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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended December 31, 1999

                                      OR

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                        Commission file number 0-28596

                             THE NORTH FACE, INC.
            (Exact name of registrant as specified in its charter)

            DELAWARE                                   94-3204082
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                   Identification Number)

2013 Farallon Drive, San Leandro, California              94577
(Address of principal executive offices)                (Zip Code)

      Registrant's telephone number, including area code: (510) 618-3500

          Securities registered pursuant to Section 12(b) of the Act:

                                     NONE

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

                   COMMON STOCK, PAR VALUE $.0025 PER SHARE

  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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X ]  No [  ]

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

  As of April 10, 2000, the aggregate market value of the registrant's voting
stock held by non-affiliates was $24,717,131.

  As of April 10, 2000, the number of shares of the registrant's Common Stock
outstanding was 12,757,229.

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                                    PART I

Item 1.  Business.

                                    GENERAL

  This Annual Report on Form 10-K contains forward-looking statements that
involve risks and uncertainties.  The statements contained herein that are not
purely historical are forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act, including without
limitation statements regarding the Company's expectations, beliefs, intentions
or strategies regarding the future.  All forward-looking statements included in
this document or incorporated by reference herein are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. Actual results,
events, or performance could differ materially from those anticipated in these
forward-looking statements as a result of a variety of factors, including those
set forth in "Factors that may Affect the Company's Business," and elsewhere
herein.

  The North Face, Inc., a Delaware corporation, was founded in 1965 by outdoor
enthusiasts as a retailer of high performance climbing and backpacking
equipment.  The North Face, Inc., together with its consolidated subsidiaries
("The North Face" or the "Company"), designs and distributes technically
sophisticated outerwear, snowsports gear, functional sportswear, tents, sleeping
bags, backpacks, daypacks, accessories and rugged footwear under The North
Face(R) name.  Through its subsidiary, La Sportiva USA, the Company distributes
rock climbing shoes, mountaineering boots and other rugged footwear under the La
Sportiva(R) name.  The Company believes that The North Face(R) is the world's
premier brand of high-performance outdoor apparel and equipment.

                               INDUSTRY OVERVIEW

  Technical outdoor apparel and equipment historically have been used primarily
by professional climbers and serious outdoor enthusiasts.  In recent years,
these products have become increasingly popular among a broader group of
consumers. The Company believes that this growth has been the result primarily
of: (i) an increase in outdoor recreational activities and adventure travel by
the general population; (ii) a shift in consumer preferences leading to a
growing demand for highly functional products at the expense of fashion-oriented
products; (iii) a growing acceptance of outdoor apparel as casual wear; and (iv)
an increase in the technical sophistication of products in this field.

  The trend towards more active outdoor lifestyles is demonstrated by increased
participation in a variety of outdoor activities such as camping, hiking and
backpacking.  A 1997 survey by the Travel Industry Association of America
indicated that one-half of U.S. adults, or 74 million people, have taken an
adventure travel trip in the past five years.  Of these, 31 million engaged in
"hard" adventure activities like whitewater rafting, scuba diving and mountain
climbing.  In addition, outdoor or rugged apparel has been increasingly worn as
casual clothing even by individuals who do not participate in outdoor activities
or require the functionality of a high-performance product.  Casual wear in
general also has become increasingly popular, particularly in the workplace, as
evidenced by the dramatic increase in "casual days" and the increased prevalence
of "brown shoes."

  The Company believes that consumers recently have demonstrated an increasing
preference for functional, performance-oriented products.  Purchase decisions
often are driven as much by a desire to create a particular perception of
themselves as healthy and active as by an actual need for these products.  An
example of this trend is the growing popularity of sport utility vehicles, which
have become one of the fastest growing segments of the automotive industry
despite the fact that most owners of such vehicles never venture off paved
streets.  Additionally, over the last decade, there have been significant
technological advances in materials and designs that have increased product
functionality and performance.  The number of

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products and product segments in the industry has increased dramatically as
marketers have developed and introduced specific products designed to suit a
greater variety of individual activities and conditions.

                               COMPANY OVERVIEW

  The Company is a leading designer, distributor and marketer of technically
sophisticated outdoor apparel and equipment under The North Face brand name.
Over the past 35 years, the Company has built a strong and widely recognized
reputation for high-quality, innovative and technically sophisticated products,
which management believes has established The North Face as the world's premier
brand of outdoor apparel and equipment.

  The Company offers a broad range of high-performance, technically
sophisticated outdoor apparel and equipment, including outerwear, functional
sportswear ("Tekware(R)"), snowsports gear, rugged footwear, tents, sleeping
bags, backpacks and other products designed for outdoor activities.  As a result
of the more than 30 years of experience gained as a provider of outdoor apparel
and equipment to many of the world's most challenging high altitude and polar
expeditions, management believes that The North Face(R) brand has achieved the
highest level of authenticity in the outdoor apparel and equipment industry. The
Company's goal is to offer the most technically advanced products in its field
and to establish the industry standard in each of its product categories. The
Company designs many of its products for extreme applications such as high
altitude mountaineering, rock and ice climbing, and back-country skiing and
snowboarding.  While management believes that only a small fraction of consumers
who buy the Company's products purchase them exclusively for participation in
such activities, the ability of its products to achieve high levels of
performance under extreme conditions reinforces The North Face brand identity.

  In April 2000, the Company executed a definitive merger agreement (the "VF
Merger Agreement") providing for the acquisition of all the outstanding shares
of the Company by VF Corporation ("VF") for $2.00 per share. As a first step in
the transaction, a subsidiary of VF will commence a cash tender offer for all
the outstanding shares of the Company at $2.00 per share. The offer will be
conditioned, among other things, upon a majority of the issued and outstanding
shares being tendered and not withdrawn prior to the expiration of the offer.
Following successful completion of the tender offer, the VF subsidiary will be
merged into The North Face and each outstanding share will be converted into the
right to receive $2.00 in cash.

  As set forth in greater detail below, the Company's difficulties in meeting
its loan agreement covenants and financing needs, its losses from operations,
its negative working capital position and the scheduled expiration of its credit
facility on April 15, 2000 have raised substantial doubt about its ability to
continue as a going concern.  As a consequence, if, for any reason, the tender
offer and merger contemplated by the VF Merger Agreement are not consummated,
the Company will be required to consider seeking protection under Chapter 11 of
the Bankruptcy Code.

                                   PRODUCTS

  The Company offers a broad range of outerwear, equipment, Tekware(R),
Ascentials (accessories), snowsports gear, rugged footwear and other products
designed for outdoor activities, such as mountaineering, climbing, backpacking,
skiing, snowboarding, hiking, trekking and adventure travel.  The Company
designs its products to function as "equipment for the body," and its goal is to
offer the most technically advanced products in its field and to establish the
industry standard in each of its product categories.  The Company designs many
of its products for extreme applications such as high altitude mountaineering,
rock and ice climbing, and back-country skiing and snowboarding.  While
management believes that only a small fraction of consumers who buy the
Company's products participate in such activities, the ability of its products
to achieve high levels of performance under extreme conditions reinforces The
North Face brand identity.  The Company also strives to offer products at more
moderate

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price-points that appeal to a broader consumer base, are higher in quality than
competitive products and incorporate many of the features, materials and
technologies used in its most technically advanced designs. As a result of the
more than 30 years of experience gained as a provider of outdoor apparel and
equipment to many of the world's most challenging high altitude and polar
expeditions, management believes that The North Face(R) has achieved the highest
level of authenticity in the outdoor apparel and equipment industry. Management
believes that its dedication to producing high-quality, innovative and
technically sophisticated products is exemplified by its marketing statement,
"For over thirty years, individuals whose lives depend on the performance of
their gear consistently choose The North Face," which differentiates The North
Face from any other company in the outdoor apparel and equipment industry.

  The Company's products are often used in severe weather and other extreme
conditions.  For example, in 1997, the Company began selling portaledges used as
sleeping platforms in big wall rock climbing.  There can be no assurance that
insurance maintained by the Company will cover possible future losses from
product liability claims.

  The North Face(R) products are original designs and most carry a lifetime
warranty for the original owner against defects in materials and workmanship.
The Company maintains a warranty reserve for the lifetime warranty offered on
many of its products, but cannot assure that future claims will not exceed this
reserve. Further, in the event that the Company experiences problems with
product quality or reliability, its reputation as a provider of high-quality
products could suffer, which could have a material adverse effect on the
Company's business.

  In 1998, sales of outerwear, equipment, Tekware, snowsports gear, Ascentials,
and other products represented approximately 50%, 15%, 13%, 9%, 8%, and 5%, of
net sales, respectively. In 1999, the Company began to offer rugged footwear
under The North Face brand. In 1999, sales of outerwear, equipment, Tekware,
footwear, snowsports gear, Ascentials, and other products represented
approximately 48%, 16%, 13%, 7%, 7%, 6%, and 3% of net sales, respectively.

Outerwear

     The Company's outerwear products are organized into two categories,
Expedition System Outerwear and Technical Outerwear. The Company's outerwear is
designed to provide protection from various combinations of cold, wet and windy
conditions and to accommodate the range of motion required for the most extreme
outdoor activities. In addition, many of the Company's outerwear products are
designed to adapt to varying conditions and situations, taking into account the
unpredictability of the weather and the fact that some outdoor activities
alternate between periods of extreme exertion and total rest, requiring a proper
balance between ventilation and insulation. Each year, the Company enhances its
outerwear lines by adding new products and design innovations. For example, in
1999 the Company added WL Gore Paclite(R), a two-ply waterproof fabric that is
15% lighter than the product it replaced, and Malden Aircore(R) fleece, a
warmer, reduced-weight fleece material, to its range of technologically superior
products. In addition, in 1999 the Company introduced an advanced "core venting"
air circulation and ventilation system to its range of technologically superior
design features. In a May 1998 BACKPACKER Magazine survey, The North Face(R) was
ranked as a leading brand in the outerwear category by 64% of the respondents,
significantly more than any other brand.

Equipment

  The Company offers three lines of technical outdoor equipment: tents, sleeping
bags and backpacks (including daypacks). Equipment is integral to The North Face
brand identity and helps define the Company's position in the marketplace.
Equipment is critical to The North Face(R) image and reputation and plays an
extremely important role in the Company's research, development, field-testing
and marketing activities.

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Tekware

  In 1996, the Company entered the broader casual sportswear market with its
introduction of Tekware, a line of high-performance functional sportswear made
from a new generation of synthetic fabrics and developed in collaboration with
E.I. DuPont de Nemours & Co. ("DuPont") and other companies. Tekware is offered
in three lines: (i) Bouldering/Climbing; (ii) Trail Running/Performance; and
(iii) Trekking/Adventure Travel. Each line offers styles for men and women and
features a collection of pants, shorts, shirts, pullovers, fleece garments, wind
jackets, vests, tank tops and tights. The synthetic fabrics from which the
Company's Tekware products are made offer significant advantages, such as rapid
drying and resistance to shrinking, tearing, fading, staining, mildewing and
wrinkling.

Ascentials

  Ascentials is comprised of the Company's line of technical apparel and
equipment accessories, including a range of lumbar packs, cargo bags, T-shirts,
high-performance thermal underwear, hats and gloves/mittens, which have been
tested extensively in extreme conditions by the Company's team of elite
athletes. In 1998 the Company introduced ballistics luggage and other
accessories targeted at a wide audience of hikers, students and travelers.

Snowsports Gear

  The Company's snowsports gear is designed for backcountry skiing and
snowboarding. The North Face(R) snowsports gear products include parkas,
jackets, anoraks, ski pants, ski suits, gloves and other accessories. These
products offer technically advanced features for weather and water protection,
freedom of movement and appropriate ventilation. Other features include the use
of tough, abrasion-resistant fabrics, like Kevlar, that are strategically
overlaid or inset for added protection in areas of excessive wear and tear, such
as the shoulders and elbows. While the design of these products is primarily
geared toward extreme users, they have become increasingly popular among
recreational and more casual users.

Rugged Footwear

  The Company entered into the rugged footwear market in 1999 with The North
Face branded products in two key categories: Trail Running and Trekking. The
Trekking category is the largest category of the rugged footwear business, while
the Trail Running category is the fastest growing segment.

                       RESEARCH, DESIGN AND DEVELOPMENT

  The Company's goal is to offer the most technically advanced products in its
industry and to establish the industry standard for quality and performance in
each of the Company's product categories. To remain on the leading edge of
product design and materials technology, the Company evaluates trends, monitors
the needs and desires of consumers and works internally and with its suppliers
to develop new materials and products and to enhance product designs.

  The Company regularly reviews its product lines and actively seeks input from
a variety of sources, including elite athletes, retailers, consumers and
suppliers. At the forefront of the product development effort is a product
development team, which includes experts in textiles and design engineering. The
product development team works primarily with staff designers and also with
outside contract designers.

  The product development cycle for a new products, from initial design to
product introduction, is generally 12 to 18 months. New designs are tested by
the Company's teams of climbers, explorers and extreme skiers and by in-house
and independent laboratories, as well as by other Company personnel. The

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North Face maintains an in-house materials testing laboratory to perform a
variety of tests, including water resistance, air permeability, tear strength
and abrasion resistance.

                            MARKETING AND PROMOTION

  The Company's goal is to increase brand awareness by projecting a high-
quality, technically sophisticated and authentic image that appeals to core
professionals and serious outdoor enthusiasts as well as to a broader segment of
consumers. The Company conveys such an image by featuring world-class climbers,
explorers, skiers and snowboarders using the Company's products on high
altitude, polar or backcountry expeditions.  The Company's marketing materials
utilize language and images that, while directed to the extreme athlete, appeal
to a broader segment of consumers.

  The Company believes that it has obtained a high level of brand awareness and
loyalty from the extreme users of its products. In order to bolster brand
loyalty and to further enhance its authentic image, the Company has supported
selected outdoor sporting events, high altitude and polar expeditions and the
teams of climbers, explorers and skiers it sponsors. The North Face(R) has been
a supplier of outerwear and equipment to many of the world's most challenging
expeditions for over 30 years. A small sampling of these expeditions includes
the 1969 Arctic Institute of North America Altitude Expedition; the 1978
American Woman's Himalayan Expedition; the 1987 International K-2 Expedition;
the 1989 Trans-Antarctica Expedition; the 1992 American Gasherbrum IV
Expedition; the 1994 Sagmartha Environmental Expedition; the 1995 Ak-Su
Kyrgyzstan Expeditions; the 1996 Shipton Spire Expeditions; the 1997 Women's
Morocco Expedition; the 1997 Queen Maud Land Expedition; the 1998 Mt. McKinley
Women's Expedition for Survivors of Breast Cancer; the 1998 Baffin Island
Expedition; and the 1999 Trango Tower Expedition.

