENDED
|                        |  |                      |       |                       
|                        |  | NOVEMBER 29,         |       | NOVEMBER 30,           |  | NOVEMBER 29, |       | NOVEMBER 30,
|                        |  | 2003                 |       | 2002                   |  | 2003         |       | 2002        
|                        |  |                      |       |                        |  |              |       |             
|                        |  | (In thousands)      
|Restricted stock grants |  |                      | 62    |                        |  |              | 84    |              |  |  | 65    |  |  |  |      | 
|Stock options           |  |                      | 2,095 |                        |  |              | 2,204 |              |  |  | 2,133 |  |  |  | 1,370 | 

Other Comprehensive Income

Other comprehensive income refers to revenue, expenses, gains and losses
that are recorded as an element of stockholders equity but are excluded from
net income. Accumulated 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
other comprehensive income for the thirteen and twenty-six week periods ended
November 29, 2003, and November 30, 2002, were as follows:

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|                                  |                                               |                              |        |                      |        |                        |        |              |     |              |     |       |      |   |       |       |      |  
|--------------------------------- | --------------------------------------------- | ---------------------------- | ------ | -------------------- | ------ | ---------------------- | ------ | ------------ | --- | ------------ | --- | ----- | ---- | - | ----- | ----- | ---- | -
|                                  |                                               |                              |        | THIRTEEN WEEKS ENDED |        | TWENTY-SIX WEEKS ENDED
|                                  |                                               |                              |        |                      |        |                       
|                                  |                                               |                              |        | NOVEMBER 29,         |        | NOVEMBER 30,           |        | NOVEMBER 29, |     | NOVEMBER 30,
|                                  |                                               |                              |        | 2003                 |        | 2002                   |        | 2003         |     | 2002        
|                                  |                                               |                              |        |                      |        |                        |        |              |     |             
|                                  |                                               |                              |        | (In thousands)      
|Net income (loss)                 |                                               | $                            | (6,689 | )                    |        | $                      | (3,666 | )            |     | $            | (61 | )     |      | $ | 1,755 |      
|Other comprehensive income:       |                                               |                              |        |                      |        |                        |        |              |     |              |     |       |      |   |       |      
|                                  | Derivatives qualifying as hedges, net of tax: |                              |        |                      |        |                        |        |              |     |              |     |       |      |   |       |       |     
|                                  |                                               | Net derivative loss          |        |                      | (1,226 | )                      |        |              | (65 | )            |     |       | (600 | ) |       |       | (455 | )
|                                  |                                               | Reclassifications to expense |        |                      | 116    |                        |        |              | 208 |              |     |       | 453  |   |       |       | 146  |  
|                                  | Foreign currency translation adjustments      |                              |        | 4,637                |        |                        |        | 302          |     |              |     | 1,128 |      |   |       | 2,133 |     
|                                  |                                               |                              |        |                      |        |                        |        |              |     |              |     |       |      |   |       |      
|Total comprehensive income (loss) |                                               | $                            | (3,162 | )                    |        | $                      | (3,221 | )            |     | $            | 920 |       |      | $ | 3,579 |      
|                                  |                                               |                              |        |                      |        |                        |        |              |     |              |     |       |      |   |       |      

3. ACQUISITIONS

On June 1, 2003, we acquired certain assets and liabilities of Max
MadHouse for initial cash consideration of $117,000. The assets and liabilities
acquired constituted what was formerly the business of our exclusive sales
agent for Germany, Austria and the Czech Republic. The consideration for the
acquisition was attributed to acquired identifiable net assets and goodwill. In
addition to the initial purchase price paid, we are required to pay additional
cash consideration based on the level of sales achieved by the acquired
business over the three-year period ending May 31, 2006. Although the aggregate
amount of additional consideration to be paid cannot yet be determined, we
currently estimate that $500,000 will be paid in the current fiscal year and an
aggregate of $1 million in additional consideration may be required. Any such
additional consideration will be allocated to goodwill.

On June 11, 2002, we acquired 100% of the outstanding capital stock of
Sunspot for cash consideration of $2.9 million. During the first quarter of
Fiscal 2004, an additional $873,000 was paid as a result of the sales levels
achieved by Sunspot during the year ended May 31, 2003. Of the total purchase
consideration paid to date, $1.7 million was allocated to identifiable acquired
assets and liabilities on the acquisition date and the remaining $2.1 million
has been 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 Sunspot through June 11, 2007. Although the aggregate amount
of additional consideration to be paid cannot yet be determined, we currently
estimate that $1 million will be paid in the current fiscal year and an
aggregate of $4.4 million in additional consideration may be required. Any such
additional consideration will be allocated to goodwill.

Had the acquisitions of Max MadHouse and Sunspot occurred on June 1, 2002,
our results of operations for the thirteen week and twenty-six week periods
ended November 29, 2003, and November 30, 2002, would not have differed
materially from our reported results of operations for these periods.

Additionally, in connection with our acquisition of Pro-tec on April 15,
2002, the acquisition agreement provides for additional consideration of up to
$1.0 million to be paid by us if certain performance criteria are met during
Fiscal 2004. Such additional consideration, if earned, will be paid either in
cash or unrestricted shares of our common stock and will be allocated to
goodwill.

4. COMMITMENTS AND CONTINGENCIES

Litigation

Vans, Inc. vs. Scott Brabson, Gordana Brabson, Jay Rosendahl, Heidi
Rosendahl, et al, Superior Court for the County of Los Angeles, Case No.
BC27031. The allegations we have made in this case, the companion arbitration,
and the resulting arbitration award are described in our Annual Report on Form
10-K for Fiscal 2003, which is filed with the Securities and Exchange
Commission. No material changes in the status of these matters have occurred
since the filing of our Form 10-K for Fiscal 2003, and no amounts have been
recorded in our condensed consolidated financial statements in connection with
this matter.

Gordana Brabson vs. Vans, Inc. et. al, Superior Court of California, County of
Santa Barbara, Case No. 01110315. This lawsuit was filed against Vans, one of
Vans current executive officers, one of its former executive officers, and
certain other individuals and entities on December 6, 2002, in connection with
a lawsuit filed by us against the plaintiff, her husband and other individuals
and entities in which we alleged that they engaged in a conspiracy to obtain
unauthorized payments from certain of our factories in China. Mrs. Brabson
alleged causes of action for invasion of privacy, trespass, and intentional
infliction of emotional distress relating to the

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investigation conducted in connection with that litigation. An agreement
to settle this case was reached in the first quarter of Fiscal 2004, and
settlement documents are still being finalized. The terms of the settlement are
confidential; however, no amounts have been recorded in the accompanying
condensed consolidated financial statements in connection with this matter. The
settlement of this case will not have a material adverse impact on our results
of operations or financial condition.

Franklin C. Ferrana a/k/a Nikki Sixx vs. Vans, Inc., High Speed
Productions, Inc. d/b/a Thrasher Magazine, Superior Court for the County of Los
Angeles, Case No. BC303262.This lawsuit was filed on September 30, 2003, and
alleges that Vans and Thrasher Magazine misappropriated the image of the
plaintiff in an advertisement. The complaint seeks compensatory damages in
excess of $1.0 million, disgorgement of profits, and punitive damages. In the
second quarter of Fiscal 2004 we filed an answer in this matter denying the
plaintiffs allegations and asserting numerous affirmative defenses. The
parties are currently engaged in discovery.

From time to time, we are involved in legal proceedings arising in the
ordinary course of business. Management does not currently expect that any of
the legal proceedings in which we are currently involved will have a material
adverse impact on results of operations or financial condition.

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. This currency risk is primarily related to purchases of inventory by
our subsidiaries which 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 November 29, 2003, our subsidiaries
hedged approximately 70% of forecasted inventory purchases through the first
quarter of Fiscal 2005.

At November 29, 2003, we also had foreign currency forward contracts
outstanding to purchase U.S. dollars using Japanese yen. These contracts were
entered into to hedge projected future cash flows in connection with certain
royalty payments to be received from our licensee for Japan during the
remainder of Fiscal 2004.

The following is a summary of outstanding foreign currency forward
contracts at November 29, 2003 (in thousands, except contract rates):

|         |  |                |        |               |  |                       |  |                      |      |                |      |                |     |   |     | 
|-------- |  | -------------- | ------ | ------------- |  | --------------------- |  | -------------------- | ---- | -------------- | ---- | -------------- | --- | - | --- | 
|         |  |                |        |               |  |                       |  |                      |      | AGGREGATE FAIR |      | NET UNREALIZED
|CURRENCY |  | AGGREGATE      |        | AVERAGE       |  | VALUE OF FORWARD      |  | LOSSES IN OTHER     
|HEDGED   |  | NOTIONAL VALUE |        | CONTRACT RATE |  | CONTRACT LIABILITY    |  | COMPREHENSIVE INCOME
|         |  |                |        |               |  |                       |  |                     
|Euro     |  | $              | 17,700 |               |  | 1.14 dollars per euro |  | $                    | (903 | )              |      | $              | 765 |  
|Yen      |  | $              | 1,490  |               |  | 110.88 yen per dollar |  | $                    | (22  | )              |      | $              | 24  |  
|         |  |                |        |               |  |                       |  |                      |      |                |      |                |     |   |     | 
|         |  | $              | 19,190 |               |  |                       |  |                      |      | $              | (925 | )              |     | $ | 789 | 
|         |  |                |        |               |  |                       |  |                      |      |                |      |                |     |   |     | 

In addition to hedging inventory purchases and royalties, we may also
hedge other foreign currency cash flow and balance sheet exposures as they are
identified.