  Recognizing that the product choices of professional athletes influence
consumer preferences, the Company employs or sponsors several world-class
professional climbers, including Conrad Anker, Greg Child, Lynn Hill, Pete
Athans, Peter Croft, Yuji Hirayama, Jay Smith, and Katie Brown; extreme skiers
Scot Schmidt, Rick Armstrong, Rob DesLauriers, Kasha Rigby and Jeremy Nobis; and
backcountry snowboarders Jim Zellers, Jay Nelson and Megan Pishke. These
athletes are integral to the Company's product research, design and testing. In
addition, they participate in promotional activities on behalf of the Company,
including product demonstrations and appearances at exhibitions, tradeshows,
retailer clinics and promotional events, and appear in photographs to promote
the Company in catalogs, advertisements, posters and videos. The Company also
has relationships with the Professional Ski Instructors of America, the National
Ski Patrol, and the American Association of Snow Board Instructors, pursuant to
which each of these organizations endorses the Company's snowsports gear.

  The Company's advertising campaign has consisted of a two-tiered strategy. The
first tier is a national campaign that consists of print advertising in targeted
vertical outdoor and snowsport publications (i.e., Outside, Backpacker, Rock and
Ice, Climbing, National Geographic Adventure, Skiing, and Powder). The second
tier is a regional campaign that consists of TV, radio, outdoor and local print
in key regional markets (i.e., Denver, Seattle, New York, Boston, Chicago and
Portland).

  In December 1999 and January 2000, the Company made its national TV
programming debut with The North Face Expeditions, five one-hour documentary
specials hosted by rock star Sting and featuring The North Face sponsored
athletes and expeditions. The trips documented included climbing Mount Everest,
big wall climbing in the Himalayas, rock climbing in Madagascar, heli-skiing in
India, and back-country skiing in Pakistan. These inspirational stories followed
the athletes as they explored the unknown and faced challenges.

  The North Face and Chevy Trucks have formed a marketing partnership that
includes future product opportunities.  At the Detroit Auto Show in January
2000, Chevy Trucks unveiled the show vehicle, The Avalanche, The North Face
Edition.  The Company worked with Chevrolet in developing this truck with

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unique seat material and trim with The North Face logo, unique floor mats,
exterior The North Face logo, The North Face summit pods that attach to the back
of the front bucket seats, and TNF water duffel bags designed exclusively for
the rear cargo bed.

                            SALES AND DISTRIBUTION

  The Company currently sells its products primarily to a select group of
specialty outdoor, premium-sporting goods and major outdoor specialty retail
customers, such as Recreational Equipment, Inc. ("REI") and Eastern Mountain
Sports, Inc.  To preserve the integrity of The North Face(R) brand identity, the
Company has historically limited its distribution to retailers that market
products that are consistent with the Company's quality standards and that
provide a high level of customer service and technical expertise.

Wholesale Sales

  The Company's wholesale customers currently consist, primarily, of specialty
outdoor product retailers. The Company sells its products to approximately 1,500
wholesale customers in the United States, representing an estimated 2,300
storefronts. In Europe, the Company sells to approximately 1,200 wholesale
customers, representing an estimated 1,600 storefronts, and in Canada, the
Company sells its products to approximately 300 wholesale customers,
representing an estimated 500 storefronts.

  The Company's products are sold to wholesale customers in the United States by
employee sales representatives, and in Canada and Europe by both employee and
independent sales representatives. Sales representatives conduct in-store
clinics to educate sales personnel on the technical qualities and uses of the
Company's products, provide customer support, review each retail account on a
periodic basis and assist the Company in forecasting levels of product needs.
Independent sales representatives in Canada and Europe are paid on a commission
basis.

  The Company maintains a specialty retailer and customer service department to
handle orders and consumer inquiries as well as a warranty department to handle
the repair or replacement of defective or damaged merchandise. Most of the
Company's products are covered by a lifetime warranty, with the exception of
footwear and those products sold through the Company's outlet stores.

  Because the Company expects its wholesale business to constitute an increasing
percentage of total sales going forward as compared to its sales in Company-
owned retail stores, overall gross margins may decline in the future. In
addition, sales returns in excess of anticipated amounts could have an adverse
effect on operations.

Summit Shops

  In 1996, the Company introduced Summit Shops, which are year-round concept
shops dedicated to The North Face(R) products located within certain of its
customers' stores. Summit Shops are intended to increase sales at retailers
carrying the Company's products by offering an attractively designed,
professionally merchandised, dedicated selling space featuring a wide range of
The North Face(R) products. The objectives of the Summit Shops are to: (i)
provide year-round floor space within the Company's customers' stores that is
dedicated to The North Face(R) products; (ii) increase the Company's control
over the merchandising and appearance of the Company's products at the retail
level; (iii) create an increased awareness of the Company's products among
consumers; (iv) modernize the specialty retailers' approach to merchandising The
North Face(R) products; (v) improve the Company's ability to monitor its
customers' sales; and (vi) maintain a consistent product assortment and
marketing presentation at the retail level. The Company has designed the
appearance of each Summit Shop, including its fixtures, merchandise displays,
descriptive placards and graphic images, to increase consumer awareness of The
North Face(R) brand identity. The Company also provides sales and product
training for the retailers' personnel who work in the Summit Shops.

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  At the end of 1999, there were a total of 461 Summit Shops. At the end of
1998, there were a total of 394 Summit Shops. These shops ranged in size from
140 to 2500 square feet and averaged approximately 425 square feet.

Company Operated Retail Stores

  The Company's eight retail stores are an important component of its marketing
and product development strategies and provide a targeted environment in which
to merchandise and sell The North Face(R) product lines. Located primarily in
high-end retail shopping districts and regional shopping malls, these stores
carry a broad range of The North Face(R) products and a small offering of
complementary products from other manufacturers. The Company believes that as a
result of its ability to control the visual presentation and product assortment
in its retail stores, these stores help build brand awareness and introduce
consumers to a broad range of The North Face(R) products. These stores also
provide a means for the Company to test the appeal of new products and
merchandising techniques. By working closely with store personnel, many of whom
are outdoor enthusiasts, the Company also obtains customer feedback that
influences product design and development.

  The Company's retail stores are located in the following cities: Denver and
Boulder, Colorado; Seattle, Washington; Oakbrook and Chicago, Illinois; and San
Francisco, Costa Mesa and Palo Alto, California. Although the Company considers
its retail stores to be an important aspect of its brand name strategy, the
Company currently has no plans to open additional retail stores.

Company Operated Outlet Stores

  Outlet stores serve as an effective means of liquidating discontinued and
excess wholesale merchandise. The Company operates fourteen North American
outlet stores, located in the following cities: Berkeley, San Francisco,
Carlsbad, Desert Hills, and San Jose, California; Freeport, Maine; Woodbury, New
York; Bend, Oregon; Birch Run, Michigan; Wrentham, Massachusetts; San Marcos,
Texas; Dawsonville, Georgia; Cookstown (Toronto) and Quebec, Canada. In
addition, the Company operates one outlet in Switzerland and opened an
additional outlet in Italy in January, 2000. The Company has no plans to open
any additional outlets in 2000.

Distribution

  In May 1998, the Company initiated outsourcing of distribution for its
business in Canada. In July 1999, the Company outsourced its distribution in the
U.S. and experienced significant delays and difficulties during the Fall 1999
shipping period. As a result, in December 1999, the Company terminated its
contract with its original third party distributor and a new provider was
engaged for its U.S. distribution. The new provider began integrating systems,
procedures and personnel during December 1999 and the beginning of January 2000.
There can be no assurance that the Company will be able to resolve its
distribution difficulties or that third-party outsourcing partners will be able
to service the Company's customers adequately in the future. In addition, the
costs of outsourcing may be greater than anticipated.

  In Europe, the Company operates a distribution and administrative facility in
Port Glasgow, Scotland.

  All the Company's products are shipped by third-party carriers.

Fluctuations in Sales

  Sales of the Company's products historically have fluctuated due to conditions
beyond the Company's control, such as weather, economic cycles, and other
conditions that affect consumer spending. The Company, like other retailers,
also is subject to seasonal and quarterly fluctuations. The Company's results of
operations may fluctuate from quarter to quarter as a result of, among other
things, the amount and timing of shipments to wholesale customers, government
shipments, the timing and magnitude of discounts in retail stores, the timing of
international licensing and royalty contracts, advertising and marketing
expenditures, increases in the number of employees and overhead, and costs
associated with new growth and new store openings.

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                           INTERNATIONAL OPERATIONS

  International sales accounted for approximately 28%, 25% and 26% of the
Company's net sales in 1999, 1998 and 1997, respectively. The Company utilizes
an integrated worldwide approach to product development, sourcing and marketing
in order to reduce costs, achieve consistent Company-wide quality standards and
create a unified global brand. By offering substantially the same product lines
and promoting the same image in catalogs, advertising and point of purchase
materials, the Company has positioned The North Face(R) brand in Europe to be
consistent with the brand image in the United States and Canada.

  The Company's business is subject to the risks generally associated with doing
business abroad. These risks include adverse fluctuations in currency exchange
rates (particularly those of the U.S. dollar against certain foreign
currencies), changes in import duties or quotas, the imposition of taxes or
other charges on imports, the impact of foreign government regulation, political
unrest, disruption or delays of shipment and changes in economic conditions in
countries in which the Company's suppliers are located.

Europe

  The Company has operated in Europe for more than 15 years and believes that it
is recognized as a leader in the design, marketing and distribution of
technically sophisticated outdoor apparel and equipment. The Company's European
operations are headquartered in Port Glasgow, Scotland and the Company maintains
a Sales and Marketing office in Volpago del Montello, Italy. Its primary markets
are the United Kingdom, Germany, Italy, France, Spain, Sweden, Denmark and The
Netherlands. In May 1998, the Company closed its manufacturing operation in its
Scotland facility and converted the space to warehousing and distribution
facilities to support its European markets.

Canada

  The Company's Canadian operations are headquartered in Quebec, Montreal. Since
early 1995, the Company has sold its products in Canada through independent
sales representatives to customers located primarily in British Columbia,
Ontario, and Quebec. Prior to 1995, the Company's products were sold in Canada
through a licensee. In May 1998, the Company consolidated certain administrative
and customer service functions of its Canadian operations within the United
States, and outsourced to a third party the Canadian distribution function.

Asia

  In Japan and Korea, substantially all the Company's trademarks are owned by
Kabushiki Kaisah Goldwin ("Goldwin"), a leading manufacturer and distributor of
high-end sports and outdoor apparel and equipment. The North Face(R) is a
leading high-performance outdoor brand in Japan. The Company and Goldwin work
closely together in the areas of product design, sourcing and brand imaging. The
Company believes that Goldwin shares the Company's strategy of building a
unified global brand. The Company benefits from this relationship by selling
certain products to Goldwin and by charging an administrative fee for orders
Goldwin adds to the Company's production. In Hong Kong and Macau, the Company's
products are sold through a licensee, Mitsui & Co., Ltd. ("Mitsui"). In China
and Nepal, the Company's products are sold through a licensee, Youngone
Corporation, and, in Thailand, the Company's products are sold through another
licensee, Thai Outdoor Sports. The Company plans to continue to pursue sales
opportunities in other Asian and Pacific Rim countries.

                          SOURCING AND MANUFACTURING

  The Company sources its products from approximately 40 unaffiliated
manufacturers primarily located in Hong Kong, China, Taiwan, Korea, Indonesia,
Bangladesh, Thailand, the United States, and Portugal. The Company believes that
it enjoys good relationships with its suppliers and manufacturers and has the
ability to secure the necessary capacity to meet any forseeable increase in
demand for its products.

  To ensure that products manufactured for the Company are consistent with its
quality standards, the Company manages all key aspects of the production
process, including establishing product specifications, selecting the materials
to be used and the suppliers of such materials, and negotiating the prices for
such

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materials. The Company maintains a staff of quality control specialists, which
conducts on-site inspections throughout the production process, including at the
mills before the fabrics are shipped, at the factories as the products are made
and, finally, just before the finished products are shipped. In connection with
these quality control efforts, in 1999 the Company opened an office in Hong
Kong, which management believes will facilitate more rapid product development,
prototyping and manufacturing and allow the Company to achieve higher levels of
quality control over products manufactured in Asia.

  The Company has no long-term contracts with its manufacturing sources, and it
competes with other companies for production facilities and import quota
capacity. None of the manufacturers used by the Company produce the Company's
products exclusively. The Company has occasionally received, and may in the
future receive, shipments of products from manufacturers that fail to conform to
the Company's quality control standards. Any disruption in the Company's ability
to obtain manufacturing services could have a material adverse effect on the
Company's business.

  The Company requires its independent manufacturers to operate in compliance
with applicable laws and regulations. Although the Company's internal and vendor
operating guidelines promote ethical business practices and the Company's
sourcing personnel periodically visit and monitor the operations of its
independent manufacturers, the Company does not control these vendors or their
labor practices. The violation of labor or other laws by an independent
manufacturer of the Company, or the divergence of an independent manufacturer's
labor practices from those generally accepted as ethical in the United States,
could result in adverse publicity for the Company and could have a material
adverse effect on the Company.

  Certain important materials used in the Company's products are only available
from one or a limited number of independent suppliers. The Company's future
success may depend upon the Company's continued ability to purchase supplies of
technically advanced textiles developed by third-parties. There can be no
assurance that the Company will be able to obtain adequate supplies of
technically advanced materials in the future or that favorable purchase terms or
other arrangements with suppliers (such as suppliers' funding of development
costs and co-operative advertising arrangements) will continue.

  The Company imports a significant portion of its merchandise from contract
manufacturers located in the Far East, including China. From time to time, the
U.S. government has considered imposing punitive tariffs on apparel and other
exports from China. The imposition of any such tariffs could disrupt the supply
of the Company's products, which could have a material adverse effect on the
Company's results of operations.

                        MANAGEMENT INFORMATION SYSTEMS

  The Company's management information and electronic data processing systems
consist of a full range of financial, distribution, merchandising, forecasting
and retail systems. During 1999, the Company successfully addressed Year 2000
issues. There has been no business interruption due to the Year 2000 issue. In
December 1999, the Company implemented the first phase of its new Enterprise
system. This implementation included data conversion, software modification,
interfaces, setup, and training. During the course of 2000, additional
functionality will be introduced and final major enhancements completed. The
Company believes that expected improvements made in 2000 and beyond, along with
routine upgrades and other enhancements, should be sufficient to accommodate the
Company for the foreseeable future. However, there can be no assurance that any
system implementation or system upgrades will be completed in a timely manner,
will be adequate to meet the needs of the Company, and will not strain the
Company's financial resources.

                                       10
<PAGE>

                                  COMPETITION

  The markets for the Company's products are highly competitive, with
competition based primarily on price, quality, brand name and service. The
recent growth in the outdoor apparel and equipment markets has encouraged the
entry of many new competitors as well as increased competition from established
companies. Although management believes that it does not compete directly with
any single company with respect to its entire range of products, the Company
does have significant competitors within each product category. In addition, as
the Company expands its product lines and offers products at a broader range of
price points, it will likely come into competition with additional outdoor
apparel and equipment companies.

  Further, the Company has recently begun experiencing increased competition
from major brand-name apparel companies who are attempting to duplicate the
Company's styles, particularly in the area of functional sportswear, outerwear
and footwear. These competitors are larger and have significantly greater
financial, marketing and other resources than the Company. While the Company
believes that it has been able to compete successfully because of its heritage,
brand image and recognition, the broad range and quality of its products, and
its selective distribution and customer service policies, including the lifetime
warranty that most of its products carry, there can be no assurance that the
Company will be able to maintain or increase its market share in the future.

  Consumer demand for the Company's products may be adversely affected, if
consumer interest in outdoor activities does not grow or declines. In addition,
some competitors may have more resources to advertise and market their products.
If the Company is unable to respond successfully to changes in consumer
preferences, or if consumer preferences shift toward competing products or away
from the Company's product categories altogether, the Company's business would
be adversely affected. The Company cannot assure future growth or consumer
demand for its products. If consumer interest in outdoor activities grows, more
competitors, who are better financed, may enter the market.

                           TRADEMARKS AND LICENSING

     The Company considers its trademarks to be among its most valuable assets
and has numerous trademark registrations in the United States, Europe and other
foreign countries. Among the Company's trademarks are The North Face(R), 'N'
Design logo(R), Remote Terrain Gear(R), Extreme Gear(R), A5 and Design(R),
Expedition System(R), Extreme(R), Tekware(R), Steep Tech(R), Quick Pitch(R),
Hydrenaline(TM), Search and Rescue(R), VaporWick(R), Hydroseal(R), UltraWick(TM)
and Windy Pass(R). Because of the popularity of many of the Company's products
and their strong brand identity and distinctive design, The North Face(R) brand
in recent years has been subject to unauthorized copying and mislabeling of
imitation goods. The Company maintains an aggressive program of trademark
enforcement and cooperation with domestic and foreign customs officials and
other authorities, and will continue to vigorously defend its trademarks against
infringement. There is no assurance that the Company's efforts to stop or reduce
the copying or counterfeiting of its trademarks or products will be successful,
that the Company's trademarks will not violate the proprietary rights of others,
or that the Company will be able to avoid or successfully defend challenges to
its trademarks or other intellectual property in the United States or abroad.

  The Company has licensed its trademarks to Mitsui, which markets Company-
designed products under The North Face(R) name in Hong Kong and Macau. In 1998,
the Company entered into trademark license agreements with Youngone Corporation
for China and Nepal. In addition, in Japan and Korea substantially all the
Company's trademarks are owned by Goldwin. In 1999, the Company entered into a
trademark license agreement with Thai Outdoor Sports for Thailand.

                                       11
<PAGE>

                                   EMPLOYEES

  As of December 31, 1999, the Company had 429 non-retail store employees, of
which 272 were employed in the United States, 124 in Europe, 7 in Canada and 16
in Hong Kong. In addition, the Company had 430 retail store employees. None of
the employees are currently covered by a collective bargaining agreement. The
Company believes that its relations with its employees are good.

Item 2.  Properties.

  The principal executive and administrative offices of the Company are located
at 2013 Farallon Drive, San Leandro, California. The general location, use and
approximate size of the Company's principal properties, all of which, other than
the facility in Scotland, are leased, are set forth below:

<TABLE>
<CAPTION>
LOCATION                       USE                                    APPROXIMATE SIZE
----------------------         ------------------------------------   -------------------
<S>                            <C>                                    <C>
San Leandro, California        Executive and administrative offices   151,085 square feet
Vacaville, California          Distribution Center (subleased)        250,445 square feet
San Francisco, California      Retail store                            12,371 square feet
Palo Alto, California          Retail store                            10,700 square feet
Costa Mesa, California         Retail store                             7,083 square feet
Seattle, Washington            Retail store                             6,504 square feet
Denver, Colorado               Retail store                            17,000 square feet
Boulder, Colorado              Retail store                             4,342 square feet
Chicago, Illinois              Retail store                            15,192 square feet
Oakbrook, Illinois             Retail store                             4,000 square feet
Berkeley, California           Outlet                                  14,150 square feet
San Francisco, California      Outlet                                  10,000 square feet
Freeport, Maine                Outlet                                  10,070 square feet
Quebec, Canada                 Outlet                                   3,089 square feet
Cookstown, Canada              Outlet                                   4,500 square feet
Woodbury, New York             Outlet                                   3,780 square feet
Birch Run, Michigan            Outlet                                   5,500 square feet
Bend, Oregon                   Outlet                                   5,940 square feet
Carlsbad, California           Outlet                                   6,428 square feet
Wrentham, Massachusetts        Outlet                                   6,252 square feet
Dawsonville, Georgia           Outlet                                   5,590 square feet
Desert Hills, California       Outlet                                   6,536 square feet
San Jose, California           Outlet                                   8,343 square feet
San Marcos, Texas              Outlet                                   3,748 square feet
Carbondale, Colorado           Former administrative office                     3.5 acres
Carbondale, Colorado           Land held for sale                                24 acres
Port Glasgow, Scotland         Administrative office and               77,200 square feet
 distribution center
Quebec, Canada                 Administrative office                    5,868 square feet
Hong Kong                      Administrative office                    9,045 square feet
Kansas City, MO                Distribution Center                    238,659 square feet
Volpago del Montello, Italy    Sales and marketing office              12,600 square feet
Boulder, Colorado              Sales office                             4,300 square feet
Poolesville, Maryland          Sales office                             2,629 square feet
Boulder, Colorado              La Sportiva USA administrative office    8,000 square feet
  and distribution center
New York, New York             Showroom                                 2,000 square feet
Medriso, Switzerland           Outlet                                     646 square feet
Cornuda, Italy                 Outlet                                   2,800 square feet
</TABLE>

                                       12
<PAGE>

Item 3.  Legal Proceedings.

  On February 27, 1999, the Company entered into a Transaction Agreement (the
"Transaction Agreement") with TNF Acquisition LLC ("TNF"), an affiliate of
Leonard Green & Partners, L.P. ("LGP"). The Transaction Agreement provided for a
tender offer for all the Company's outstanding stock (other than shares held by
James G. Fifield, former President and Chief Executive Officer) at $17.00 cash
per share and the acquisition of control of the Company by LGP and Mr. Fifield.
On March 5, 1999, the Company withdrew its tender offer. The Transaction
Agreement remained in full force and effect, although LGP had informed the
Company that it was reevaluating the transactions contemplated by the
Transaction Agreement (the "Transactions"). On September 1, 1999, the
Transaction Agreement was terminated and the Company agreed to pay LGP $2.2
million to reimburse LGP for expenses associated with the terminated Transaction
Agreement.

  In March 1999, various complaints were filed against the Company and its Board
of Directors in the Delaware court of Chancery and in the California Superior
Court, Alameda County in connection with the Transactions. The complaints, filed
on behalf of a purported class of the Company's shareholders, generally alleged
that the Transactions were unfair and inadequate to the Company's shareholders
and charged the defendants with self-dealing and breach of fiduciary duties. The
complaints generally requested injunctive relief to prevent the consummation of
the Transactions, and sought other remedies in the event the Transactions were
completed. The Company has filed a motion to dismiss these claims.

  Beginning in March 1999, purported class action lawsuits were filed in federal
district court against the Company and certain of its former and current
officers and directors alleging violations of the federal securities laws. These
complaints (collectively, the "Securities Litigation") have been consolidated in
federal district court in Colorado. The consolidated action generally alleges
that the Company made false and misleading statements about its financial
results from January 22, 1998 through April 16, 1999. The Company has filed a
motion to dismiss these claims.

  On April 6, 1999, a shareholder derivative action purportedly on behalf of the
Company, captioned Eng v. Cason, et. al., Civil Action No. 810726-0, was filed
in California Superior Court, Alameda County. The complaint alleged that the
Company's directors and various current and former officers violated California
law and breached fiduciary duties to the Company by engaging in alleged wrongful
conduct from April 25, 1997 through March 12, 1999, including the conduct
complained of in the Securities Litigation. The Company was named solely as a
nominal defendant, against whom the plaintiff sought no recovery. The Alameda
Superior Court granted the Company's motion to dismiss the derivative complaint
with leave to amend.

  In December 1999, a case, FDX Supply Chain Services, Inc. v. The North Face,
Inc., No. 99-2569, was filed in federal district court in the district of
Kansas. The dispute arises out of contract in which FDX agreed to provide
warehouse services to the Company, fill orders and ship the Company's products
to customers nationwide from the Company's warehouse facility in Lenexa, Kansas.
The Company terminated the contract in December 1999. The lawsuit alleges
damages of $5.2 million for breach of contract. The Company has filed
counterclaims seeking $25 million in damages, alleging that the damage
limitation provisions of the agreement should not apply because of FDX's
misrepresentations inducing the Company to enter into the agreement and FDX's
gross failure to perform. FDX has moved to dismiss all the Company's
counterclaims because of, inter alia, the damage limitation provisions of the
agreement.

Item 4.  Submission of Matters to a Vote of Security Holders.

  None.

                                       13
<PAGE>

                                    PART II

Item 5.  Market for Registrants Common Equity and Related Stockholder Matters.

  The Company's Common Stock is listed on the NASDAQ National Market and trades
under the symbol "TNFI." As of March 28, 2000, there were approximately 185
stockholders of record. Information concerning certain dividend restrictions
under the Company's credit facility is set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operation-Liquidity and Capital
Resources" below. The Company does not anticipate paying any dividends in the
foreseeable future.

  Following are the high and low closing prices for the Company's Common Stock
for each of the four quarters of 1999, 1998 and 1997:

<TABLE>
<CAPTION>

  YEAR ENDED DECEMBER 31, 1999     HIGH    LOW
  ----------------------------    ------  ------
  <S>                             <C>     <C>
  First Quarter                   $16.63  $11.63
  Second Quarter                  $12.44  $ 8.63
  Third Quarter                   $11.63  $ 5.94
  Fourth Quarter                  $ 6.94  $ 4.06

  YEAR ENDED DECEMBER 31, 1998     HIGH    LOW
  ----------------------------    ------  ------

  First Quarter                   $28.38  $20.75
  Second Quarter                  $26.13  $20.50
  Third Quarter                   $24.25  $ 9.50
  Fourth Quarter                  $14.38  $ 9.50

  YEAR ENDED DECEMBER 31, 1997     HIGH    LOW
  ----------------------------    ------  ------

  First Quarter                   $21.75  $16.00
  Second Quarter                  $19.50  $13.63
  Third Quarter                   $26.88  $18.50
  Fourth Quarter                  $27.63  $18.75
</TABLE>

                                       14
<PAGE>

Item 6.  Selected Consolidated Financial Data

                             THE NORTH FACE, INC.
                     SELECTED CONSOLIDATED FINANCIAL DATA
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                          YEARS ENDED DECEMBER 31,
                                                                  ----------------------------------------
                                                              1995       1996       1997       1998        1999
                                                            --------   --------   --------   --------    --------
<S>                                                         <C>        <C>        <C>        <C>        <C>
Net Sales                                                    $121,534   $158,226   $203,247   $247,096  $ 237,977
Operating income (loss)                                        10,524     13,544     16,133     10,686    (82,997)
Income (loss) before provision for taxes                        5,583      9,275     13,146      5,843    (97,938)
Net income (loss)                                               3,485      5,664      7,955      3,592   (100,481)
Net income (loss) per share:
  Basic                                                      $   1.07   $   0.84   $   0.70   $   0.30  $   (7.90)
  Diluted                                                    $   0.47   $   0.62   $   0.69   $   0.29  $   (7.90)
Weighted average shares outstanding:
  Basic                                                         3,249      6,742     11,297     12,121     12,723
  Diluted                                                       7,434      9,183     11,578     12,485     12,723

                                                                           AS OF DECEMBER 31,
                                                                  ---------------------------------------
                                                              1995       1996       1997       1998        1999
                                                            --------   --------   --------   --------    --------
BALANCE SHEET DATA

Working capital                                              $ 22,668   $ 51,799   $ 61,995   $ 68,546  $ (10,040)
Total assets                                                   84,508    110,587    167,449    232,644    187,539
Short-term debt                                                 4,838         95     25,734     55,910     88,294
Long-term debt                                                 36,388        135      5,177      5,360      1,174
Stockholders' equity                                           20,568     86,499    100,141    123,210     25,489
</TABLE>

                                       15
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
      of Operations

                              THE NORTH FACE, INC.
                             SUMMARY FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                 AS A PERCENTAGE OF SALES
                                                YEARS ENDED DECEMBER 31,         (EXCEPT FOR INCOME TAXES)
                                            --------------------------------  -------------------------------
                                              1997       1998        1999       1997       1998       1999
                                            ---------  ---------  ----------  ---------  ---------  ---------
<S>                                         <C>        <C>        <C>         <C>        <C>        <C>
Net sales                                   $203,247   $247,096   $ 237,977     100.0%     100.0%     100.0%
Gross profit                                  92.483    111,962      83,691      45.5%      45.3%      35.2%
Operating expenses                            76,350    101,276     166,688      37.6%      41.0%      70.0%
Operating income (loss)                       16,133     10,686     (82,997)      7.9%       4.3%     (34.9%)
Interest expense                              (2,238)    (4,907)     (8,307)     (1.1%)     (2.0%)     (3.5%)
Other income (expense), net                     (749)        64      (6,634)     (0.4%)       --       (2.8%)
Income (loss) before provision for taxes      13,146      5,843     (97,938)      6.5%       2.4%     (41.2%)
Provision for income taxes                     5,191      2,251       2,543      39.5%      38.5%      (2.6%)
Net income (loss)                           $  7,955   $  3,592   $(100,481)      3.9%       1.5%     (42.2%)
</TABLE>

  The following table sets forth the Company's net sales by distribution channel
as well as domestic versus international net sales:

                           FOR THE YEARS ENDED DECEMBER 31,
                           --------------------------------
                              1997       1998       1999
                           ----------  ---------  ---------

Wholesale customers          $168,543   $202,747   $184,284
Company-operated retail        34,704     44,349     53,693
                             --------   --------   --------

Total net sales              $203,247   $247,096   $237,977
                             ========   ========   ========


United States                $150,798   $186,443   $172,369
International                  52,449     60,653     65,608
                             --------   --------   --------

Total net sales              $203,247   $247,096   $237,977
                             ========   ========   ========

                                    GENERAL

  In April 2000, the Company executed the VF Merger Agreement providing for the
acquisition of all the outstanding shares of the Company by VF for $2.00 per
share. As a first step in the transaction, a subsidiary of VF will commence a
cash tender offer for all the outstanding shares of the Company at $2.00 per
share. The offer will be conditioned, among other things, upon a majority of the
issued and outstanding shares being tendered and not withdrawn prior to the
expiration of the offer. Following successful completion of the tender offer,
the VF subsidiary will be merged into The North Face and each outstanding share
will be converted into the right to receive $2.00 in cash.

  The Company's difficulties in meeting its loan agreement covenants and
financing needs, its losses from operations, its negative working capital
position and the scheduled expiration of its credit facility on April 15, 2000
have raised substantial doubt about its ability to continue as a going concern.
As a consequence, if, for any reason, the tender offer and merger contemplated
by the VF Merger Agreement are not

                                       16
<PAGE>

consummated, the Company will be required to consider seeking protection under
Chapter 11 of the Bankruptcy Code.