Net unrealized losses on foreign exchange contracts at November 29, 2003,
were included in accumulated other comprehensive income and are expected to be
reclassified into earnings within the next ten months as the related underlying
transactions affect earnings. Actual amounts ultimately reclassified to
earnings are dependent on the exchange rates in effect when derivative
contracts that are currently outstanding mature.

Inventory purchase commitments.

At November 29, 2003, we had firm commitments to purchase inventory in the
amount of $28.7 million. These commitments included contingent liabilities
under open letters of credit with foreign suppliers aggregating $637,000.

5. DISCONTINUED OPERATIONS

In Fiscal 2003 we made the decision to substantially exit the skatepark
business. This decision was driven by the proliferation of large, free public
skateparks that have been constructed in close proximity to our skateparks over
the past three years, and which

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adversely affected attendance and revenues at our skateparks. When the
decision to substantially exit the skatepark business was made, we operated 11
skateparks and were party to a lease for the construction of an additional park
to be opened in Sacramento, California in Fiscal 2004. Our skatepark in
Bakersfield, California was closed in February 2003, before we made the
decision to substantially exit the skatepark business.

As of November 29, 2003, we have closed four skateparks: Bakersfield,
California; Denver, Colorado; Phoenix, Arizona; and Atlanta, Georgia. The
Denver, Phoenix and Atlanta parks closed during the first quarter of Fiscal
2004. Of the eight skateparks that we continue to operate, we have reached
agreements with the landlords to close five of the parks generally over the
next six to eighteen months. We have also reached agreements to significantly
reduce the future rent under the leases for two of the three parks we expect to
operate in the future.

Upon the closure of each of our skateparks, the related operating results
are recast as discontinued operations in the consolidated statements of
operations for all periods presented. Accordingly, the four skateparks we have
closed through November 29, 2003, are presented as discontinued operations in
the accompanying condensed consolidated statements of operations.

In addition to the four skateparks we have closed, our discontinued
operations include the operating results of a Triple Crown specialty retail
store that was closed during the second quarter of Fiscal 2004 as a result of
underperformance. In connection with the closure of this store, we incurred
pre-tax lease termination charges of $150,000, which are included within net
loss from discontinued operations for the thirteen and twenty-six week periods
ended November 29, 2003.

Summarized operating results for our discontinued operations were as
follows:

|                        |  |                      |      |                        |  |                   |       |                   |  |   |        |   |  |   |       |  
|----------------------- |  | -------------------- | ---- | ---------------------- |  | ----------------- | ----- | ----------------- |  | - | ------ | - |  | - | ----- | -
|                        |  | THIRTEEN WEEKS ENDED |      | TWENTY-SIX WEEKS ENDED
|                        |  |                      |      |                       
|                        |  | NOVEMBER 29, 2003    |      | NOVEMBER 30, 2002      |  | NOVEMBER 29, 2003 |       | NOVEMBER 30, 2002
|                        |  |                      |      |                        |  |                   |       |                  
|                        |  |                      |      |                        |  | (In thousands)    |       |                   |  |  
|Net sales               |  | $                    | 141  |                        |  | $                 | 1,103 |                   |  | $ | 1,325  |   |  | $ | 2,705 |  
|Gross profit            |  |                      | 85   |                        |  |                   | 775   |                   |  |   | 733    |   |  |   | 1,915 |  
|Lease termination costs |  |                      | 134  |                        |  |                   |      |                   |  |   | 4,822  |   |  |   |      |  
|Net loss                |  | $                    | (163 | )                      |  | $                 | (362  | )                 |  | $ | (5,088 | ) |  | $ | (510  | )
|                        |  |                      |      |                        |  |                   |       |                   |  |   |        |   |  |   |       |  

Our results from continuing operations for the thirteen and twenty-six
week periods ended November 29, 2003, include pre-tax lease termination costs
of $1.9 million and $3.9 million, respectively, which relate to lease
termination agreements reached during Fiscal 2004 for skateparks that we
continued to operate as of November 29, 2003. Our November 29, 2003 balance
sheet included lease termination liabilities aggregating $3.8 million and
liabilities held in connection with disposal activities aggregating $108,000,
representing the portion of skatepark lease termination costs that had not yet
been paid.

6. SEGMENT DISCLOSURES

Our reportable segments are based on three distinct product sales channels:
retail, national and international. The retail segment consists of U.S. retail
operations, which include our domestic retail stores and skateparks. The
national segment consists of all domestic operations outside of retail
operations, which includes the domestic wholesale business, the VANS Warped
Tour® and the VANS High Cascade Snowboard Camp®. The international segment
includes the international wholesale business and 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. Corporate
activities are comprised of certain centralized selling and distribution costs
incurred in the worldwide distribution of our products as well as corporate
administrative costs. Such costs aggregated $11.5 million and $9.0 million for
the thirteen week periods ended November 29, 2003, and November 30, 2002,
respectively, and $27.0 million and $24.0 million for the twenty-six week
periods ended November 29, 2003, and November 30, 2002, respectively.
Unallocated operating costs are comprised of a substantial portion of our
marketing, advertising and promotional costs, which are incurred to promote
brand awareness and which are not directly associated with any one sales
channel. Our chief operating decision-maker evaluates the performance of our
segments based on gross margin and direct operating profit, excluding such
unallocated amounts.

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Summary information by segment follows:

|                                    |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |        |  
|----------------------------------- | ------------- | ------------- | ------ | -------------------- | ------ | ---------------------- | ------ | -------------- | ------ | ------------ | ------- | ------- | ------ | - | ------- | ------- | ------ | -
|                                    |               |               |        | THIRTEEN WEEKS ENDED |        | TWENTY-SIX WEEKS ENDED
|                                    |               |               |        |                      |        |                       
|                                    |               |               |        | NOVEMBER 29,         |        | NOVEMBER 30,           |        | NOVEMBER 29,   |        | NOVEMBER 30,
|                                    |               |               |        | 2003                 |        | 2002                   |        | 2003           |        | 2002        
|                                    |               |               |        |                      |        |                        |        |                |        |             
|                                    |               |               |        |                      |        |                        |        | (In thousands) |        |              |         |        
|Net sales:                          |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |        
|                                    | Retail        |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |       
|                                    |               | Skateparks    |        | $                    | 3,152  |                        |        | $              | 3,393  |              |         | $       | 7,127  |   |         | $       | 7,926  |  
|                                    |               | Retail stores |        |                      | 20,529 |                        |        |                | 18,479 |              |         |         | 53,351 |   |         |         | 48,348 |  
|                                    | National      |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |       
|                                    |               | Wholesale     |        |                      | 23,727 |                        |        |                | 19,098 |              |         |         | 66,590 |   |         |         | 64,456 |  
|                                    |               | Other         |        |                      | 145    |                        |        |                | 145    |              |         |         | 11,173 |   |         |         | 10,356 |  
|                                    | International |               |        | 17,630               |        |                        |        | 18,388         |        |              |         | 55,629  |        |   |         | 51,448  |       
|                                    |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |        
|Total net sales                     |               | $             | 65,183 |                      |        | $                      | 59,503 |                |        | $            | 193,870 |         |        | $ | 182,534 |        
|                                    |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |        |  
|Gross profit:                       |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |        
|                                    | Retail        |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |       
|                                    |               | Skateparks    |        | $                    | 2,314  |                        |        | $              | 2,480  |              |         | $       | 5,073  |   |         | $       | 5,878  |  
|                                    |               | Retail stores |        |                      | 11,002 |                        |        |                | 10,102 |              |         |         | 29,041 |   |         |         | 26,270 |  
|                                    | National      |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |       
|                                    |               | Wholesale     |        |                      | 9,759  |                        |        |                | 7,534  |              |         |         | 24,803 |   |         |         | 23,432 |  
|                                    |               | Other         |        |                      | (32    | )                      |        |                | (20    | )            |         |         | 2,135  |   |         |         | 578    |  
|                                    | International |               |        | 8,403                |        |                        |        | 8,167          |        |              |         | 29,159  |        |   |         | 23,076  |       
|                                    |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |        
|Total gross profit                  |               | $             | 31,446 |                      |        | $                      | 28,263 |                |        | $            | 90,211  |         |        | $ | 79,234  |        
|                                    |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |        |  
|Income (loss) from operations:      |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |        
|                                    | Retail        |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |       
|                                    |               | Skateparks    |        | $                    | (2,416 | )                      |        | $              | (967   | )            |         | $       | (4,427 | ) |         | $       | (881   | )
|                                    |               | Retail stores |        |                      | (1,918 | )                      |        |                | (2,521 | )            |         |         | 1,823  |   |         |         | (52    | )
|                                    | National      |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |       
|                                    |               | Wholesale     |        |                      | 6,503  |                        |        |                | 3,765  |              |         |         | 17,299 |   |         |         | 15,616 |  
|                                    |               | Other         |        |                      | (138   | )                      |        |                | (148   | )            |         |         | 1,785  |   |         |         | 287    |  
|                                    | International |               |        | 4,113                |        |                        |        | 4,463          |        |              |         | 18,902  |        |   |         | 13,592  |       
|                                    | Unallocated   |               |        | (11,527              | )      |                        |        | (9,036         | )      |              |         | (26,973 | )      |   |         | (23,991 | )     
|                                    |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |        
|Total income (loss) from operations |               | $             | (5,383 | )                    |        | $                      | (4,444 | )              |        | $            | 8,409   |         |        | $ | 4,571   |        
|                                    |               |               |        |                      |        |                        |        |                |        |              |         |         |        |   |         |         |        |  

Included in skatepark income (loss) from operations for the thirteen week
and twenty-six week periods ended November 29, 2003, are lease termination
costs of $1.9 million and $3.9 million, respectively.