  Investments in La Sportiva Businesses. On July 2, 1998, the Company acquired a
20% interest in La Sportiva S.p.A. (formerly La Sportiva S.r.l.), a premier
manufacturer and distributor of trekking, mountaineering, and climbing footwear
located in Ziano di Fiemme, Italy, for a purchase price of $2.5 million, and
incurred direct costs of approximately $0.6 million, for a total purchase price
of approximately $3.1 million.  The Company has accounted for its 20% interest
in La Sportiva S.p.A. under the equity method. The purchase price of La Sportiva
S.p.A. exceeded the Company's proportionate share of the net assets acquired by
$2.4 million, which was recorded as goodwill and has been amortized on a
straight line basis over 40 years.

  In a related transaction on July 2, 1998, the Company acquired 100% of the
outstanding common stock of La Sportiva USA, (which owns the exclusive rights to
distribute footwear for La Sportiva S.p.A. in the United States) for a purchase
price of approximately $3.9 million.  The purchase price includes $3.1 million,
which was paid in 133,335 shares of the Company's Common Stock and $0.8 million
in cash to be paid to the former owners of La Sportiva USA over five years.
The purchase price of La Sportiva USA exceeded the fair value of the net assets
acquired by approximately $3.8 million, which was recorded as goodwill and is
being amortized on a straight line basis over 40 years. The acquisition was
recorded under the purchase method of accounting. The Company has consolidated
the results of La Sportiva USA beginning on July 2, 1998.

  On January 13, 2000, the Company sold its 20% interest in La Sportiva S.p.A.
to the majority shareholders for $2.3 million. In addition, the Company is
attempting to sell La Sportiva USA.

  Products.  In 1997, sales of outerwear, equipment, Tekware, snowsport gear,
Ascentials, and other products represented approximately 48%, 20%, 12%, 9%, 6%
and 5%, respectively, of net sales. In 1998, sales of outerwear, equipment,
Tekware, snowsport gear, Ascentials, and other products represented
approximately 50%, 15%, 13%, 9%, 8% and 5%, respectively, of net sales. In 1999,
sales of outerwear, equipment, Tekware, footwear, snowsports gear, Ascentials,
and other products represented approximately 48%, 16%, 13%, 7%, 7%, 6%, and 3%,
respectively, of net sales.

  Distribution.  The North Face is a global company with operations in the
United States, Europe and Canada. The Company sells its products to a select
group of mountaineering, backpacking and skiing retailers, premium sporting
goods retailers and major outdoor specialty retail chains. The Company sells its
products to approximately 3,000 wholesale customers representing approximately
4,400 storefronts.  Additionally, the Company's products are sold under
trademark licensing agreements in Hong Kong, China, Thailand, Nepal and Macau.
In addition, in Japan and Korea substantially all the Company's trademarks are
owned by Goldwin.

  Order Cycle.  The North Face currently is engaged primarily in a two season
wholesale business, Spring (January to June) and Fall (July to December).
Wholesale customers place preseason orders, which generally are non-cancelable,
with the Company from one to eight months prior to the beginning of the season.
Reorders are placed throughout the season and products are shipped based on
availability. Preseason orders have typically accounted for approximately 75% of
total sales to wholesale customers.

  Production Cycle.  Based on preseason orders and expected reorders, the
Company places Buy 1 production orders with its contract manufacturers
representing approximately 50% - 60% of the season's purchases six to seven
months before the beginning of the season.  Four months prior to the beginning
of the season, the Company places Buy 2 to cover the remaining demand.  Fixed
production prices are agreed upon approximately three months prior to placement
of such production orders.  As a result, the Company's production costs are
relatively predictable one season in advance of the delivery of products.

                                       17
<PAGE>

  Management of Inventory.  Success in the technical outdoor apparel industry is
dependent in part, on a company's ability to manage its inventory of merchandise
in proportion to the demand for such merchandise.  If the Company miscalculates
the consumer demand for its products or its ability to execute customer orders
in a timely manner, it may be faced with significant excess inventory and excess
fabric for some products and missed opportunities for others.  Weak sales and
resulting markdowns and/or write-offs could cause the Company's profitability to
be significantly impaired and may have a material adverse effect on the
Company's financial condition and results of operations.

  Summit Shops.  At the end of 1998, the Company had 394 Summit Shops and, at
the end of 1999, the Company had 461 Summit Shops. The Company's current Summit
Shop program provides a selection of Summit Shop formats, each varying in size
and design in order to match Summit Shop designs with the dealer's environment
and capacity.  The Company does not plan to add more Summit Shops in 2000, but
may move existing shops from one dealer to another.

  Company Operated Retail Sales.  As of December 31, 1999, the Company operated
eight full-price retail stores and fifteen outlets.  Subsequent to December 31,
1999, the Company opened one outlet store in Italy.  The Company currently does
not plan to open any additional retail or outlet stores in 2000.

  Government Sales.  The North Face historically has produced tents and other
products for the U.S. government. The timing of these sales has fluctuated
historically and is dependent on the Company's obtaining and retaining contracts
from the government. The timing of the sales under these contracts can affect
the Company's quarterly results.  Sales from government contracts totaled $0.3
million in 1999 compared to $1.8 million in 1998. There can be no assurance that
the Company will obtain any additional contracts to produce products for the
government in the future.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

  Net Sales.  Net sales decreased by 3.7% to $238.0 million for 1999 compared to
1998.

  Net sales to wholesale customers decreased by 9.1% to $184.3 million from
$202.7 million for 1999 compared to 1998.  This decrease related primarily to
difficulties encountered by the Company when it outsourced its U.S. distribution
of products to a third party distributor.  These difficulties included the
inability to ship the volume ordered by customers, resulting in cancellations in
Fall 1999, as well as inaccurate shipping, resulting in chargebacks and returns
from customers.

  Company-operated retail and outlet store sales increased by 21.1% to $53.7
million from $44.3 million for 1999 compared to 1998.  This increase was
attributable to the opening of six new outlet stores during 1999 as well as the
annualized revenue generated by the opening of five outlet stores during 1998.

  Gross Profit.  Gross profit as a percentage of net sales declined from 45.3%
in 1998 to 35.2% in 1999.  This decrease is primarily due to the following: (1)
$11.8 million of chargebacks from customers resulting from shipping difficulties
discussed above; (2) $7.3 million of discounts offered in Fall 1999 as a result
of shipping difficulties discussed above; (3) inventory shrinkage at the newly
outsourced U.S. distribution center; (4) the write-down of excess inventory to
estimated realizable value; and, (5) lower retail margins resulting from
liquidation sales to dispose of excess inventory as well as a larger proportion
of retail sales coming from outlet business due to the outlet store openings in
1998 and 1999.

  Operating Expenses. Operating expenses include selling, marketing, and general
and administrative expenses. Operating expenses increased by 64.6% to $166.7
million  from $101.3 million for 1999 compared to 1998.  The 1999 operating
expenses included the write down of the value of its trademark by $22.7 million
to reflect the estimated value based on the price reflected in the VF Merger
Agreement.  The Company also

                                       18
<PAGE>

wrote down the value of the goodwill for La Sportiva S.p.A. and La Sportiva USA
by $2.9 million to bring the balance to the estimated market value realization.
Furthermore, the increase in operating expenses is attributed to an increase of
$8.1 million related to the closure of the Company's Vacaville, California
distribution center, the start-up of its Lenexa, Kansas distribution center,
higher actual costs of distribution by the Company's third party distributor, a
$2.6 million accommodation made to two wholesale distributor customers, and $5.1
million higher media and promotional spending. In addition, depreciation and
amortization expense was $5.0 million higher in 1999 related to higher capital
spending on information systems and Summit Shops. The Company also incurred $8.4
million of higher executive and corporate administration expenses primarily due
to bank charges, legal fees, consulting fees, and severance costs in 1999
compared to 1998. In addition, product development costs and information system
costs were each $1.0 million higher in 1999. Due to the operating costs of
outlets opened in the second half of 1998 and in 1999, retail store costs were
$3.3 million higher in 1999 compared to 1998. Furthermore, European operating
costs were $1.9 million higher in 1999 primarily related to higher sales volume
in Europe.

  Interest Expense.  Interest expense increased to $8.3 million from $4.9
million for 1999 compared to 1998 primarily as a result of higher borrowings
during 1999 as the Company invested in upgrading its information systems,
opening new outlets and the expansion of the Summit Shop program, as well as
higher operating costs.

  Other Expenses.  During 1999, the Company incurred other expenses of $6.6
million, of which $4.1 million is related to the transactions contemplated by
the Transaction Agreement (see Note 4 of notes to Consolidated Financial
Statements).  The remaining other expense was primarily related to foreign
exchange losses.

  Provision For Income Taxes.  Provision for income taxes as a percent of pretax
income or loss was approximately -2.6% for 1999 compared to 38.5% for 1998. This
change in the effective income tax rate reflects a full valuation allowance,
recorded in the fourth quarter, for the tax benefit related to net operating
loss carryforwards due to the uncertainty of future earnings.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

  Net Sales.  Net sales increased by 21.6% to $247.1 million for 1998 compared
to 1997.

  Net sales to wholesale customers increased by 20.3% to $202.7 million from
$168.5 million for 1998 compared to 1997.  This increase related primarily to
increased unit shipments to the Company's new and existing wholesale customers
resulting from: (i) the introduction of new products, including new products
within the Outerwear and Tekware categories; (ii) significant growth in sales of
Outerwear products, which accounted for approximately 50% of total sales in 1998
compared to 48% in 1997; (iii) continued growth of existing products; (iv)
continued growth in international sales; and (v) the opening of new Summit Shops
during 1998.

  Company-operated retail and outlet store sales increased by 27.8% to $44.3
million from $34.7 million for 1998 compared to 1997.  This increase was
attributable to comparable store sales increases as well as the opening of five
new outlet stores: Quebec in February; Woodbury Common, New York in May; Bend,
Oregon in July; Carlsbad, California in August; and Birch Run, Michigan in
September.

  Gross Profit.  Gross profit as a percentage of net sales declined from 45.5%
in 1997 to 45.3% in 1998 primarily due to consignment sales with lower  gross
margins, primarily in the third quarter.

  Operating Expenses.  Operating expenses include selling, marketing, and
general and administrative expenses. Operating expenses increased by 32.6% to
$101.3 million in 1998 from $76.3 million compared to

                                       19
<PAGE>

1997, primarily as a result of increases in variable and fixed costs to support
the growth of the Company's business. In addition, during 1998, the Company
recorded charges of $1.7 million related to the closing of a manufacturing
facility in Scotland, the closure of its Canadian distribution facility and the
termination of its German sales agent. Also during 1998, the Company recorded
expenses of $5.7 million related primarily to (i) relocating a portion of its
corporate headquarters to Carbondale, Colorado; (ii) the realignment of its San
Leandro, California administrative facility; and (iii) establishing a Hong Kong
operation to facilitate its sourcing of products in Asia.

  Interest Expense.  Interest expense increased to $4.9 million from $2.2
million for 1998 compared to 1997 primarily as a result of higher borrowings
from the Company's $130 million credit facility established in September 1998 to
support expansion and working capital requirements.

  Provision For Income Taxes.  Provision for income taxes as a percent of pretax
income was approximately 38.5% for 1998 compared to 39.5% for 1997. This
decrease in the effective income tax rate reflects the application of tax
credits for research and developments activities as well as the mix of the
Company's pretax earnings among domestic and international operations, which are
subject to different tax rates.

                                       20
<PAGE>

                        QUARTERLY DATA AND SEASONALITY

  The following table sets forth certain unaudited financial data for each of
the Company's eight fiscal quarters ended December 31, 1999. The operating
results for any quarter are not necessarily indicative of results for any future
period.

<TABLE>
<CAPTION>
                                              YEAR ENDED DECEMBER 31, 1999
                                        ------------------------------------------
(In thousands)                             Q1        Q2         Q3          Q4
                                        --------  ---------  ---------  ----------
<S>                                     <C>       <C>        <C>        <C>
Net sales                               $51,256   $ 54,596   $ 70,997   $ 61,128
Gross profit                             23,347     23,915     29,522      6,907
Operating income (loss)                  (5,953)   (10,614)    (9,789)   (56,641)
Net income (loss)                        (5,491)    (7,585)   (10,663)   (76,742)*
Net income (loss) per share:
       Basic                            $ (0.43)  $  (0.60)  $  (0.84)  $  (6.02)
       Diluted                          $ (0.43)  $  (0.60)  $  (0.84)  $  (6.02)
Weighted average shares outstanding:
       Basic                             12,687     12,726     12,733     12,743
       Diluted                           12,687     12,726     12,733     12,743
</TABLE>

*  Net loss in the fourth quarter of 1999 includes the recording of a $27.7
million valuation allowance for the tax benefit related to net operating loss
carryforwards due to the uncertainty of future earnings, a $25.6 million
impairment of intangible assets, and an $11.8 million adjustment to accounts
receivable and sales as a result of chargebacks from customers related to
inaccurate shipping.

<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31, 1998
                                        --------------------------------------
(In thousands)                             Q1        Q2        Q3        Q4
                                        --------  ---------  -------  --------
<S>                                     <C>       <C>        <C>      <C>
Net sales                               $45,704   $ 43,171   $93,645  $64,576
Gross profit                             19,925     18,910    41,242   31,885
Operating income (loss)                    (400)   ( 3,861)   13,368    1,579
Net income (loss)                          (843)   ( 2,579)    7,229     (215)
Net income (loss) per share:
       Basic                            $ (0.07)  $  (0.22)  $  0.58  $ (0.02)
       Diluted                          $ (0.07)  $  (0.22)  $  0.57  $ (0.02)
Weighted average shares outstanding:
       Basic                             11,539     11,968    12,481   12,491
       Diluted                           11,539     11,968    12,752   12,491
</TABLE>

  The Company, like other retailers, is subject to seasonal and quarterly
fluctuations. The Company's results of operations may fluctuate from quarter to
quarter as a result of, among other things, the amount and timing of shipments
to wholesale customers, government shipments, the timing and magnitude of
discounts in retail stores, the timing of international licensing and royalty
contracts, advertising and marketing expenditures, increases in the number of
employees and overhead to support growth and store opening costs.

                        LIQUIDITY AND CAPITAL RESOURCES

   The Company has a revolving credit facility, which provides for borrowings up
to $115.0 million until December 31, 1999, and thereafter up to $100.0 million,
with the actual borrowings limited based on the amount of eligible receivables
and inventory.  In addition, the credit facility includes a $15.0 million term

                                       21
<PAGE>

note facility, which calls for $0.75 million to be repaid quarterly beginning on
October 1, 1999. The credit facility also includes certain financial covenants
and restrictions on new indebtedness and the payment of cash dividends. The
revolving line of credit and the term note facility bear interest at variable
rates (10.75% at December 31, 1999). This credit facility expired on March 31,
2000 and was amended in March 2000 to extend the expiration date to April 15,
2000.

   The Company experienced significant liquidity problems in the third and
fourth quarters of 1999 as a result of the shipping difficulties encountered
when it outsourced its U.S. distribution of products to a third party
distributor.  Late shipments significantly reduced the Company's sales,
profitability, and borrowing base.

   As a result of the liquidity problems, the Company was charged an amendment
fee of $400,000 in November 1999 and paid an additional $575,000 extension fee
in December 1999 as the bank credit facility was not repaid in full by December
31, 1999.  Also, the Company issued to the lender 202,597 warrants to purchase
the Company's common stock at an exercise price of $4.1825, which became
exercisable beginning on January 15, 2000, as the bank credit facility was not
repaid in full by that date.

   In February 2000, the Company's bank credit facility was amended to increase
the borrowing limit to the available collateral plus $16.0 million and to
reflect certain changes in the financial and reporting covenants, among other
things.  In addition, the interest rate increased by 0.5% under this amendment.
The Company was charged an amendment fee of $1.0 million which was paid upon the
signing of the amendment, and a deferred fee of $3.5 million, which was payable
on the earlier of (1) the sale of at least 51% of the outstanding shares or the
assets of the Company or (2) June 15, 2000.  In April 2000, the Company and the
lender signed a waiver and agreement reducing the deferred fee from $3.5 million
to $876,000 for the transactions comtemplated by the VF Merger Agreement.

   The Company estimates that its capital expenditures in 2000 will be
approximately $4.0 million.  This amount will be used principally for the
upgrade of management information systems and updates of current Summit Shops.
In 1999, capital expenditures, including property and equipment financed through
capital leases, was $17.7 million, which was primarily used for investing in
Summit Shops, the upgrade of management information systems, the opening of
outlet stores and store upgrades, and general corporate purposes.

Impact of New Accounting Pronouncements

  See Note 2 to the Consolidated Financial Statements for a discussion of the
impact of new accounting standards.

Item 7a.  Quantitative and Qualitative Disclosure About Market Risk

  The Company is exposed to market risks, which include foreign currency risks,
interest rate risks and inflation risk.  The Company does not engage in
financial transactions for trading or speculative purposes.

  Foreign Currency Exchange Rate Risk.  The Company's inventory purchases from
contract manufacturers in the Far East are denominated in United States dollars;
however, purchase prices for the Company's products may be impacted by
fluctuations in the exchange rate between the United States dollar and the local
currencies of the contract manufacturers, which may have the effect of
increasing the Company's cost of goods in the future. In addition, the Company's
sales in Europe and Canada are denominated in the local currencies of the
applicable specialty retailer, which may have a negative impact on profit
margins or the rate of growth of sales in those countries if the U.S. dollar
were to strengthen significantly. Due to the number of foreign currencies
involved and the fact that not all of these foreign currencies fluctuate in the
same manner against the United States dollar, the Company cannot quantify in any
meaningful way the potential effect of such fluctuations on future income.

                                       22
<PAGE>

  The Company sources product in U.S. dollars and sells product throughout the
world, but primarily in the United States, Canada and Europe.  To reduce the
Company's exposure to changes in the U.S. dollar value of foreign sales and
receivables the Company enters into forward options and contracts.  This hedging
of foreign exchange risk is carried out on a seasonal basis with each season
running for six months of the year, spring being January through June and Fall
being July through December.  In general, the Company hedges for the current
season and the next season.  At December 31, 1999, the Company held the
following foreign currency derivatives all of which expire during 2000:

<TABLE>
<CAPTION>
CURRENCY                             OPEN CONTRACT CURRENCY       OPEN CONTRACT U.S.           FAIR
(In thousands)                                VALUE                  DOLLAR VALUE             VALUE
                                     ----------------------       ------------------          -----
<S>                                  <C>                          <C>                         <C>
Contracts:

Euro                                          26,149                   $26,312                $2,054
Swedish Kroners                               16,746                     2,048                    76
Danish Kroners                                17,300                     2,567                   222
Swill Francs                                   2,681                     1,875                   179
Canadian Dollars                               4,900                     3,393                     8
                                                                       -------                ------
Total                                                                  $36,195                $2,539
</TABLE>

  In January 2000, the Company sold all open foreign exchange contracts at a net
gain of $1.1 million.

  The Company may be affected by the current devaluation of the Asian currencies
due to the Company's importing of raw materials to Asia. Furthermore, the
Company may be affected by economic and political conditions in each of the
countries in which it operates.  Risks associated with operating in the
international arena include: (i) economic instability, including the possible
revaluation of currencies; (ii) extreme currency exchange fluctuations where the
Company has not entered into foreign currency forward and option contracts to
manage exposure to certain foreign currency commitments hedged any forward
transactions; (iii) changes to import or export regulations (including quotas);
(iv) labor or civil unrest; and (v) in certain parts of the world, political
instability.  The Company has not as yet been materially affected by any such
risks, but cannot predict the likelihood of such developments occurring or the
impact of any such risks to the future profitability of the Company.

  Interest Rate Risk.  The interest payable on the Company's bank line of credit
is based on variable interest rates and therefore affected by changes in market
interest rates.  If interest rates on existing variable rate debt rose 80 basis
points, the Company's results from operations and cash flows would have been
impacted by approximately $837,000.

  Inflation Risk.  The Company believes that the relatively moderate rates of
inflation over the last three years in the United States, where it primarily
competes, have not had a significant effect on its net sales or results of
operations. Higher rates of inflation have been experienced in a number of
foreign countries in which the Company's products are manufactured, but this has
not had a material effect on the Company's net sales or results of operations.
In the past, the Company has been able to offset its cost increases by
negotiation, increasing selling prices or changing suppliers.

                                       23
<PAGE>

Item 8.  Financial Statements and Supplementary Data.

                             THE NORTH FACE, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                    FOR THE YEARS ENDED DECEMBER 31,
                                                   -----------------------------------
                                                      1999         1998        1997
                                                   -----------  ----------  ----------
<S>                                                <C>          <C>         <C>
Net sales                                           $ 237,977    $247,096    $203,247
Cost of sales                                         154,286     135,134     110,764
                                                    ---------    --------    --------
Gross profit                                           83,691     111,962      92,483
Operating expenses                                    166,688     101,276      76,350
                                                    ---------    --------    --------
Operating income (loss)                               (82,997)     10,686      16,133
Interest expense                                       (8,307)     (4,907)     (2,238)
Other income (expense), net                            (6,634)         64        (749)
                                                    ---------    --------    --------
Income (loss) before provision for income taxes       (97,938)      5,843      13,146
Provision for income taxes                              2,543       2,251       5,191
                                                    ---------    --------    --------
Net income (loss)                                   $(100,481)   $  3,592    $  7,955
                                                    =========    ========    ========
Net income (loss) per share:
  Basic                                                $(7.90)      $0.30       $0.70
  Diluted                                              $(7.90)      $0.29       $0.69
Weighted average shares outstanding:
  Basic                                                12,723      12,121      11,297
  Diluted                                              12,723      12,485      11,578
</TABLE>


              See Notes to the Consolidated Financial Statements

                                       24
<PAGE>

                             THE NORTH FACE, INC.
                          CONSOLIDATED BALANCE SHEETS
              (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                                    -------------------
                                                                      1999       1998
                                                                    ---------  --------
<S>                                                                 <C>        <C>
ASSETS
Current assets:
Cash and cash equivalents                                           $ 11,824   $ 13,452
 Trade accounts receivable, net                                       40,284     71,460
 Other receivables                                                     3,403     10,069
 Inventories                                                          82,365     57,457
Deferred taxes                                                           247      3,661
 Other current assets                                                  6,696      8,820
                                                                    --------   --------
  Total current assets                                               144,819    164,919
Property and equipment, net                                           32,859     25,916
Trademarks and intangibles, net                                        7,454     33,975
Debt issuance costs, net                                                 828      1,730
Other assets                                                           1,579      6,104
                                                                    --------   --------
  Total assets                                                      $187,539   $232,644
                                                                    ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                                   $ 47,506   $ 22,773
 Accrued employee expenses                                             3,041      5,063
 Short-term borrowings and current portion of long-term
     debt and capital lease obligations                               88,294     55,910
 Income taxes payable                                                  1,674      1,508
 Other current liabilities                                            14,344     11,119
                                                                    --------   --------
  Total current liabilities                                          154,859     96,373
Long-term debt and capital lease obligations                           1,174      5,360
Other long-term liabilities                                            5,375      7,000
                                                                    --------   --------
  Total liabilities                                                  161,408    108,733
                                                                    --------   --------

Minority interest                                                        642        701
Commitments and contingencies (Notes 11, 12 and 15)                       --         --

Stockholders' equity:
 Preferred stock, $1.00 par value-shares authorized 4,000,000;
   none issued and outstanding                                            --         --
 Common stock, $.0025 par value-shares authorized 50,000,000;
  issued and outstanding 12,744,000 and 12,494,000, respectively          32         31
 Additional paid-in capital                                          103,920    101,049
 Retained earnings (accumulated deficit)                             (78,821)    21,660
 Accumulated other comprehensive income - cumulative translation
   adjustments                                                           358        470
                                                                    --------   --------
 Total stockholders' equity                                           25,489    123,210
                                                                    --------   --------
 Total liabilities and stockholders' equity                         $187,539   $232,644
                                                                    ========   ========
</TABLE>

              See Notes to the Consolidated Financial Statements

                                       25
<PAGE>

                             THE NORTH FACE, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                                                  ----------------------------------
                                                                                      1999       1998       1997
                                                                                   ----------  ---------  ---------
<S>                                                                               <C>           <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................................................      $(100,481)  $  3,592   $  7,955
Adjustments to reconcile net income (loss) to cash used in operating
 activities:
  Depreciation and amortization...............................................         13,370      7,728      5,130
  Loss on disposal of property and equipment..................................          1,677      2,235      2,869
  Adjustment to warranty accrual..............................................          1,495        (90)      (895)
  Write down of trademark and goodwill........................................         25,596         --         --
  Deferred income taxes.......................................................          3,414       (796)      (375)
  Issuance of notes payable for tender offer expenses.........................          2,226         --         --
  Provision for doubtful accounts.............................................         15,425        799        278
  Tax benefit of exercise of stock options....................................            148      1,285      4,803
  Other.......................................................................             --        (43)        --
Changes in operating assets and liabilities (net of effects of acquisition):
  Accounts receivable.........................................................         15,751    (22,849)   (27,618)
  Inventories.................................................................        (24,908)    (9,717)   (15,207)
  Income tax receivable.......................................................          4,593       (671)        --
  Other assets................................................................          8,735     (5,279)   (11,714)
  Accounts payable, accrued liabilities and other liabilities.................         22,982      9,272     13,435
                                                                                    ---------   --------   --------
NET CASH USED IN OPERATING ACTIVITIES:                                                 (9,977)   (14,534)   (21,339)
                                                                                    ---------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired as a result of the purchase of La Sportiva USA..................             --        235         --
Investment in La Sportiva, S.r.l..............................................             --     (3,086)        --
Purchases of property and equipment...........................................        (15,891)   (17,236)   (13,935)
Other.........................................................................             --         43
                                                                                    ---------   --------   --------
NET CASH USED IN INVESTING ACTIVITIES.........................................        (15,891)   (20,044)   (13,935)
                                                                                    ---------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt proceeds.......................................................         10,000         --      6,826
Repayments of long-term debt..................................................         (1,839)      (348)      (546)
Proceeds from revolver, net...................................................         16,025     30,707     24,400
Payment of debt issuance costs................................................             --     (1,915)       (94)
Collection of note receivable.................................................             --      6,549         --
Proceeds from issuance of stock...............................................            224      8,373        889
Redemption of La Sportiva USA preferred stock.................................            (59)        --         --
                                                                                    ---------   --------   --------
NET CASH PROVIDED BY FINANCING ACTIVITIES.....................................         24,351     43,366     31,475
                                                                                    ---------   --------   --------
Effect of foreign currency fluctuations on cash...............................           (111)       153         (5)
                                                                                    ---------   --------   --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..............................         (1,628)     8,941     (3,804)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..................................         13,452      4,511      8,315
                                                                                    ---------   --------   --------
CASH AND CASH EQUIVALENTS, END OF YEAR........................................      $  11,824   $ 13,452   $  4,511
                                                                                    =========   ========   ========
NONCASH INVESTING ACTIVITY--ISSUANCE OF COMMON STOCK
   FOR THE ACQUISITION OF LA SPORTIVA USA:
Purchase of working capital...................................................      $      --   $   (798)  $     --
Purchase of property and equipment............................................             --        (28)        --
Purchase of other long-term assets............................................             --        (34)        --
Assumption of other long-term liabilities.....................................             --        702         --
Excess purchase price over the fair value of net assets acquired..............             --     (3,835)        --
Redeemable preferred stock....................................................             --        876
                                                                                    ---------   --------   --------
TOTAL ISSUANCE OF COMMON STOCK FOR THE ACQUISITION OF
   LA SPORTIVA USA............................................................             --   $ (3,117)        --
                                                                                    =========   ========   ========
SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for:
     Interest......................................................                 $   6,630   $  3,934   $  2,136
     Income taxes..................................................                 $   4,070   $  4,398   $  4,488
Noncash financing activities:
     Issuance of common stock for land.............................                 $   2,500   $     --   $     --
     Issuance of common stock for note receivable..................                 $      --   $  6,549   $     --
     Acquisition of property and equipment through capital leases..                 $   1,786   $     --   $     --
</TABLE>

              See Notes to the Consolidated Financial Statements

                                       26
<PAGE>

                             THE NORTH FACE, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                (In thousands)

<TABLE>
<CAPTION>
                                                    PREFERRED STOCK               COMMON STOCK                  ADDITIONAL
                                              ---------------------------  ----------------------------
                                                                                                                 PAID-IN
                                                 SHARES         AMOUNT        SHARES         AMOUNT              CAPITAL
                                              -------------  ------------  -------------  -------------         ----------
<S>                                           <C>            <C>           <C>            <C>                   <C>
January 1, 1997                                          --            --         11,200            $29           $ 76,130
Net income                                               --            --             --             --                 --
Other comprehensive income -
  translation adjustments                                --            --             --             --                 --
Comprehensive income                                     --            --             --             --                 --

Exercise of stock options including
  tax benefit                                            --            --            286             --              5,354
Sale of common stock                                     --            --             --             --                 --
Employee stock purchase plan                             --            --             16             --                243
                                                -----------    ----------   ------------    -----------       ------------
December 31, 1997                                        --            --         11,502            $29           $ 81,727
Net income                                               --            --             --             --                 --
Other comprehensive income -
  Translation adjustments                                --            --             --             --                 --
Comprehensive income                                     --            --             --             --                 --

Exercise of stock options including
  tax benefit                                            --            --            177             --              1,867
Sale of common stock                                     --            --            665              2             14,048
Shares issued for acquisition of
  La Sportiva USA                                        --            --            133             --              3,117
Employee stock purchase plan                             --            --             17             --                290
                                                -----------    ----------    -----------   ------------       ------------
December 31, 1998                                        --            --         12,494            $31           $101,049
Net loss                                                 --            --             --             --                 --
Other comprehensive income -
  Translation adjustments                                --            --             --             --                 --
Comprehensive loss                                       --            --             --             --                 --