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

GENERAL

The following discussion contains forward-looking statements about our
revenues, earnings, spending, margins, orders, products, plans, strategies and
objectives that involve risk and uncertainties. Forward-looking statements
include any statement that may predict, forecast or imply future results, and
may contain words like believe, anticipate, expect, estimate,
project, or words similar to those. Our actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in 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, 2003, which is filed with the
Securities and Exchange Commission, and in our press release dated December 19,
2003.

GENERAL OVERVIEW

Vans is a leading global action sports and lifestyle company that
merchandises, designs, sources and distributes VANS-branded active-casual and
performance footwear, apparel and accessories. Action sports, including
skateboarding, snowboarding, surfing, wakeboarding, BMX 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 action sports culture. We have implemented a unique marketing
plan to reach our customers through multiple points of contact which include
owning and operating action sports entertainment events and venues, such as the
VANS Triple Crown Series, VANS skateparks and the VANS High Cascade Snowboard
Camp®, sponsoring professional and amateur athletes and the VANS Warped Tour®,
as well as advertising in targeted print and television media.

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RECENT DEVELOPMENTS IN OUR EXIT FROM THE SKATEPARK BUSINESS

As previously disclosed by us, in Fiscal 2003 we made the decision to
substantially exit the skatepark business. This decision was driven by the
proliferation of large, free public skateparks that have been constructed in
close proximity to our skateparks over the past three years, and which
adversely affected attendance and revenues at our skateparks. When the decision
to substantially exit the skatepark business was made, we operated 11
skateparks and were party to a lease for the construction of an additional park
to be opened in Sacramento, California in Fiscal 2004. Our skatepark in
Bakersfield, California was closed in February 2003, before we made the
decision to substantially exit the skatepark business.

As of November 29, 2003, we have closed four skateparks: Bakersfield,
California; Denver, Colorado; Phoenix, Arizona; and Atlanta, Georgia. The
Denver, Phoenix and Atlanta parks closed in the first quarter of Fiscal 2004.
Of the eight skateparks that we continue to operate, we have reached agreements
with the landlords to close five of the parks. Additionally, in the second
quarter of Fiscal 2004 we reached agreements to significantly reduce the future
rent payments under the leases for two of the three parks we expect to operate
in the future. We currently plan to keep open three skateparks primarily to
promote brand awareness, and we expect that all other parks will be closed
generally over the next six to eighteen months.

Our operating results for the second quarter of Fiscal 2004 include
pre-tax lease termination costs of $1.9 million related to two skatepark lease
termination agreements that were reached during the quarter for parks that we
continued to operate as of November 29, 2003; and our operating results for the
first six months of Fiscal 2004 include pre-tax lease termination costs of $3.9
million related to three lease termination agreements that were reached during
such period for parks that we continued to operate as of November 29, 2003. As
discussed further in Note 5 to the Condensed Consolidated Financial Statements,
the operating results for closed skateparks are presented as discontinued
operations beginning in the period the skatepark is closed.

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
provide reserves 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. These
reserves become permanent reductions in the carrying value of inventory until
sold. If actual market conditions are less favorable than those projected by
us, additional inventory write-downs may be required.

Impairment of Property, Plant and Equipment.We evaluate the carrying
value of property, plant and equipment 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 evaluate future undiscounted cash flows related to the relevant
assets. 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

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plan and modify them on a store-by-store basis if other factors should be
considered. The discount rate applied is based upon our weighted average cost
of capital adjusted for the risks associated with the operations being
analyzed.

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. 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; $6.2 million associated with
the acquisition of Pro-tec; $5.8 million related to the acquisition of Global
Accessories Limited (now known as Vans Inc. Limited); $4.9 million associated
with our acquisition of a majority interest in the VANS Warped Tour; $2.1
million associated with our acquisition of Sunspot; and $400,000 associated
with the acquisition of certain assets and liabilities of Max MadHouse.

Taxes.We record valuation allowances to reduce our deferred tax assets to
amounts that we believe are more likely than not to be realized. Realization of
deferred tax assets (such as net operating loss carryforwards) is dependent on
future taxable earnings and is therefore uncertain. On a quarterly basis, we
assess the likelihood that our deferred tax asset balance will be recovered
from future taxable income. To the extent we believe that recovery is not
likely, we establish a valuation allowance against our deferred tax asset,
increasing our income tax expense in the period such determination is made.

We have not recorded U.S. income tax expense for foreign earnings that we
have determined to be indefinitely reinvested offshore, thus reducing our
overall income tax expense. The amount of earnings designated as indefinitely
reinvested offshore is based upon the actual deployment of such earnings in our
offshore assets. Income tax considerations are also a factor in determining the
amount of foreign earnings to be repatriated. In the event actual cash needs of
our U.S. entities exceed our current expectations, we may need to repatriate
foreign earnings which have been designated as indefinitely reinvested
offshore. This would result in additional income tax expense being recorded.
Because the determination of foreign earnings as indefinitely reinvested
offshore involves future plans and expectations, there is a possibility that
amounts determined to be indefinitely reinvested offshore may vary from our
current expectations, thereby affecting future income tax expense.

On an interim basis, we separately estimate what our effective tax rate
will be domestically and internationally for the full fiscal year and record a
quarterly income tax provision in accordance with the anticipated annual rate
for each of these jurisdictions. As the fiscal year progresses, we refine our
estimate based upon actual events and earnings by jurisdiction during the year.
This estimation process can result in significant changes to our expected
effective tax rate. When this occurs, we adjust the income tax provision during
the quarter in which the change in estimate occurs so that the year-to-date
provision reflects the expected domestic and international annual rates.

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RESULTS OF OPERATIONS

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

VANS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

|                                              |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |              |      |     |      |       |      |     |      | 
|--------------------------------------------- | ---------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------ | ---- | -------------------- | ---- | ---------------------- | ---- | ------------ | ---- | ------------ | ---- | --- | ---- | ----- | ---- | --- | ---- | 
|                                              |                                          |                                                                                    |                          |      | THIRTEEN WEEKS ENDED |      | TWENTY-SIX WEEKS ENDED
|                                              |                                          |                                                                                    |                          |      |                      |      |                       
|                                              |                                          |                                                                                    |                          |      | NOVEMBER 29,         |      | NOVEMBER 30,           |      | NOVEMBER 29, |      | NOVEMBER 30,
|                                              |                                          |                                                                                    |                          |      | 2003                 |      | 2002                   |      | 2003         |      | 2002        
|                                              |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |             
|Retail sales                                  |                                          |                                                                                    | 36.3                     | %    |                      |      | 36.8                   | %    |              |      | 31.2         | %    |     |      | 30.8  | %   
|National sales                                |                                          |                                                                                    | 36.6                     |      |                      |      | 32.3                   |      |              |      | 40.1         |      |     |      | 41.0  |     
|International sales                           |                                          |                                                                                    | 27.1                     |      |                      |      | 30.9                   |      |              |      | 28.7         |      |     |      | 28.2  |     
|                                              |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |              |      |     |      |       |     
|Net sales                                     |                                          |                                                                                    | 100.0                    |      |                      |      | 100.0                  |      |              |      | 100.0        |      |     |      | 100.0 |     
|Cost of sales                                 |                                          |                                                                                    | 51.8                     |      |                      |      | 52.5                   |      |              |      | 53.5         |      |     |      | 56.6  |     
|                                              |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |              |      |     |      |       |     
|Gross profit                                  |                                          |                                                                                    | 48.2                     |      |                      |      | 47.5                   |      |              |      | 46.5         |      |     |      | 43.4  |     
|Operating expenses:                           |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |              |      |     |      |       |     
|                                              | Retail                                   |                                                                                    |                          | 23.7 |                      |      |                        | 26.4 |              |      |              | 16.5 |     |      |       | 17.6 |    
|                                              | Marketing, advertising and promotion     |                                                                                    |                          | 9.0  |                      |      |                        | 9.6  |              |      |              | 8.1  |     |      |       | 9.0  |    
|                                              | Selling, distribution and administrative |                                                                                    |                          | 20.8 |                      |      |                        | 18.7 |              |      |              | 15.4 |     |      |       | 14.2 |    
|                                              | Lease termination costs                  |                                                                                    |                          | 2.9  |                      |      |                        | 0.0  |              |      |              | 2.0  |     |      |       | 0.0  |    
|                                              | Amortization of intangibles              |                                                                                    |                          | 0.1  |                      |      |                        | 0.3  |              |      |              | 0.1  |     |      |       | 0.2  |    
|                                              |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |              |      |     |      |       |     
|                                              |                                          |                                                                                    | Total operating expenses |      |                      | 56.5 |                        |      |              | 55.0 |              |      |     | 42.2 |       |      |     | 40.9 | 
|                                              |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |              |      |     |      |       |     
|                                              |                                          | Income (loss) from operations                                                      |                          |      | (8.3                 | )    |                        |      | (7.5         | )    |              |      | 4.3 |      |       |      | 2.5 |     
|Interest (income), net                        |                                          |                                                                                    | (0.2                     | )    |                      |      | (0.3                   | )    |              |      | (0.1         | )    |     |      | (0.2  | )   
|Other (income) expense, net                   |                                          |                                                                                    | 0.7                      |      |                      |      | (0.8                   | )    |              |      | 0.2          |      |     |      | 0.1   |     
|                                              |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |              |      |     |      |       |     
|                                              |                                          | Income (loss) from continuing operations
before income taxes and minority interest |                          |      | (8.8                 | )    |                        |      | (6.4         | )    |              |      | 4.2 |      |       |      | 2.6 |     
|Income tax (benefit) expense                  |                                          |                                                                                    | 0.6                      |      |                      |      | (1.8                   | )    |              |      | 0.9          |      |     |      | 0.8   |     
|Minority interest                             |                                          |                                                                                    | 0.6                      |      |                      |      | 1.0                    |      |              |      | 0.7          |      |     |      | 0.5   |     
|                                              |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |              |      |     |      |       |     
|Income (loss) from continuing operations      |                                          |                                                                                    | (10.0                    | )    |                      |      | (5.6                   | )    |              |      | 2.6          |      |     |      | 1.3   |     
|Loss from discontinued operations, net of tax |                                          |                                                                                    | (0.3                     | )    |                      |      | (0.6                   | )    |              |      | (2.6         | )    |     |      | (0.3  | )   
|Net income (loss)                             |                                          |                                                                                    | (10.3                    | )%   |                      |      | (6.2                   | )%   |              |      | 0.0          | %    |     |      | 1.0   | %   
|                                              |                                          |                                                                                    |                          |      |                      |      |                        |      |              |      |              |      |     |      |       |     

16



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##### Table of Contents



QUARTERLY PERIOD ENDED NOVEMBER 29, 2003 (Q2 FISCAL 2004), AS COMPARED TO
QUARTERLY PERIOD ENDED NOVEMBER 30, 2002 (Q2 FISCAL 2003)

Net Sales

Net sales for Q2 Fiscal 2004 increased 9.5% to $65.2 million from $59.5
million for Q2 Fiscal 2003 and included a 15.2% year-over-year increase in
comparable store sales worldwide (excluding merchandise revenues from
skateparks expected to be closed and revenues from concessions and skate
sessions at all of our skateparks). The sales increase was the net effect of
increases in National and Retail sales, favorable variances in foreign exchange
rates partially offset by a decrease in International sales, as discussed
below.

Retail.Retail sales, which consist solely of sales through our U.S.
retail stores and skatepark sessions and concessions, increased 8.3% to $23.7
million in Q2 Fiscal 2004 from $21.9 million in Q2 Fiscal 2003. This increase
was driven by a 14.0% year-over-year increase in comparable U.S. store sales
(excluding merchandise revenues from skateparks expected to be closed and
revenues from concessions and skate sessions at all of our skateparks). The
comparable store sales increase was fueled by growth in womens
and kids
footwear,
as well as apparel, with the largest percentage increase from our
womens footware line. Comparable revenues from concessions and skate sessions at
our skateparks declined 21.9% year-over-year.

During Q2 Fiscal 2004, we reduced our U.S. retail store count to 149 total
stores as a result of the closing of four stores. No skateparks were
closed during Q2 Fiscal 2004. As discussed above under the caption Recent
Developments In Our Exit from the Skatepark Business, we currently plan to
keep open three skateparks, primarily to promote brand awareness, and we expect
that all other parks will be closed generally over the next six to eighteen months.

National.National sales, which include all U.S. sales except sales
through our U.S. retail stores, increased 24.1% to $23.9 million in Q2 Fiscal
2004 from $19.2 million in Q2 Fiscal 2003. This increase was primarily due to a
3.2% increase in average selling prices year-over-year and an 18.9% increase in
units sold, which resulted from a greater-than-expected level of at-once orders
for the quarter. The strongest increases in unit sales were in our womens
footwear business.

International.International sales, which include sales through our
European stores, decreased 4.1% to $17.6 million in Q2 Fiscal 2004 from $18.4
million in Q2 Fiscal 2003. This decrease was primarily due to a $400,000
decrease in European sales and an approximately $600,000 decrease in sales in
Mexico and South America, partially offset by a $200,000 increase in Canadian
sales. The $400,000 sales decrease in Europe resulted from a $1.7 million
decrease in sales on a constant-dollar basis, partially offset by a $1.3
million favorable variance in exchange rates relating to our direct operations
in Europe. Sales by such operations are made in euros and British sterling and
benefited from the weakening U.S. dollar during the quarter. The sales decline
in Europe resulted from a 32.4% decrease in units sold, primarily due to a
shift in shipments from Q2 Fiscal 2004 to Q1 Fiscal 2004 as compared to the
comparable periods in the prior year, and an ongoing shift in fashion trends
in Europe from skate-oriented footwear to fashionable athletic
footwear.

Gross Profit

Gross profit increased 11.3% to $31.4 million in Q2 Fiscal 2004 from $28.3
million in Q2 Fiscal 2003. As a percentage of net sales, gross profit increased
to 48.2% for Q2 Fiscal 2004, versus 47.5% for Q2 Fiscal 2003 as a result of
improved gross margins in the national and international sales channels, partly
offset by decreased retail gross margins. Domestically, retail gross profit
decreased as a percentage of sales from 57.6% in Q2 Fiscal 2003 to 56.2% in Q2
Fiscal 2004 as a result of decreased skatepark session revenues and decreased
average selling prices, primarily due to the turnover of slow-moving inventory.
National gross profits increased as a percentage of sales from 39.0% in Q2
Fiscal 2003 to 40.7% in Q2 Fiscal 2004 largely due to increased average selling
prices in Q2 Fiscal 2004 and a reduction in wholesale markdowns versus those
taken in Q2 Fiscal 2003. Internationally, gross profit increased as a
percentage of sales from 44.4% in Q2 Fiscal 2003 to 47.7% in Q2 Fiscal 2004
driven primarily by favorable fluctuations in exchange rates between the euro
and U.S. dollar.

Loss from Operations

We incurred a loss from operations of $5.4 million in Q2 Fiscal 2004
versus $4.4 million in Q2 Fiscal 2003. Operating expenses in Q2 Fiscal 2004
increased 12.6% to $36.8 million versus $32.7 million in Q2 Fiscal 2003 largely
due to $1.9 million of skatepark lease termination costs incurred in Q2 Fiscal
2004. See Recent Developments in Our Exit from the Skatepark Business, above.
As a percentage of sales, operating expenses, excluding lease termination
costs, decreased to 53.6% versus 55.0% a year ago. The material components of
the decrease in operating expenses are discussed below.

17



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##### Table of Contents



Retail.Retail expenses decreased slightly to $15.4 million in Q2 Fiscal
2004 versus $15.7 million in Q2 Fiscal 2003 primarily due to the net reduction
of nine stores since the same period a year ago, partially offset by an increase in labor
and related costs in order to support the increased retail sales volume
discussed above.

Marketing, advertising and promotion.Marketing, advertising and promotion
expenses increased 2.6% to $5.9 million in Q2 Fiscal 2004 from $5.7 million in
Q2 Fiscal 2003, primarily due to increases in athlete sponsorships.

Selling, distribution and administrative.Selling, distribution and
administrative expenses increased 21.3% to $13.5 million in Q2 Fiscal 2004 from
$11.1 million in Q2 Fiscal 2003, primarily as a result of an increase in bonus expense
of $1.2 million due to the likely achievement of performance targets for Fiscal
2004, and net increased costs of approximately $700,000 related to our
European business. The net increase in costs related to our European business
was a result of an approximately $500,000 increase related to changes in
exchange rates between European currencies, primarily the euro, and the U.S.
dollar and by approximately $200,000 in increased costs on a constant-dollar
basis, which was primarily a result of the acquisition of Max MadHouse.

Lease termination costs.Please see the discussion of these costs under
the caption Recent Developments in Our Exit from the Skatepark Business.

Amortization of intangibles.Amortization of intangibles decreased
slightly to $92,000 in Q2 Fiscal 2004 compared to $177,000 in Q2 Fiscal 2003,
as a result of certain assets acquired in the Pro-tec transaction being
completely amortized in Fiscal 2003.

Interest (Income), Net

Interest (income), net decreased to $126,000 in Q2 Fiscal 2004 from
$157,000 in Q2 Fiscal 2003, primarily due to lower interest rates received on
monies invested.

Other (Income) Expense, Net

Other (income) 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 (income) expense, net,
decreased to $453,000 of expense for Q2 Fiscal 2004 from $502,000 of income for
Q2 Fiscal 2003, primarily due to unfavorable fluctuations in foreign currency
exchange rates in Europe and Mexico.

Income Tax Expense

Income tax expense increased to $399,000 in Q2 Fiscal 2004 from a $1.1
million benefit in Q2 Fiscal 2003. The increase in income tax
expense and related effect on our effective tax rate are attributable to no tax
benefit being recognized against losses sustained by our U.S. operations in Q2
Fiscal 2004 offset by income tax expense provided against profits generated
offshore. We have not recognized an income tax benefit related to losses
generated by our U.S. operations as we expect such operations to generate a
taxable loss for Fiscal 2004.