Exercise of stock options including
  tax benefit                                            --            --             21             --                159
Sale of common stock                                     --            --            206              1              2,500
Employee stock purchase plan                             --            --             23             --                212
                                                -----------    ----------     ----------        -------       ------------
December 31, 1999                                        --            --         12,744            $32           $103,920
                                                ===========    ==========     ==========        =======       ============

<CAPTION>
                                                                                                       ACCUMULATED
                                                                                                          OTHER
                                                                                                      COMPREHENSIVE
                                                                     RETAILED                         INCOME (LOSS)-
                                                                     EARNINGS                           CUMULATIVE
                                              SUBSCRIPTIONS        (ACCUMULATED     COMPREHENSIVE      TRANSLATION
                                               AVAILABLE             DEFICIT)       INCOME (LOSS)      ADJUSTMENTS       TOTAL
                                              -------------         ---------       -------------    ---------------   ----------
<S>                                           <C>                   <C>             <C>              <C>               <C>
January 1, 1997                                       (95)          $  10,113               --            $ 322         $  86,499
Net income                                             --               7,955        $   7,955               --             7,955
Other comprehensive income -
  translation adjustments                              --                  --               (5)              (5)               (5)
Comprehensive income                                   --                  --        $   7,950               --                --
                                                                                     =========
Exercise of stock options including
  tax benefit                                          95                  --                                --             5,449
Sale of common stock                                   --                  --                                --                --
Employee stock purchase plan                           --                  --                                --               243
                                                  -------           ---------                             -----         ---------
December 31, 1997                                 $    --           $  18,068                             $ 317         $ 100,141
Net income                                             --               3,592        $   3,592               --             3,592
Other comprehensive income -
  Translation adjustments                              --                  --              153              153               153
Comprehensive income                                   --                  --        $   3,745               --                --
                                                                                     =========
Exercise of stock options including
  tax benefit                                          --                  --                                --             1,867
Sale of common stock                                   --                  --                                --            14,050
Shares issued for acquisition of
  La Sportiva USA                                      --                  --                                --             3,117
Employee stock purchase plan                           --                  --                                --               290
                                                  -------           ---------                             -----         ---------
December 31, 1998                                      --           $  21,660                             $ 470         $ 123,210
Net loss                                               --           (100,481)        $(100,481)              --          (100,481)
Other comprehensive income -
  Translation adjustments                              --                  --             (112)            (112)             (112)
Comprehensive loss                                     --                  --        $(100,593)              --                --
                                                                                     =========
Exercise of stock options including
  tax benefit                                          --                  --                                --               159
Sale of common stock                                   --                  --                                --             2,501
Employee stock purchase plan                           --                  --                                --               212
                                                  -------           ---------                             -----         ---------
December 31, 1999                                 $    --           $(78,821)                             $ 358         $  25,489
                                                  =======           =========                             =====         =========
</TABLE>

              See Notes to the Consolidated Financial Statements

                                       27
<PAGE>

                             THE NORTH FACE, INC.

                       CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

1.  Business and Basis of Presentation

  The North Face, Inc. designs and distributes technically sophisticated
outerwear, snowsports gear, functional sportswear, tents, sleeping bags,
backpacks, daypacks, accessories and rugged footwear under The North Face(R)
name. Through its subsidiary, La Sportiva(R) USA, the Company distributes rock
climbing shoes, mountaineering boots and other rugged footwear under the La
Sportiva name. The Company sells its products to select specialty retailers
throughout the United States, Europe and Canada. As of December 31, 1999 the
Company also operated 8 retail stores and 15 outlets.

     The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, during the year ended December 31, 1999, the Company incurred net
losses of $100.5 million, and, as of that date, the Company's current
liabilities exceeded its current assets by $10.0 million. These factors, among
others, raise substantial doubt about the Company's ability to continue as a
going concern.

     The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should be Company be
unable to continue as a going concern. As described in Note 10, the Company's
bank credit facility expires on April 15, 2000; therefore, the outstanding loan
($85.5 million) has been classified as a current liability. In April 2000, the
Company executed a definitive merger agreement (the "VF Merger Agreement")
providing for the acquisition of all the outstanding shares of the Company by VF
Corporation ("VF") for $2.00 per share. As a first step in the transaction, a
subsidiary of VF will commence a cash tender offer for all the outstanding
shares of the Company at $2.00 per share. The offer will be conditioned, among
other things, upon a majority of the issued and outstanding shares being
tendered and not withdrawn prior to the expiration of the offer. Following
successful completion of the tender offer, the VF subsidiary will be merged into
The North Face and each outstanding share will be converted into the right to
receive $2.00 in cash.

  The Company's difficulties in meeting its loan agreement covenants and
financing needs, its losses from operations, its negative working capital
position and the scheduled expiration of its credit facility on April 15, 2000
have raised substantial doubt about its ability to continue as a going concern.
As a consequence, if, for any reason, the tender offer and merger contemplated
by the VF Merger Agreement are not consummated, the Company will be required to
consider seeking protection under Chapter 11 of the Bankruptcy Code.

2.  Summary of Significant Accounting Policies

  Principles of Consolidation.  The consolidated financial statements include
the financial statements of The North Face, Inc. and its subsidiaries.  All
significant intercompany accounts have been eliminated.

  Use of Estimates.  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual amounts could differ from those estimates.

  Foreign Currency Translation.  The assets and liabilities of the Company's
foreign subsidiaries have been translated into U.S. dollars using the exchange
rates in effect at period end, and the revenues and expenses have been
translated into U.S. dollars using the average exchange rates in effect during
the period. Adjustments resulting from translating foreign financial statements
into U.S. dollars are reported as translation adjustments as a separate
component of stockholders' equity. Aggregate transaction losses for 1999, 1998
and 1997 were $927,000, $192,000 and $698,000, respectively.

  Cash Equivalents represent short-term investments with original maturities of
less than three months.

                                       28
<PAGE>

  Accounts Receivable from wholesale customers are recorded upon the sale of
inventory to independent retailers and distributors net of a provision for
estimated returns. A sale occurs when inventories are shipped and title and risk
of loss have transferred from the Company to the buyer. Seasonal goods are
generally shipped to retailers prior to the selling season. The Company offers
extended payment terms for preseason orders.

  Inventories are stated at the lower of average cost or market. The Company
principally contracts for the manufacture of its products in the U.S., Asia and
Europe. Costs related to these inventories represent landed cost, which consists
of the price paid to third party manufacturers and inbound duties and freight.

  Trademarks and Intangibles consist primarily of trademarks and goodwill and
are being amortized on a straight-line basis over forty years. The Company
assesses impairment of long-lived assets on a periodic basis in accordance with
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to Be Disposed Of". Accumulated amortization at December 31, 1999 and
1998 was approximately $4.6 million and $3.6 million, respectively. Amortization
expense was $940,000, $860,000 and $785,000 for the years ended December 31,
1999, 1998 and 1997, respectively. In the fourth quarter of 1999, the Company
recognized impairment in the amount of $22.7 million in order to state the value
of Company's equity consistent with the purchase price proposed under the VF
Merger Agreement. In addition, in the fourth quarter of 1999, the Company
recognized impairment in the amount of $2.9 million because of management's
decision to sell La Sportiva S.p.A. and La Sportiva USA. The fair value of the
impaired assets were recorded based on the estimated sales price of these
businesses.

  Property and Equipment is stated at cost.  Depreciation and amortization is
computed using the straight-line method over the remaining estimated useful life
of the asset (or over the remaining lease term, if shorter, for capital leases).
The estimated useful lives of certain categories are as follows:

  Leasehold improvements                     5 - 10 years
  Machinery and equipment                         5 years
  Furniture, fixtures and office equipment   3 -  7 years

  Expenditures for replacements and improvements are capitalized; maintenance
and repairs are expensed as incurred.

  Investment in La Sportiva S.p.A.  The Company accounts for its 20% interest in
La Sportiva S.p.A. using the equity method and the investment is included in
other assets in the accompanying balance sheet.  See Note 3.

  Product Warranty.  Substantially all of the Company's products, except
footwear, carry a lifetime warranty for defects in quality and workmanship which
allows the Company to repair or replace, at its option, the products found to
have a manufacturing defect. The Company maintains warranty departments in the
U.S., Canada and Europe and repairs or replaces items returned under warranty.
The Company's estimated liability for future warranty claims related to past
sales at December 31, 1999, and 1998 is approximately $5.6 million and $4.1
million, respectively, of which the non-current portion of $4.5 million and $3.0
million is classified as other long-term liabilities as of December 31, 1999 and
1998, respectively. The current portion of the warranty liability is $1.1
million and $1.1 million and is classified as other current liabilities as of
December 31, 1999 and 1998, respectively. Warranty expense was approximately
$1,771,000, $1,504,000 and $1,496,000 for the years ended December 31, 1999,
1998 and 1997, respectively.

  Deferred Rent.  Certain of the Company's operating leases contain
predetermined fixed increases of the minimum rental rate during the initial
lease term. For these leases, the Company recognizes the related rental expense
on a straight-line basis over the life of the lease and records the difference
between the amount charged to rent expense and the rent paid as deferred rent.

  Income Taxes.  The Company applies an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences, the
Company generally considers all expected future events other than enactment of
changes in the tax laws or rates. Deferred taxes are provided for temporary
differences between assets and liabilities for financial reporting purposes and
for income tax purposes and valuation allowances are recorded against net
deferred tax assets where appropriate. No U.S. income tax provisions

                                       29
<PAGE>

have been provided on the cumulative undistributed earnings of foreign
operations as it is the Company's intention to utilize those earnings in those
foreign operations for an indefinite period of time.

  Minority Interest.  Minority interest represents redeemable preferred stock of
La Sportiva USA owned by the majority shareholders of La Sportiva S.p.A. The
redeemable preferred stock has a 1% cumulative dividend and is redeemable in
minimum increments of $50,000 per year.

  Earnings Per Share.  Basic earnings per share (EPS) is computed by dividing
net income by the weighted average number of common shares outstanding for the
period. Diluted earnings per share is computed by dividing net earnings by the
diluted weighted average number of common shares outstanding during the period.
Diluted EPS reflects the potential dilution that could occur upon exercise of
outstanding stock options.  Diluted EPS for the year ended December 31, 1999
exclude any effect of all stock options because their inclusion would be
antidilutive.  The following is a summary of the calculation of the number of
shares used in calculating basic and diluted EPS (in thousands):


                                      Years Ended December 31,
                                      ------------------------
                                       1999     1998     1997
                                      -------  -------  ------

Shares used to compute basic EPS       12,723   12,121  11,297
Add effect of dilutive securities:
   Stock options                           --      364     281
                                       ------   ------  ------

Shares used to compute diluted EPS     12,723   12,485  11,578
                                       ======   ======  ======

  Stock-Based Compensation.  Statement of Financial Accounting Standards No.
123, "Accounting for Stock-based Compensation (SFAS No. 123)", allows either
adoption of a fair value method for accounting for stock-based compensation
plans or continuation of accounting under Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employee", and related
interpretations with supplemental disclosures. The Company has chosen to account
for its stock options using the intrinsic value based method prescribed in APB
Opinion No. 25 and, accordingly, does not recognize compensation expense for
stock option grants made at an exercise price equal to or in excess of the fair
market value of the stock at the date of grant. Pro forma net income and
earnings per share amounts as if the fair value method had been adopted are
presented in Note 13. SFAS No. 123 does not impact the Company's results of
operations, financial position or cash flows.

  Derivatives.  Gains and losses on forward foreign exchange contracts used to
hedge foreign currency denominated receivables are recognized currently. Gains
and losses related to qualifying hedges of preseason orders (which are
considered firm commitments) are deferred and recognized in income when the
hedged transaction occurs.

  Comprehensive Income (Loss).  In the first quarter of 1998, the Company
adopted SFAS No. 130, "Reporting Comprehensive Income," which established
standards for reporting and displaying comprehensive income and its components
in financial statements. Comprehensive income is defined as net income and all
non-owner changes in stockholders' equity. Accumulated other comprehensive
income consists entirely of foreign currency translation adjustments and is
presented in the statement of shareholders equity.

  Estimated Fair Value of Financial Instruments.  SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments", requires disclosure of the estimated
fair value of financial instruments. The carrying values of cash and cash
equivalents, accounts receivable and accounts payable approximates their
estimated fair values due to the short-term nature of those instruments. The
carrying value of the Company's debt approximates its estimated fair value based
on interest rates available to the Company and debt instruments with similar
terms.

                                       30
<PAGE>

  Segment Data.  During the year ended December 31, 1998, the Company adopted
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131). SFAS 131 supersedes SFAS 14, "Financial Reporting for
Segments of a Business Enterprise", replacing the "industry segment" approach
with the "management" approach. The management approach designates the internal
reporting that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. SFAS
131 also requires disclosures about products and services, geographic areas and
major customers. The adoption of SFAS 131 did not affect results of operations
or the financial position of the Company but did affect the disclosure of
segment information.

  New Accounting Pronouncement.  In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
statement requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This statement is effective for fiscal years beginning after June
15, 2000 and is not to be applied retroactively to financial statements for
prior periods. Management has not assessed the impact of the adoption of SFAS
No. 133.

  Reclassifications.  Certain amounts in the 1998 and 1997 financial statements
have been reclassified to conform with the 1999 presentation. Such
reclassifications had no effect on earnings.

3.  Investments in La Sportiva Businesses

  On July 2, 1998, the Company acquired a 20% interest in La Sportiva S.r.l., a
premier manufacturer and distributor of trekking, mountaineering, and climbing
footwear located in Ziano di Fiemme, Italy for a purchase price of $2.5 million,
and incurred direct costs of approximately $0.6 million, for a total purchase
price of approximately $3.1 million. In August 1998, La Sportiva S.r.l. changed
its name to La Sportiva S.p.A. The majority shareholders of La Sportiva S.p.A.
have a "put option" which may require the Company to purchase, in a single
transaction, an additional 31% interest in La Sportiva S.p.A. for 6.8 billion
lira ($3.5 million at December 31, 1999). This put option may be exercised at
any time during the period beginning on July 1, 2000 and ending on July 1, 2003.
After the expiration of the "put option" and until December 31, 2004, the
Company may exercise a "call option" which, if exercised, would require the
majority shareholders of La Sportiva S.p.A. to sell an additional 31% interest
to the Company for 6.8 billion lira ($3.5 million at December 31, 1999). The
Company has accounted for its 20% interest in La Sportiva S.p.A. under the
equity method. The purchase price of La Sportiva S.p.A. exceeded the Company's
proportionate share of the net assets acquired by $2.4 million, which was
recorded as goodwill and is being amortized on a straight line basis over 40
years.

  In October 1998, the Company entered into a foreign exchange contract, whereby
it hedged the potential future payment of the put and call options of 6.8
billion lira ($3.5 million at December 31, 1999). In connection with that
transaction, the Company recorded a $583,000 and $231,000 foreign exchange loss
in its statement of operations for the years ended December 31, 1999 and 1998,
respectively.