In future periods, we expect our effective tax rate to fluctuate as the
mix between taxable income or loss generated in the U.S. and foreign
jurisdictions changes. In that regard, we expect our effective tax rate for
Fiscal 2004 to be in the range of approximately 26% to 29%.* Additionally, due
primarily to the closure of skateparks, we expect our net operating loss
carryforwards to reach approximately $30 million. Since we anticipate
providing a full valuation allowance against these net operating loss
carryforwards, we expect our federal tax rate for U.S. earnings, if any, to be zero for
the next few years, and our state tax rate for U.S. earnings, if any, to be seven percent.* See Critical Accounting Policies  Taxes.



---

|* |  | Note: This is a forward-looking statement. Our actual effective tax rate,
net operating loss carryforwards and valuation allowances against
operating loss carryforwards could differ materially. Important factors
that could cause such differences include, but are not limited to: (i)
changes or expected changes to U.S. or international tax laws; and (ii)
differences between our forecasted and actual operating results.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents



Minority Interest

Minority interest decreased to $417,000 in Q2 Fiscal 2004 from $594,000 in
Q2 Fiscal 2003, primarily as a result of decreased earnings from our Mexico
subsidiary in Q2 Fiscal 2004.

Loss from Discontinued Operations, Net of Tax

As discussed more fully above under the caption Recent Developments in
Our Exit from the Skatepark Business, in Fiscal 2003 we made the decision to
substantially exit the skatepark business. Discontinued operations for all
periods presented include the results of operations for the four skateparks
that had been closed as of August 30, 2003, and the closure of one Triple Crown
specialty retail store during Q2 Fiscal 2004. Losses from discontinued
operations decreased to $163,000 in Q2 Fiscal 2004 from $362,000 in Q2 Fiscal
2003 primarily as a result of losses incurred in Q2 Fiscal 2003 by the four
skateparks that were closed prior to Q2 Fiscal 2004. As we close additional
skateparks in the future, the related operating results will be recast as
discontinued operations in the consolidated statements of operations for all
periods presented.

TWENTY-SIX WEEK PERIOD ENDED NOVEMBER 29, 2003 (FISCAL 2004 SIX MONTHS), AS
COMPARED TO TWENTY-SIX WEEK PERIOD ENDED NOVEMBER 30, 2002 (FISCAL 2003 SIX
MONTHS).

Net Sales

Net sales for the Fiscal 2004 Six Months increased 6.2% to $193.9 million
from $182.5 million for the Fiscal 2003 Six Months and included a 14.3%
year-over-year increase in comparable store sales worldwide (excluding
merchandise revenues from skateparks expected to be closed and revenues from
concessions and skate sessions at all of our skateparks). The sales increase
was the net effect of increases in Retail, National and International sales and
favorable variances in foreign exchange rates as discussed below.

Retail.Retail sales, which consist solely of sales through our U.S.
retail stores and skatepark sessions and concessions, increased 7.5% to $60.5
million in the Fiscal 2004 Six Months from $56.3 million in the Fiscal 2003 Six
Months. This increase was driven by a year-over-year increase in comparable
U.S. store sales (excluding merchandise revenues from skateparks expected to be
closed and revenues from concessions and skate sessions at all of our
skateparks) of 13.3%. The comparable store sales increase was fueled by growth
in our womens and kids footwear lines as well as apparel. Comparable revenues
from concessions and skate sessions at our eight skateparks declined 30.6%
year-over-year.

During the Fiscal 2004 Six Months, we reduced our U.S. retail store count
to 149 total stores as a result of closing three skateparks and the net closing
of five stores. As discussed above under the caption Recent Developments In
Our Exit from the Skatepark Business, we currently plan to keep open three
skateparks primarily to promote brand awareness, and we expect that all other
parks will be closed generally over the next six to eighteen months.

National.National sales, which include all U.S. sales except sales
through our U.S. retail stores, increased 3.9% to $77.8 million in the Fiscal
2004 Six Months from $74.8 million in the Fiscal 2003 Six Months. This increase
was primarily due to a 7.2% increase in units sold, partially offset by a 4.7%
decrease in average selling prices year-over-year. The strongest increases in
unit sales were in our womens and kids footwear business. Additionally, we had
an approximately $1.0 million or 11.6% year-over-year increase in revenues from
the VANS Warped Tour®.

International.International sales, which include sales through our
European stores, increased 8.1% to $55.6 million in the Fiscal 2004 Six Months
from $51.4 million in the Fiscal 2003 Six Months. This increase was primarily
due to a $4.0 million increase in European sales and a $1.0 million increase in
royalties from our licensee for Japan, partially offset by an approximately
$700,000 decrease in sales in Central America. The $4.0 million sales increase
in Europe resulted from a $4.7 million favorable variance in exchange rates
relating to our direct operations in Europe, partially offset by a $700,000
decrease in sales on a constant-dollar basis. The sales decline resulted from a
3.6% decrease in units sold and a 6.0% decrease in local currency average
selling prices.

Gross Profit

Gross profit increased 13.9% to $90.2 million in the Fiscal 2004 Six
Months from $79.2 million in the Fiscal 2003 Six Months. As a percentage of net
sales, gross profit increased to 46.5% for the Fiscal 2004 Six Months, versus
43.4% for the Fiscal 2003 Six Months as a result of improved gross margins in
the National and International sales channels. Domestically, retail gross
profit as a percentage of sales was relatively flat at approximately 56.4% on a
period-to-period basis. National gross profits increased as a percentage of
sales from 32.6% in the Fiscal 2003 Six Months to 34.7% in the Fiscal 2004 Six
Months largely due to increased margin contribution from the VANS Warped Tour®
in the Fiscal 2004 Six Months and a reduction in wholesale markdowns versus
those taken in the

19



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Fiscal 2003 Six Months. Internationally, gross profit increased as a
percentage of sales from 44.8% in the Fiscal 2003 Six Months to 52.3% in the
Fiscal 2004 Six Months driven primarily by favorable fluctuations in exchange
rates between the euro and U.S. dollar and increased license income from Japan.

Income from Operations

We had income from operations of $8.4 million in the Fiscal 2004 Six
Months versus $4.6 million in the Fiscal 2003 Six Months. Operating expenses in
the Fiscal 2004 Six Months increased 9.6% to $81.8 million versus $74.7 million
in the Fiscal 2003 Six Months largely due to $3.9 million of skatepark lease
termination costs incurred in the Fiscal 2004 Six Months. See Recent
Developments in Our Exit from the Skatepark Business, above. As a percentage
of sales, operating expenses, excluding lease termination costs, decreased to
40.2% versus 40.9% a year ago. The material components of the decrease in
operating expenses are discussed below.

Retail.Retail expenses increased slightly to $32.1 million in the Fiscal
2004 Six Months versus $32.0 million in the Fiscal 2003 Six Months, primarily
due to increased labor and related costs in order to support the increased
retail stales volume discussed above, partially offset by cost savings
resulting from the net closing of two stores since the beginning of Fiscal 2003.

Marketing, advertising and promotion.Marketing, advertising and promotion
expenses decreased 4.1% to $15.7 million in the Fiscal 2004 Six Months from
$16.4 million in the Fiscal 2003 Six Months, primarily due to planned decreases
in promotional activities related to trade shows and advertising costs.

Selling, distribution and administrative.Selling, distribution and
administrative expenses increased 15.4% to $29.9 million in the Fiscal 2004 Six
Months from $25.9 million in the Fiscal 2003 Six Months, primarily due to (i)
net increased costs of approximately $1.2 million related to our European
business, (ii) a $1.9 million increase in bonus expense due to the likely
achievement of performance targets for Fiscal 2004, and (iii) $500,000 of
employee severance costs incurred in Q1 Fiscal 2004 . The net increase in costs
related to our European business was a result of an approximately $1.3 million
increase related to changes in exchange rates between European currencies,
primarily the euro, and the U.S. dollar.

Lease termination costs.Please see the discussion of these costs under
the caption Recent Developments in Our Exit from the Skatepark Business.

Amortization of intangibles.Amortization of intangibles decreased
slightly to $258,000 in the Fiscal 2004 Six Months compared to $365,000 in the
Fiscal 2003 Six Months, as a result of certain assets acquired in the Pro-tec
transaction being completely amortized in Fiscal 2003.

Interest (Income), Net

Interest (income), net decreased to $185,000 in the Fiscal 2004 Six Months
from $425,000 in the Fiscal 2003 Six Months, primarily due to lower interest
rates received on monies invested.

Other (Income) Expense, Net

Other (income) 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 (income) expense, net,
increased to $376,000 of expense for the Fiscal 2004 Six Months from $260,000
of expense for the Fiscal 2003 Six Months, primarily due to unfavorable fluctuations in foreign
currency exchange rates in Europe and Mexico and the non-recurrence
of foreign currency transaction losses that occurred in Q1 Fiscal 2003 related
to our business in Brazil and Argentina.