                                       31
<PAGE>

  Summary financial information for La Sportiva S.p.A. as of December 31, 1999
and 1998 and for the year ended December 31, 1999 and for the period from July
2, 1998 to December 31, 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                      1999         1998
                                                                   -----------  -----------
<S>                                                                <C>          <C>
Current assets                                                         $ 6,097      $ 6,253
Noncurrent assets                                                        4,210        6,339
                                                                       -------      -------
Total assets                                                           $10,307      $12,592
                                                                       =======      =======

Current liabilities                                                    $ 3,349      $ 4,701
Noncurrent liabilities                                                   3,049        4,170
                                                                       -------      -------
Total liabilities                                                        6,398        8,871
Shareholders' equity                                                     3,909        3,721
                                                                       -------      -------
Total liabilities and shareholders' equity                             $10,307      $12,592
                                                                       =======      =======

Net sales, including sales to La Sportiva USA of $2,253 (1999)
  and $1,013 (1998)                                                    $ 9,096      $ 4,474
Income before income taxes                                               1,336           85
Net income                                                                 673           14
</TABLE>

  In a related transaction on July 2, 1998, the Company acquired 100% of the
outstanding common stock of La Sportiva USA, (which owns the exclusive rights to
distribute footwear for La Sportiva S.p.A. in the United States) located in
Boulder, Colorado, for a purchase price of approximately $3.9 million. The
purchase price includes $3.1 million which was paid in 133,335 shares of the
Company's common stock and additional $0.8 million in cash to be paid to the
former owners of La Sportiva USA over five years.

  The purchase price of La Sportiva USA exceeded the fair value of the net
assets acquired by approximately $3.8 million, which was recorded as goodwill
and was initially amortized on a straight line basis over 40 years. The
acquisition was recorded under the purchase method of accounting. The Company
has consolidated the results of La Sportiva USA beginning on July 2, 1998.

  On January 13, 2000, the Company sold its 20% interest in La Sportiva S.p.A.
to the majority shareholders for 4.3 billion lira ($2.3 million). As a result of
this sale, the Company sold its foreign exchange contract for 6.8 billion lira
in January 2000. In addition, the Company is attempting to sell La Sportiva USA.
The goodwill for La Sportiva S.p.A. and La Sportiva USA was written down by
$2,879,000 in 1999 to reduce the balance to the estimated market value.

4.  Terminated Agreement to Sell the Company

  On February 27, 1999, the Company entered into a Transaction Agreement (the
"Transaction Agreement") with TNF Acquisition LLC ("TNF"), an affiliate of
Leonard Green & Partners, L.P. ("LPG"). The Transaction Agreement provided for a
tender offer for all of the Company's outstanding stock (other than shares held
by James G. Fifield, former President and Chief Executive Officer) at $17 cash
per share and the acquisition of control of the Company by LGP and Mr. Fifield.
On March 5, 1999, the Company withdrew its tender offer. The Transaction
Agreement remained in full force and effect although LGP had informed the
Company that they were reevaluating the transactions contemplated by the
Transaction Agreement (the "Transactions"). On September 1, 1999, the
Transaction Agreement was terminated and the Company agreed to pay LGP $2.2
million in expenses associated with the terminated Transaction Agreement. Such
transaction expenses are payable in installments to LGP through June 2000. Also
in connection with the termination of the Transaction Agreement, Mr. Fifield
resigned as the Company's Chief Executive

                                       32
<PAGE>

Officer. Total expenses incurred in connection with the terminated agreement
during the year ended December 31, 1999 were $4.1 million which are included in
other expenses.

5.  Accounts Receivable

  The allowance for doubtful accounts was $2,246,000, $1,743,000 and $1,321,000
as of December 31, 1999, 1998 and 1997, respectively. Write-offs to accounts
receivable during the years ended December 31, 1999, 1998 and 1997 were
approximately $3,622,000, $377,000 and $239,000, respectively. Additionally, an
adjustment was made in 1999 to reduce accounts receivable and sales by
$11,803,000 as a result of chargebacks from customers related to inaccurate
shipping.

  During the years ended December 31, 1999, 1998 and 1997, no customer accounted
for more than 10% of net sales.

6.  Inventories

  Inventories as of December 31, 1999 and 1998 consist of (in thousands):

                                                   1999     1998
                                                  -------  -------

Finished goods                                    $80,452  $51,655
Work in progress                                      120      239
Raw materials                                       1,793    5,563
                                                  -------  -------

Total inventories                                 $82,365  $57,457
                                                  =======  =======

7.  Property and Equipment

Property and equipment as of December 31, 1999 and 1998 consist of (in
thousands):


                                                    1999       1998
                                                  ---------  ---------

Leasehold improvements                            $ 11,077   $ 10,500
Furniture, fixtures and office equipment            40,226     27,167
Machinery and equipment                              2,578      2,578
Land                                                 2,943         --
                                                  --------   --------

                                                    56,824     40,245
Less accumulated depreciation and amortization     (23,965)   (14,329)
                                                  --------   --------

Total property and equipment, net                 $ 32,859   $ 25,916
                                                  ========   ========

  Depreciation and amortization expense related to property and equipment was
$11,558,000, $6,637,000, and $4,218,000 for the years ended December 31, 1999,
1998 and 1997, respectively.  Maintenance and repair expense was $991,000,
$740,000 and $648,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.

                                       33
<PAGE>

8.  Income Taxes

  The Company's pre tax income before extraordinary items consisted of (in
thousands):

                       For the Years Ended December 31,
                       ---------------------------------
                          1999        1998       1997
                       -----------  ---------  ---------

            U.S.         $(97,973)     $2,127    $ 8,582
            Foreign            35       3,716      4,564
                         --------      ------    -------
                         $(97,938)     $5,843    $13,146
                         ========      ======    =======

  The provision for income taxes consists of the following (in thousands):

                                     For the Years Ended December 31,
                                   ------------------------------------
                                       1999         1998        1997
                                   ------------  ----------  ----------
Federal:
 Current                               $  949       $1,261      $2,698
 Deferred                                 595         (434)         61
State:
 Current                                  218          374         632
 Deferred                                 123         (257)        240
Foreign:
 Current                                  626        1,600       1,805
 Deferred                                  32         (293)       (245)
                                       ------       ------      ------
                                       $2,543       $2,251      $5,191
                                       ======       ======      ======

  Reconciliation of the U.S. Federal statutory rate to the Company's effective
tax rate is as follows:

                                              For the Years Ended December 31,
                                             ---------------------------------
                                              1999         1998        1997
                                             ------       ------      ------

Statutory rate                                (35.0%)       34.0%       34.0%
State income taxes, net of federal benefit      0.1%         3.1%        4.3%
Foreign tax                                     0.7%          --          --
Valuation allowance                            38.7%          --          --
Other                                          (1.9%)        1.4%        1.2%
                                             ------       ------      ------
Effective income tax rate                       2.6%        38.5%       39.5%
                                             ======       ======      ======

  Deferred income taxes for the Company reflect the tax effects of temporary
differences between amounts of assets and liabilities for financial reporting
purposes and such amounts measured by tax laws.

                                       34
<PAGE>

Significant components of the net deferred tax assets as of December 31, 1999
and 1998 are as follows (in thousands):

                                             1999       1998
                                           ---------  --------
Deferred tax assets:
Inventory costs not yet deductible         $  1,295   $ 2,281
Depreciation                                    546       657
Liabilities not yet deductible for tax       12,666     3,356
Net operating losses                         19,561        --
Intangibles                                   4,805        --
Valuation allowance                         (37,947)       --
                                           --------   -------

                                                926     6,294
                                           --------   -------

Deferred tax liabilities:
Intangibles                                      --    (4,154)
Liabilities deductible for tax not book        (679)   (1,143)
                                           --------   -------

                                               (679)   (5,297)
                                           --------   -------
Net deferred tax assets                    $    247   $   997
                                           ========   =======

  Due to the uncertainty surrounding the realization of its deferred tax assets,
the Company recorded a valuation allowance in the fourth quarter of 1999.

  The Company has available federal net operating loss carryforwards totaling
$49.6 million which expire in 2019.  The Company has available state net
operating loss carryforwards totaling approximately $35.0 million which begin to
expire in 2004.

  The cumulative amount of undistributed earnings of the European and Canadian
subsidiaries, which the Company intends to indefinitely reinvest outside of the
United States and upon which deferred income taxes are not provided, is
approximately $11.5 million at December 31, 1999.

9.  Employee Benefit Plans

  The Company's European subsidiary has a contributory defined benefit pension
plan covering substantially all full-time employees. Benefits are based on years
of service and compensation. The Company funds the plan in amounts not less than
the minimum statutory requirements in the United Kingdom. The plan's assets
consist of a mutual fund which invests in equity securities.

  Net pension plan expense (income) consisted of the following for the years
ended December 31 (in thousands):

                                       1999     1998    1997
                                     --------  ------  ------

Service cost                         $    62   $ 100   $ 101
Interest cost                            363     358     291
Expected return on plan assets          (562)   (324)   (269)
Recognized net actuarial gain         (1,388)   (186)    (14)
                                     -------   -----   -----

Net pension plan expense (income)    $(1,525)  $ (52)  $ 109
                                     =======   =====   =====

                                       35
<PAGE>

The changes in the projected benefit obligation and plan assets for the years
ended December 31 were as follows (in thousands):

                                                       1999     1998
                                                     --------  -------
Changes in projected benefit obligation:
Projected benefit obligation at beginning of year    $ 4,081   $3,981
Service cost                                              62      100
Interest cost                                            363      358
Actuarial gain                                        (1,388)    (195)
Benefits paid                                           (199)    (163)
                                                     -------   ------

Projected benefit obligation at end of year            2,919    4,081
                                                     -------   ------

Changes in plan assets:
Fair value of plan assets at beginning of year         4,107    3,600
Actual return on plan assets                             332      257
Employer contributions                                   281      355
Employee contributions                                    36       58
Benefits paid                                           (199)    (163)
                                                     -------   ------
Fair value of plan assets at end of year               4,557    4,107
                                                     -------   ------
Pension asset liability                              $ 1,638   $   26
                                                     =======   ======

  The weighted average assumptions for 1999 and 1998 were as follows:

  Discount rate                      9%
  Expected return on plan assets     9%
  Rate of compensation increase      7%

  Effective January 1998, the Company has made available a profit sharing
retirement plan. Under the plan employee and company contributions qualify for
favorable tax treatment under Section 401(k) of the Internal Revenue Code. Under
the 401(k) plan, the Company offers a discretionary match, based on company
growth and profits (paid in The North Face, Inc., Common Stock). Employee
contributions are always 100% vested. Employer contributions will be vested at
20% per year; 100% after five years. The Company's Board of Directors has
approved the allocation of a 25% matching contribution on a maximum of 6% of
employee compensation contributed to the plan in accordance with the terms of
the plan for the year ended 1998. The Company's matching contribution was
$86,000 and $130,000 for the year ended December 31, 1999 and 1998,
respectively.

  The Company's subsidiary, La Sportiva USA, also has a profit sharing plan. La
Sportiva USA makes discretionary matching contributions up to 15% of the
participant's annual salary. Employee contributions are 100% vested. Company
matching contributions made by La Sportiva USA vest over a period of six years.
La Sportiva USA made discretionary contributions of $64,000 and $44,000 for the
year ended December 31, 1999 and the period from July 2, 1998 through December
31, 1998, respectively.

                                       36
<PAGE>

10.  Debt

  Total debt as of December 31, 1999 and 1998 consists of the following (in
thousands):

                              1999       1998
                            ---------  ---------

Revolving line of credit    $ 71,204   $ 55,107
Term note                     14,250      5,000
Mortgage                          --         72
Notes payable                  2,080        499
                            --------   --------

Total                         87,534     60,678
Less:  current portion       (87,534)   (55,778)
                            --------   --------
Long-term debt              $      0   $  4,900
                            ========   ========

  The Company has a Global Senior Secured Revolving Credit Facility with the
Industrial Bank of Japan, Limited, New York Branch (as syndication agent and
documentation agent), and IBJ Whitehall Business Credit Corporation (as
arrangers, collateral agent and as administrative agent for itself and other
lenders), and other financial institutions.  The credit facility includes a term
note, a revolving line of credit and a letter of credit facility.  This credit
facility expired on March 31, 2000 and was amended in March 2000 to extend the
expiration date to April 15, 2000.

  The term note facility calls for $0.75 million to be repaid quarterly
beginning on October 1, 1999 with the outstanding principal balance due and
payable on the termination date of the loan agreement.  The revolving line of
credit provides for borrowings up to $115.0 million until December 31, 1999, and
thereafter up to $100.0 million with the actual borrowings limited based on the
amount of eligible receivables and inventory (approximately $77.7 million of
collateral at December 31, 1999).  The eligible inventory collateral is limited
to $50.0 million.  The credit facility provides a sublimit facility for letters
of credit up to a maximum of $40.0 million (approximately $5.5 million
outstanding as of December 31, 1999).  Borrowings and outstanding letters of
credit under the credit facility are secured by substantially all of the assets
of the Company.  The credit facility also includes certain financial covenants
and restrictions on new indebtedness and the payment of cash dividends.

  Until November 1999, the term note carried interest payable monthly at the
higher of (a) the bank's base commercial lending rate minus .50% or (b) .50%
above the federal funds effective rate plus the applicable margin.  The interest
on the revolving line of credit carried interest payable monthly at a rate of
either (1) the prime rate which is the higher of (a) the bank's base commercial
lending rate minus .50% or (b) .50 above the federal funds effective rate plus
the applicable margin, or (2) LIBOR plus the applicable margin, at the option of
the Company.  In November 1999, the Company's interest rates were amended to the
bank's base commercial lending rate plus 2.0% during any period in which the
Company utilizes a special inventory advance rate in the calculation of the
collateral.  At December 31, 1999, the Company's interest rate was 10.75% on the
revolving line of credit and the term loan.

  Fees for outstanding letters of credit are payable at 1.5% per annum.  The
Company also pays a monthly unused line fee on the revolving line of credit at
 .375% per annum.  The Company was charged an amendment fee of $400,000 in
November 1999 and paid an additional $575,000 extension fee in December 1999 as
the bank credit facility was not repaid in full by December 31, 1999.  Also, the
Company issued the lender 202,597 warrants to purchase the Company's common
stock at an exercise price of $4.8125 which became exercisable beginning on
January 15, 2000,as the bank credit facility was not repaid in full by that
date.

   In February 2000, the Company's bank credit facility was amended to increase
the borrowing limit to the available collateral plus $16.0 million and to
reflect certain changes in the financial and reporting covenants, among other
things.  In addition, the interest rate increased by 0.5% under this amendment.
The Company was charged an amendment fee of

                                       37
<PAGE>

$1.0 million which was paid upon the signing of the amendment and a deferred fee
of $3.5 million, which was payable on the earlier of (1) the sale of at least
51% of the outstanding shares or assets of the Company or (2) June 15, 2000. In
April 2000, the Company and the lender signed a waiver and agreement reducing
the deferred fee from $3.5 million to $876,000 for the transactions contemplated
by the VF Merger Agreement.