Income Tax Expense

Income tax expense increased to $1.7 million in the Fiscal 2004 Six Months
from $1.5 million in the Fiscal 2003 Six Months, as a result of increased
income from continuing operations, offset by a lower effective tax rate. Our
effective tax rate was 20.8% in the Fiscal 2004 Six Months versus 31.8% in the
Fiscal 2003 Six Months. The decrease in our effective tax rate was
due to the absence of U.S. taxes in the Fiscal 2004 Six Months and
the impact of lower tax rates internationally in the Fiscal 2004 Six
Months versus the Fiscal 2003 Six Months. We have not recognized an income tax benefit related to losses
generated by our U.S. operations as we expect such operations to generate a
taxable loss for Fiscal 2004.

20



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##### Table of Contents



In future periods, we expect our effective tax rate to fluctuate as the
mix between taxable income or loss generated in U.S. and foreign jurisdictions
changes. In that regard, we expect our effective tax rate for Fiscal 2004 to be
in the range of approximately 26% to 29%.* Additionally, due primarily to the
closure of skateparks, we expect our net operating loss carryforwards to reach
approximately $30 million. Since we anticipate providing a full valuation
allowance against these net operating loss carryforwards, we expect our federal tax
rate for U.S. earnings, if any, to be zero for the next few years, and our state tax rate for U.S.
earnings, if any, to be seven percent.* See
Critical Accounting Policies  Taxes.

Minority Interest

Minority interest increased to $1.5 million in the Fiscal 2004 Six Months
from $1.0 in the Fiscal 2003 Six Months, primarily as a result of increased
income produced by the VANS Warped Tour®.

Loss from Discontinued Operations, Net of Tax

As discussed more fully above under the caption Recent Developments in
Our Exit from the Skatepark Business, in Fiscal 2003 we made the decision to
substantially exit the skatepark business. Discontinued operations for all
periods presented include the results of operations for the four skateparks
that had been closed as of August 30, 2003, and the closure of a Triple Crown
specialty retail store during Q2 Fiscal 2004. Losses from discontinued
operations increased to $5.1 million in the Fiscal 2004 Six Months from
$510,000 in the Fiscal 2003 Six Months primarily as a result of lease
termination charges of $4.7 million incurred in connection with two of the
three skateparks that were closed in the Fiscal 2004 Six Months. As we close
additional skateparks in the future, the related operating results will be
recast as discontinued operations in the consolidated statements of operations
for all periods presented.

Liquidity and Capital Resources

Cash Flows

We have historically financed our operations with a combination of cash
flows from operations, borrowings under credit facilities and the sale of
equity securities. At November 29, 2003, we had $112.1 million in working
capital and $63.9 million in cash and cash equivalents. This compares to
working capital of $106.1 million and cash and cash equivalents of $52.8
million at May 31, 2003. Our working capital increased during the Fiscal 2004
Six Months primarily as a result of the receipt of $5.1 million in full payment
of a note receivable held in connection with the sale of our former Orange,
California manufacturing facility.

During the Fiscal 2004 Six Months operating activities provided $10.0
million of cash, including a usage of $6.8 million of cash in connection with
discontinued operations, versus $11.0 million of cash provided by operating
activities in the Fiscal 2003 Six Months, which included cash usage of $131,000
from discontinued operations. The net increase in operating cash flow from
continuing operations was the result of a $2.8 million increase in income from
continuing operations, a higher reduction in inventory balances in the Fiscal
2004 Six Months compared to the same period last year, offset by a larger
increase in accounts receivable, a smaller increase in prepaid expenses, and a
reduction in lease termination liabilities in the Fiscal 2004 Six Months
compared to the same period last year.

Accounts receivable increased $8.7 million to $34.3 million during the
Fiscal 2004 Six Months, and inventory levels decreased from $64.0 million at
May 31, 2003, to $42.6 million at November 29, 2003, primarily due to the
seasonal increase in our U.S. wholesale business in connection with the
back-to-school selling season. Compared to a year ago, our inventory levels
have decreased 7.2%. This decrease was the result of improved management of
inventory levels and increased sales in our National and Retail business.

In connection with our exiting the skatepark business, as more fully
discussed under the caption Recent Developments in Our Exit from the Skatepark
Business, in the Fiscal 2004 Six Months we had a net reduction of $4.5 million
in lease termination liabilities as a result of the payment of lease
termination costs for skateparks that we will be closing. In total, we paid
$14.1 million during the Fiscal 2004 Six Months in connection with lease
termination costs to exit the skatepark business. Of the amounts paid, $6.4
million



---

|* |  | Note: This is a forward-looking statement. Our actual effective tax rate,
net operating loss carryforwards and valuation allowances against
operating loss carryforwards could differ materially. Important factors
that could cause such differences include, but are not limited to: (i)
changes or expected changes to U.S. or international tax laws; and (ii)
differences between our forecasted and actual operating results.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21



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##### Table of Contents



related to skateparks classified as discontinued operations in the
accompanying condensed consolidated financial statements. At November 29, 2003,
our balance sheet included lease termination liabilities of $3.8 million and
liabilities held in connection with disposal activities aggregating $108,000,
which represents lease termination liabilities related to skateparks classified
as discontinued operations.

Investing activities provided cash of $1.8 million in the Fiscal 2004 Six
Months primarily as a result of the repayment of the $5.1 million note
receivable described above. This was partially offset by $2.8 million in
capital expenditures and approximately $497,000 paid in connection with the
purchase of certain of the assets and liabilities of Max MadHouse. In the
Fiscal 2003 Six Months, investing activities provided $16.7 million, due mainly
to net sales of marketable debt securities of $24.0 million, offset by capital
expenditures of $6.4 million and approximately $1.0 million paid in connection
with the acquisition of Sunspot. Capital expenditures were higher in the Fiscal
2003 Six Months than in the Fiscal 2004 Six Months as a result of new retail
store and skatepark openings.

Cash used in financing activities was $1.5 million in the Fiscal 2004 Six
Months, which was primarily the net result of cash outflows of $909,000 for net
repayments of long-term debt and $814,000 in dividends paid to a minority
shareholder of one of our subsidiaries, partially offset by $195,000 in
proceeds from the issuance of common stock. In the Fiscal 2003 Six Months,
financing activities used $3.1 million in cash, primarily consisting of $2.2
million in net cash outflows to purchase common stock pursuant to our stock
repurchase program, $178,000 in net repayments of long-term debt, and $734,000
in dividends paid to the minority shareholder of one of our subsidiaries.

The following table summarizes our contractual payment obligations and
commitments as of November 29, 2003:

|                           |       |   |                                                   |       |      |   |        |        |      |   |        |        |            |   |        |        |  |   |       |       |  |   |        |        |  |   |        |        | 
|-------------------------- | ----- | - | ------------------------------------------------- | ----- | ---- | - | ------ | ------ | ---- | - | ------ | ------ | ---------- | - | ------ | ------ |  | - | ----- | ----- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                           |       |   | PAYMENT
OBLIGATIONS BY FISCAL YEAR (IN THOUSANDS)
|                           |       |   |                                                  
|                           |       |   | 2004                                              |       | 2005 |   | 2006   |        | 2007 |   | 2008   |        | THEREAFTER |   | TOTAL 
|                           |       |   |                                                   |       |      |   |        |        |      |   |        |        |            |   |       
|Operating leases           |       | $ | 6,455                                             |       |      | $ | 11,808 |        |      | $ | 10,578 |        |            | $ | 10,078 |        |  | $ | 7,933 |       |  | $ | 20,445 |        |  | $ | 67,297 |       
|Long-term debt             |       |   | 109                                               |       |      |   | 1,240  |        |      |   | 5      |        |            |   | 5      |        |  |   | 5     |       |  |   | 250    |        |  |   | 1,614  |       
|Athlete license agreements |       |   | 1,032                                             |       |      |   | 916    |        |      |   | 399    |        |            |   | 142    |        |  |   |      |       |  |   |       |        |  |   | 2,489  |       
|                           |       |   |                                                   |       |      |   |        |        |      |   |        |        |            |   |        |        |  |   |       |       |  |   |        |        |  |   |        |       
|                           | Total |   | $                                                 | 7,596 |      |   | $      | 13,964 |      |   | $      | 10,982 |            |   | $      | 10,225 |  |   | $     | 7,938 |  |   | $      | 20,695 |  |   | $      | 71,400 | 
|                           |       |   |                                                   |       |      |   |        |        |      |   |        |        |            |   |        |        |  |   |       |       |  |   |        |        |  |   |        |       

At November 29, 2003, we had firm commitments to purchase inventory in the
amount of $28.7 million during the third and fourth quarters of Fiscal 2004.
These commitments included contingent liabilities under open letters of credit
with foreign suppliers aggregating $637,000.

Borrowings

We maintain a $20.0 million credit facility, which enables us to obtain
advances for the issuance of commercial letters of credit and standby letters
of credit. Outstanding letters of credit are secured by our cash balances. This
facility matures on May 1, 2004. As of November 29, 2003, $637,000 in open
commercial letters of credit were outstanding under this facility.

Vans Latinoamericana, our subsidiary for 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 November 29, 2003, the
aggregate outstanding balance under the note was $1.2 million.

Share Repurchase Program

On September 21, 2001, we adopted a 1.0 million share repurchase program.
Through 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 stock under
the program in the Fiscal 2004 Six Months.

Capital Expenditures

Our future commitments for capital expenditures are primarily related to
the opening and remodeling of retail stores. We plan to open three stores and
remodel, re-size or relocate eight existing stores during the remainder of
Fiscal 2004. We estimate the aggregate cost of these openings, remodels and
relocations to be approximately $1.9 million.

22



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Capital Resources

Our liquid asset position at November 29, 2003, consisted of cash and cash
equivalents of $63.9 million. This compares to cash and cash equivalents of $52.8 million at May 31,
2003. We believe our capital resources will be sufficient to fund our
operations and capital expenditures and anticipated growth plan for the
foreseeable future.* Approximately $36.6 million of our liquid
asset position as of November 29, 2003, is held by European subsidiaries of Vans and could be subject to U.S.
income taxes if it is repatriated to Vans.

RECENT ACCOUNTING PRONOUNCEMENTS

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) (EITF 94-3). SFAS 146
is effective for exit or disposal activities that are initiated after December
31, 2002.

As a result of the implementation of SFAS 146, the accounting for amounts
recorded in connection with our decision to substantially exit the skatepark
business was materially impacted. Under the guidance of EITF 94-3, we would
have recorded as an expense during the year ended May 31, 2003 (the period in
which management committed to an exit plan for the skateparks), an estimate of
certain costs that would be directly incurred in connection with skatepark
closures. The most significant element of these costs is lease termination
charges. With the implementation of SFAS 146, costs associated with exit
activities are to be recorded in the period in which they are incurred. In the
case of lease termination costs, this is the period in which we enter into an
agreement with the landlord. Accordingly, our consolidated results of
operations include lease termination charges in the periods in which we entered
into an agreement. Additionally, other direct costs associated with closing
skateparks will be expensed in future periods as they are incurred.

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 adoption of SFAS 148 had
no material financial impact to our consolidated financial statements. We have
provided the additional disclosures required by SFAS 148 for the thirteen and
twenty-six week periods ended November 29, 2003, and November 30, 2002, in Note
1 to the Condensed 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 that 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 December
15, 2003. We will adopt the provisions of FIN 46 in the quarter ending February
28, 2004, 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. Since we do not currently have any variable interest entities, the
adoption of the provisions of FIN 46 is not expected to have a material impact
on our financial position or results of operations.

SEASONALITY

The following table contains unaudited selected quarterly financial data
for the eight quarters ended November 29, 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



---

|* |  | 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 aggregate 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; (vii) slowing in
the U.S., California or global economies which could materially impact our
business; and (viii) the ability to repatriate cash held in our European
subsidiaries to the United States without paying a significant amount of
U.S. taxes thereon.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 CONSOLIDATED QUARTERLY RESULTS
(DOLLARS IN THOUSANDS)

|                              |                                                        |  |               |        |               |  |         |         |          |  |              |         |            |  |         |        |          |  |   |        |    |  |   |         |    |  |   |         |    |  |   |        |   
|----------------------------- | ------------------------------------------------------ |  | ------------- | ------ | ------------- |  | ------- | ------- | -------- |  | ------------ | ------- | ---------- |  | ------- | ------ | -------- |  | - | ------ | -- |  | - | ------- | -- |  | - | ------- | -- |  | - | ------ | --
|                              |                                                        |  | QUARTER ENDED |        | QUARTER ENDED
|                              |                                                        |  |               |        |              
|                              |                                                        |  | NOVEMBER 29,  |        | AUGUST 30,    |  | MAY 31, |         | MARCH 1, |  | NOVEMBER 30, |         | AUGUST 31, |  | MAY 31, |        | MARCH 2,
|                              |                                                        |  | 2003          |        | 2003          |  | 2003    |         | 2003     |  | 2002         |         | 2002       |  | 2002    |        | 2002    
|                              |                                                        |  |               |        |               |  |         |         |          |  |              |         |            |  |         |        |         
|STATEMENT OF
OPERATIONS DATA: |                                                        |  |               |        |               |  |         |         |          |  |              |         |            |  |         |        |          |  |   |        |    |  |   |         |    |  |   |         |    |  |   |       
|                              | Net sales                                              |  | $             | 65,183 |               |  | $       | 128,687 |          |  | $            | 62,373  |            |  | $       | 80,769 |          |  | $ | 59,503 |    |  | $ | 123,031 |    |  | $ | 62,464  |    |  | $ | 80,253 |   
|                              | Gross profit                                           |  |               | 31,446 |               |  |         | 58,765  |          |  |              | 29,224  |            |  |         | 38,188 |          |  |   | 28,263 |    |  |   | 50,971  |    |  |   | 25,073  |    |  |   | 36,392 |   
|                              | Asset impairment
charges                               |  |               |       |               |  |         |        |          |  |              | 1,213   |            |  |         | 12,509 |          |  |   |       |    |  |   |        |    |  |   | 1,612   |    |  |   |       |   
|                              | Goodwill impairment
charges                            |  |               |       |               |  |         |        |          |  |              | 4,550   |            |  |         |       |          |  |   |       |    |  |   |        |    |  |   |        |    |  |   |       |   
|                              | Lease termination
charges                              |  |               | 1,921  |               |  |         | 1,971   |          |  |              | 7,893   |            |  |         |       |          |  |   |       |    |  |   |        |    |  |   |        |    |  |   |       |   
|                              | Income (loss) from
continuing operations               |  |               | (6,526 | )             |  |         | 11,553  |          |  |              | (19,542 | )          |  |         | (7,245 | )        |  |   | (3,304 | )  |  |   | 5,569   |    |  |   | (11,023 | )  |  |   | 600    |   
|                              | Income (loss) from
discontinued
operations,
net of tax |  |               | (163   | )             |  |         | (4,925  | )        |  |              | (3,034  | )          |  |         | (1,961 | )        |  |   | (362   | )  |  |   | (148    | )  |  |   | (3,911  | )  |  |   | (117   | ) 
|                              | Net income (loss)                                      |  | $             | (6,689 | )             |  | $       | 6,628   |          |  | $            | (22,576 | )          |  | $       | (9,206 | )        |  | $ | (3,666 | )  |  | $ | 5,421   |    |  | $ | (14,934 | )  |  | $ | 483    |   
|AS A PERCENTAGE OF
NET SALES: |                                                        |  |               |        |               |  |         |         |          |  |              |         |            |  |         |        |          |  |   |        |    |  |   |         |    |  |   |         |    |  |   |       
|                              | Net sales                                              |  |               | 100    | %             |  |         | 100     | %        |  |              | 100     | %          |  |         | 100    | %        |  |   | 100    | %  |  |   | 100     | %  |  |   | 100     | %  |  |   | 100    | % 
|                              | Gross profit                                           |  |               | 48     |               |  |         | 46      |          |  |              | 47      |            |  |         | 47     |          |  |   | 47     |    |  |   | 41      |    |  |   | 40      |    |  |   | 45     |   
|                              | Asset impairment
charges                               |  |               | 0      |               |  |         | 0       |          |  |              | 2       |            |  |         | 15     |          |  |   | 0      |    |  |   | 0       |    |  |   | 3       |    |  |   | 0      |   
|                              | Goodwill impairment
charges                            |  |               | 0      |               |  |         | 0       |          |  |              | 7       |            |  |         | 0      |          |  |   | 0      |    |  |   | 0       |    |  |   | 0       |    |  |   | 0      |   
|                              | Lease termination
charges                              |  |               | 3      |               |  |         | 2       |          |  |              | 13      |            |  |         | 0      |          |  |   | 0      |    |  |   | 0       |    |  |   | 0       |    |  |   | 0      |   
|                              | Income (loss) from
continuing operations               |  |               | (10    | )             |  |         | 9       |          |  |              | (31     | )          |  |         | (9     | )        |  |   | (6     | )  |  |   | 5       |    |  |   | (18     | )  |  |   | 1      |   
|                              | Income (loss) from
discontinued
operations,
net of tax |  |               | 0      |               |  |         | (4      | )        |  |              | (5      | )          |  |         | (2     | )        |  |   | (1     | )  |  |   | 0       |    |  |   | (6      | )  |  |   | 0      |   
|                              | Net income                                             |  |               | (10    | )             |  |         | 5       |          |  |              | (36     | )          |  |         | (11    | )        |  |   | (6     | )  |  |   | 4       |    |  |   | (24     | )  |  |   | 1      |   
|                              | Comparable store sales
Increase (decrease)             |  |               | 15.2   | %             |  |         | 13.7    | %        |  |              | 9.0     | %          |  |         | (6.6   | )%       |  |   | (9.3   | )% |  |   | (4.9    | )% |  |   | (7.4    | )% |  |   | (5.1   | )%

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 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 November 29, 2003, we
held $63.9 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
$639,000.

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Foreign Currency Risk

We operate our business and sell our products in a number of countries
throughout the world and, as a consequence, we 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.

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 12 months. We generally hedge a substantial portion of our
projected exposure from inventory purchases for the coming six to 12 months. As
of November 29, 2003, we had $17.7 million outstanding in foreign exchange
forward contracts to hedge the euro against the U.S. dollar, at an average
contract rate of $1.14 per euro.

At November 29, 2003, we also had $1.5 million outstanding in foreign
currency forward contracts to purchase U.S. dollars using Japanese yen at an
average contract rate of 110.9 yen per U.S. dollar. These forward contracts
were entered into to hedge projected future cash flows in connection with
certain royalty payments to be received from our licensee for Japan during the
remainder of Fiscal 2004.

Net unrealized gains/losses on foreign exchange contracts at November 29,
2003, aggregated a loss of $789,000, all of which is included in accumulated
other comprehensive income and is expected to be reclassified into earnings
within the next 12 months as the inventory related to the foreign exchange
contacts is sold.

In addition to hedging inventory purchases and royalties, we may also
hedge other foreign currency cash flow and balance sheet exposures as they are
identified. We do not hold or issue derivative instruments for trading
purposes.

Our financial performance can be affected by fluctuations in the value of
the euro and British sterling when translating the financial statements of our
European subsidiaries into U.S. dollars. Revenues from euro-sourced and
sterling-sourced operations aggregated $7.6 million and $4.8 million,
respectively, for Q2 Fiscal 2004 and $30.6 million and $10.8 million,
respectively for the 2004 Fiscal Six 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
the end of the period covered by this report (the Evaluation Date), we
carried out an evaluation, under the supervision and with the participation of
management, including our President and Chief Executive Officer and our 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 Vice President and Chief Financial Officer concluded
that, as of the Evaluation Date, our disclosure controls and procedures were
effective under Rule 13a-14.

There has been no change in our internal controls over financial reporting
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.

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##### Table of Contents






PART II
OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

Vans, Inc. vs. Scott Brabson, Gordana Brabson, Jay Rosendahl, Heidi
Rosendahl, et al, Superior Court for the County of Los Angeles, Case No.
BC27031.The allegations we have made in this case, the companion arbitration,
and the resulting arbitration award are described in our Annual Report on Form
10-K for Fiscal 2003, which is filed with the Securities and Exchange
Commission. No material changes in the status of these matters have occurred
since the filing of our Form 10-K for Fiscal 2003, and no amounts have been
recorded in our condensed consolidated financial statements in connection with
this matter.

Gordana Brabson vs. Vans, Inc. et. al, Superior Court of California,
County of Santa Barbara, Case No. 01110315. This lawsuit was filed against
Vans, one of Vans current executive officers, one of its former executive
officers, and certain other individuals and entities on December 6, 2002, in
connection with a lawsuit filed by us against the plaintiff, her husband and
other individuals and entities in which we alleged that they engaged in a
conspiracy to obtain unauthorized payments from certain of our factories in
China. Mrs. Brabson alleged causes of action for invasion of privacy, trespass,
and intentional infliction of emotional distress relating to the investigation
conducted in connection with that litigation. An agreement to settle this case
was reached in Q1 Fiscal 2004, and settlement documents are still being
finalized. The terms of the settlement are confidential. The settlement of this
case will not have a material adverse impact on our future results of
operations or financial condition.

Franklin C. Ferrana a/k/a Nikki Sixx vs. Vans, Inc., High Speed
Productions, Inc. d/b/a Thrasher Magazine, Superior Court for the County of Los
Angeles, Case No. BC303262.This lawsuit was filed on September 30, 2003, and
alleges that Vans and Thrasher Magazine misappropriated the image of the
plaintiff in an advertisement. The complaint seeks compensatory damages in
excess of $1.0 million, disgorgement of profits, and punitive damages. In Q2
Fiscal 2004 we filed an answer in this matter denying the plaintiffs
allegations and asserting numerous affirmative defenses. The parties are
currently engaged in discovery.

In addition to the foregoing, from time to time we are the subject of
claims in the ordinary course of our business.




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

On October 28, 2003, we held our 2003 Annual Meeting of Stockholders. The
following matters were voted on at the meeting: (i) the election of directors;
(ii) the approval of Amendment No. 3 to the Vans, Inc. 2000 Long-Term Incentive
Plan; (iii) the approval of a non-binding resolution to re-ratify and
re-approve the Vans, Inc. Stockholder Rights Plan; and (iv) the ratification
and approval of KPMG LLP as the Companys independent auditors for Fiscal 2004.

The results of the voting on these matters (including the names of all
persons elected as directors) are set forth below:

|                      |  |           |            |                  |  |             |           |                  |  |  |   |  |  |  |   | 
|--------------------- |  | --------- | ---------- | ---------------- |  | ----------- | --------- | ---------------- |  |  | - |  |  |  | - | 
|                      |  |           |            |                  |  | VOTES       |           |                  |  |  |   |  |  | 
|PROPOSAL              |  | VOTES FOR |            | AGAINST/WITHHELD |  | ABSTENTIONS |           | BROKER NON-VOTES
|                      |  |           |            |                  |  |             |           |                 
|Proposal No. 1        |  |           |            |                  |  |             |           |                  |  |  |   |  |  |  |   | 
|Election of Directors |  |           |            |                  |  |             |           |                  |  |  |   |  |  |  |   | 
|Nominees:             |  |           |            |                  |  |             |           |                  |  |  |   |  |  |  |   | 
|Walter E. Schoenfeld  |  |           | 15,554,928 |                  |  |             | 297,137   |                  |  |  | 0 |  |  |  | 0 | 
|Gary H. Schoenfeld    |  |           | 15,707,228 |                  |  |             | 144,837   |                  |  |  | 0 |  |  |  | 0 | 
|Wilbur J. Fix         |  |           | 15,591,792 |                  |  |             | 1,260,273 |                  |  |  | 0 |  |  |  | 0 | 
|Gerald Grinstein      |  |           | 15,709,230 |                  |  |             | 142,835   |                  |  |  | 0 |  |  |  | 0 | 
|James R. Sulat        |  |           | 15,683,122 |                  |  |             | 168,943   |                  |  |  | 0 |  |  |  | 0 | 
|Kathleen M.
Gardarian |  |           | 14,620,124 |                  |  |             | 1,231,941 |                  |  |  | 0 |  |  |  | 0 | 
|Lisa M. Douglas       |  |           | 14,619,424 |                  |  |             | 1,232,641 |                  |  |  | 0 |  |  |  | 0 | 
|Charles G. Armstrong  |  |           | 15,682,020 |                  |  |             | 170,045   |                  |  |  | 0 |  |  |  | 0 | 
|Leonard R. Wilkens    |  |           | 14,620,132 |                  |  |             | 1,231,933 |                  |  |  | 0 |  |  |  | 0 | 

26



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##### Table of Contents



|                                                                 |  |           |            |                  |  |             |           |                  |  |  |           |  |  |  |        | 
|---------------------------------------------------------------- |  | --------- | ---------- | ---------------- |  | ----------- | --------- | ---------------- |  |  | --------- |  |  |  | ------ | 
|                                                                 |  |           |            |                  |  | VOTES       |           |                  |  |  |           |  |  | 
|PROPOSAL                                                         |  | VOTES FOR |            | AGAINST/WITHHELD |  | ABSTENTIONS |           | BROKER NON-VOTES
|                                                                 |  |           |            |                  |  |             |           |                 
|Approval of
Proposal No. 2                                       |  |           |            |                  |  |             |           |                  |  |  |           |  |  |  |        | 
|Amendment No. 3 to
2000 Long-Term
Incentive Plan                 |  |           | 8,986,610  |                  |  |             | 3,618,879 |                  |  |  | 3,213,303 |  |  |  | 33,273 | 
|Proposal No. 3                                                   |  |           |            |                  |  |             |           |                  |  |  |           |  |  |  |        | 
|Approval of
Stockholder Rights
Plan                              |  |           | 8,823,880  |                  |  |             | 3,822,534 |                  |  |  | 3,200,403 |  |  |  | 5,248  | 
|Proposal No. 4                                                   |  |           |            |                  |  |             |           |                  |  |  |           |  |  |  |        | 
|Ratification of KPMG
LLP as Independent
Auditors for Fiscal
2004 |  |           | 15,852,065 |                  |  |             | 35,957    |                  |  |  | 1,394     |  |  |  | 0      | 




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits.

|     |  |                                                                                                                                             
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Employment Agreement between Vans, Inc. and Craig E. Gosselin, dated September 18, 2003                                                     
|     |  |                                                                                                                                             
|10.2 |  | Employment Agreement between Vans, Inc, and Dana M. Guidice, dated October 10, 2003                                                         
|     |  |                                                                                                                                             
|31.1 |  | Certification of Scott J. Blechman Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended                         
|     |  |                                                                                                                                             
|31.2 |  | Certification of Gary H. Schoenfeld Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended                        
|     |  |                                                                                                                                             
|32.1 |  | Certification of Scott J. Blechman Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
|     |  |                                                                                                                                             
|32.2 |  | 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



|(b) |  | Reports on Form 8-K. We filed two reports on Form 8-K during the
quarterly period ended November 29, 2003. The first report was dated
September 17, 2003, and disclosed our pre-announcement of financial
results for Q1 Fiscal 2004. The second report was dated September 25,
2003, and disclosed our actual Q1 Fiscal 2004 financial results.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents






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: January 8, 2004 |  | By:          |  | /s/ Gary H. Schoenfeld                      
|                      |  |              |  |                                             
|                      |  |              |  | GARY H. SCHOENFELD                          
|                      |  |              |  | President and Chief Executive Officer       
|                      |  |              |  |                                             
|Date: January 8, 2004 |  | By:          |  | /s/ Scott J. Blechman                       
|                      |  |              |  |                                             
|                      |  |              |  | SCOTT J. BLECHMAN                           
|                      |  |              |  | Vice President and Chief Financial Officer  
|                      |  |              |  | (Principal Financial and Accounting Officer)

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