11. Leases

  The Company leases buildings, equipment and vehicles under non-cancelable
lease agreements that expire at various dates through 2006. The leases generally
provide for renewal options for periods ranging from three to ten years. The
building leases generally provide for additional rents based on store sales and
for payment of taxes, insurance and maintenance expenses related to the leased
assets.

  Future minimum lease payments under all leases with initial or remaining non-
cancelable lease terms in excess of one year as of December 31, 1999 are as
follows (in thousands):

                                               CAPITAL   OPERATING
YEARS ENDING DECEMBER 31,                       LEASES    LEASES
-------------------------                      --------  ---------

2000                                               834       6,516
2001                                               780       5,632
2002                                               283       4,601
2003                                               133       3,220
2004                                                --       2,052
Thereafter                                          --       1,219
                                                ------     -------

Minimum lease commitments                       $2,030     $23,240
                                                ======     =======

Less:  amount representing interest               (174)
                                                ------

Present value of net minimum lease payments      1,856
Less:  current portion                            (751)
                                                ------

Long-term portion                               $1,105
                                                ======

  The cost of property under capitalized leases was $2,426,000 and $636,000, as
of December 31, 1999 and 1998, respectively, and primarily represents furniture,
fixtures and office equipment. Accumulated amortization related to these leases
was approximately $1,035,000 and $350,000 as of December 31, 1999 and 1998,
respectively.

  Rental expense for operating leases was as follows (in thousands):

                                            1999       1998       1997
                                          ---------  ---------  ---------

Minimum rentals                              $7,129     $5,375     $4,651
Contingent rentals                              533        215         90
                                             ------     ------     ------
                                             $7,662     $5,590     $4,741
                                             ======     ======     ======

12. Commitments and Contingencies

  On February 27, 1999, the Company entered into a Transaction Agreement (the
"Transaction Agreement") with TNF Acquisition LLC ("TNF"), an affiliate of
Leonard Green & Partners, L.P. ("LGP"). The Transaction Agreement

                                       38
<PAGE>

provided for a tender offer for all the Company's outstanding stock (other than
shares held by James G. Fifield, former President and Chief Executive Officer)
at $17.00 cash per share and the acquisition of control of the Company by LGP
and Mr. Fifield. On March 5, 1999, the Company withdrew its tender offer. The
Transaction Agreement remained in full force and effect, although LGP had
informed the Company that it was reevaluating the transactions contemplated by
the Transaction Agreement (the "Transactions"). On September 1, 1999, the
Transaction Agreement was terminated and the Company agreed to pay LGP $2.2
million to reimburse LGP for expenses associated with the terminated Transaction
Agreement.

  In March 1999, various complaints were filed against the Company and its Board
of Directors in the Delaware court of Chancery and in the California Superior
Court, Alameda County in connection with the Transactions. The complaints, filed
on behalf of a purported class of the Company's shareholders, generally alleged
that the Transactions were unfair and inadequate to the Company's shareholders
and charged the defendants with self-dealing and breach of fiduciary duties. The
complaints generally requested injunctive relief to prevent the consummation of
the Transactions, and sought other remedies in the event the Transactions were
completed. The Company has filed a motion to dismiss these claims.

  Beginning in March 1999, purported class action lawsuits were filed in federal
district court against the Company and certain of its former and current
officers and directors alleging violations of the federal securities laws. These
complaints (collectively, the "Securities Litigation") have been consolidated in
federal district court in Colorado. The consolidated action generally alleges
that the Company made false and misleading statements about its financial
results from January 22, 1998 through April 16, 1999. The Company has filed a
motion to dismiss these claims.

  On April 6, 1999, a shareholder derivative action purportedly on behalf of the
Company, captioned Eng v. Cason, et. al., Civil Action No. 810726-0, was filed
in California Superior Court, Alameda County. The complaint alleged that the
Company's directors and various current and former officers violated California
law and breached fiduciary duties to the Company by engaging in alleged wrongful
conduct from April 25, 1997 through March 12, 1999, including the conduct
complained of in the Securities Litigation. The Company was named solely as a
nominal defendant, against whom the plaintiff sought no recovery. The Alameda
Superior Court granted the Company's motion to dismiss the derivative complaint
with leave to amend.

  In December 1999, a case, FDX Supply Chain Services, Inc. v. The North Face,
Inc., No. 99-2569, was filed in federal district court in the district of
Kansas. The dispute arises out of contract in which FDX agreed to provide
warehouse services to the Company, fill orders and ship the Company's products
to customers nationwide from the Company's warehouse facility in Lenexa, Kansas.
The Company terminated the contract in December 1999. The lawsuit alleges
damages of $5.2 million for breach of contract. The Company has filed
counterclaims seeking $25 million in damages, alleging that the damage
limitation provisions of the agreement should not apply because of FDX's
misrepresentations inducing the Company to enter into the agreement and FDX's
gross failure to perform. FDX has moved to dismiss all the Company's
counterclaims because of, inter alia, the damage limitation provisions of the
agreement.

  Income Taxes. The Internal Revenue Service ("IRS") is presently examining the
Company's Federal tax returns for the taxable years ended December 31, 1994
through 1996. The IRS is also examining intercompany transfer prices. The
outcome of these examinations and any related liabilities, if any, cannot
presently be determined. The Company has made no provision for any liability
that might result, as management is of the opinion that the Company will not
sustain any significant adjustments as a result of these examinations.

  Purchase Commitments. The Company has approximately $57.4 million and $46.2
million of purchase commitments as of December 31, 1999 and 1998, respectively,
related to goods ordered for future production in the normal course of business.
Certain of these commitments are collateralized by outstanding letters of
credit. See Note 10.

                                       39
<PAGE>

  Derivatives.  The Company's international subsidiaries sell merchandise
throughout Europe and Canada. These sales are denominated in the local currency
of the retailer's country. Additionally, certain of the purchases of the
Company's international subsidiaries are denominated in U.S. dollars. To protect
the Company from the risk that the eventual net cash inflows resulting from the
sale of products to foreign customers will be adversely affected by changes in
exchange rates, the Company's subsidiaries enter into forward exchange contracts
and options (hedging instruments) to hedge their foreign denominated accounts
receivable, matched firm orders and anticipated orders. At December 31, 1999,
the Company held the following foreign currency derivatives, all of which expire
during 2000:

CURRENCY                       OPEN CONTRACT    OPEN CONTRACT U.S.    FAIR
(In thousands)                CURRENCY VALUE       DOLLAR VALUE       VALUE
                              --------------    ------------------    -----
Contracts:

Euro                              26,149               $26,312        $2,054
Swedish Kroners                   16,746                 2,048            76
Danish Kroners                    17,300                 2,567           222
Swiss Francs                       2,681                 1,875           179
Canadian Dollars                   4,900                 3,393             8
                                                       -------        ------
Total                                                  $36,195        $2,539

  In January 2000, the Company sold all open foreign exchange contracts at a net
gain of $1.1 million.

13.  Stockholders' Equity

  On May 13, 1998, an employment agreement was executed between the Company and
James G. Fifield, its Chief Executive Officer, President and Director. In
connection with the employment agreement in May 1998, the Company sold 665,060
shares of its common stock to Mr. Fifield for $21.125 per share for a total of
$14,049,000. Mr. Fifield pledged 310,030 shares of the common stock in
connection with a full recourse promissory note in favor of the company for the
principal sum of $6,549,000. In June 1998, the promissory note plus interest at
an annual rate of 5.43% was repaid by Mr. Fifield and the 310,030 pledged shares
of common stock were issued to Mr. Fifield.

  On January 11, 1999, the Company issued 206,188 shares of common stock at
$12.125 per share as consideration for the purchase of land to be used for its
new corporate headquarters in Carbondale, Colorado.

  Preferred Share Purchase Rights. The Company has 4,000,000 shares of
authorized preferred stock of which 100,000 shares have been designated as
Series A participating preferred stock. On July 6, 1998, pursuant to a Preferred
Shares Rights Agreement between the Company and American Stock Transfer & Trust,
Co. as Rights Agent, the Company's Board of Directors declared a dividend of one
right (a "Right") to purchase one one-thousandth of a share of the Company's
Series A participating preferred stock, $1.00 par value per share, ("Series A
Preferred") for each outstanding share of common stock, $0.0025 par value per
share, of the Company. The dividend was provided to stockholders of record as of
the close of business on July 20, 1998. Each Right entitles the registered
holder to purchase from the Company, under certain circumstances, one one-
thousandth of a share of Series A preferred at an exercise price of $140.00
subject to adjustment. Each share of Series A participating preferred stock
entitles the holder to 1,000 votes on all matters submitted the vote of the
shareholders.

  Preferred Stock. Upon consummation of the Company's initial public offering,
all outstanding shares of the Company's Preferred Stock, including accrued
dividends, were converted into 4,220,808 shares of Common Stock. Preferred
Shareholders were entitled to dividends of 10% of the face value payable
quarterly in either cash or additional shares of Preferred Stock, were
convertible into Common Stock, carried liquidation preferences of face value and
had voting rights on an as-converted basis.

                                       40
<PAGE>

  1994 Stock Incentive Plan. In 1994, the Company adopted the 1994 Stock
Incentive Plan (the "1994 Plan") to issue non-qualified stock options ("NQSOs")
to purchase shares of common stock. All NQSOs were granted at an exercise price
that was, at the time of grant, an amount equal to the fair market value of a
share of common stock, as determined by the Board of Directors. Additionally,
1,159,950 restricted shares of common stock were granted under the 1994 Plan
pursuant to the payment of cash and delivery of promissory notes totaling
$261,250 due June 7, 2004, bearing interest at a rate of 9.0% per annum. As of
December 31, 1999, substantially all of the restricted stock had been converted
into common stock and the promissory notes had been repaid. The Company
currently does not anticipate making additional grants under the 1994 Plan.

  1995 and 1996 Stock Incentive Plans. The Company's 1995 Stock Incentive Plan
(the "1995 Plan") was adopted by the Company in April 1995, and the Company's
1996 Stock Incentive Plan (the "1996 Plan") was adopted by the Company in May
1996. The terms of the 1995 Plan and the 1996 Plan (together, the "Option
Plans") are substantially the same, except where noted below.

  A maximum of 1,524,820 shares of common stock (subject to adjustment in the
case of certain stock splits, stock dividends, and reorganizations) have been
reserved for issuance pursuant to options granted under the Option Plans. NQSOs
granted under the 1995 Plan and NQSOs granted to officers under the 1996 Plan
become fully vested on June 7, 2004, with accelerated vesting over four years
based upon specified performance goals and expire on June 7, 2004. NQSOs granted
under the 1996 Plan to employees vest over 4 years and expire on June 7, 2004.
In the first quarter of 1998 an amendment to the Company's 1996 Plan was
ratified by shareholders to increase the number of shares of common stock
reserved for issuance by 600,000 shares. The Company currently does not
anticipate making additional grants under the 1995 Plan.

  Under the 1996 Plan, options with respect to no more than 400,000 shares may
be granted to any individual in any year and no options may be granted to a
person who, at the time of grant, owns shares possessing 10% or more of the
total combined voting power of all classes of stock of the Company. All of the
Company's officers, directors and other salaried employees are eligible to
receive options under the option plans.

  The exercise price of an option granted under the option plans may not be less
than 100% of the fair market value of a share of common stock at the date of
grant and no options may be exercisable more than ten years following the date
of grant. For grants to non-officers under the 1996 Plan, vesting must be at
least 20% per year following the date of grant, unless otherwise permitted by
applicable law.

  1996 Directors' Stock Option Plan. The 1996 Directors' Stock Option Plan (the
"Directors' Plan") was adopted by the Company in May 1996. A total of 100,000
shares of Common Stock has been reserved for issuance under the Directors' Plan.
The Directors' Plan provides for the grant of non-qualified stock options to
purchase 25,000 shares to each non-employee director of the Company initially
elected to the Board after the effective date of the Directors' Plan. Because
the disinterested administration requirement of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 ceased to be applicable to awards made under all
equity based plans of the Company, no further grants will be made as described
in the preceding sentence and in lieu thereof awards will be made under the
Directors' Plan on a discretionary basis to non-employee directors of the
Company.

  1998 Nonstatutory Stock Option Plan. The Company's 1998 Nonstatutory Stock
Option Plan was adopted in May 1998 and amended in September 1998. A maximum of
1,700,000 shares have been reserved for issuance pursuant to options granted
under the Plan. NQSO's granted under the 1998 Plan vest as determined by the
Plan Administrator. The term of the Plan is ten years and should expire in March
2008.

  Stock Warrants.  In November 1999, the Company issued their credit facility
lender 202,597 contingent warrants to purchase the Company's common stock at an
exercise price of $4.8125 which became exercisable beginning on January 15, 2000
when the bank credit facility was not repaid in full by that date.

                                       41
<PAGE>

Activity for all of the Company's stock option plans from January 1, 1996
through December 31, 1998 was as follows:

<TABLE>
<CAPTION>
                                                     1999                            1998                           1997
                                        -----------------------------   -----------------------------   ----------------------------
                                                     WEIGHTED AVERAGE                WEIGHTED AVERAGE               WEIGHTED AVERAGE
                                          SHARES      EXERCISE PRICE      SHARES      EXERCISE PRICE      SHARES     EXERCISE PRICE
                                        ----------   ----------------   ----------   ----------------   ---------   ----------------
<S>                                     <C>          <C>                <C>          <C>                <C>         <C>
Outstanding, beginning of year           3,248,309        $12.08         1,146,666         $12.41       1,069,602        $ 6.60
   Granted                               1,142,000          6.24         4,368,400          15.03         492,600         18.52
   Exercised                               (20,343)         4.48          (177,018)          3.27        (286,011)         1.93
   Cancelled                            (1,389,437)        16.67        (2,089,739)         19.18        (129,525)        10.84
                                         ---------                       ---------                      ---------
Outstanding, end of year                 2,980,529        $ 7.77         3,248,309         $12.08       1,146,666        $12.41
                                         =========                       =========                      =========
Options exercisable at year end          1,472,517        $ 7.55           498,572         $ 6.12         390,071        $ 4.31
                                         =========                       =========                      =========
Weighted average fair
value of options granted
during the year                                           $ 2.57                           $ 8.12                        $ 7.35
                                                          ======                           ======                        ======
</TABLE>

  The following table summarizes additional information about stock options
outstanding at December 31, 1999.

<TABLE>
<CAPTION>
                                 OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                                 -------------------                      -------------------
                                         WEIGHTED
                                         AVERAGE          WEIGHTED                        WEIGHTED
                                         REMAINING        AVERAGE                         AVERAGE
     RANGE OF          SHARES            CONTRACTUAL      EXERCISE      SHARES            EXERCISE
  EXERCISE PRICES      OUTSTANDING       LIFE             PRICE         OUTSTANDING       PRICE
  ---------------      -----------       -----------      --------      -----------       -------
<S>                    <C>               <C>              <C>           <C>               <C>
$0.22   To  $ 7.44        1,357,532              8.91      $ 5.32          593,926         $ 4.27
 9.56   To   14.38        1,617,997              8.08        9.79          877,341           9.74
18.22   To   25.63            5,000              8.36       20.50            1,250          20.50
                          ---------                                     ----------
$0.22   To  $25.63        2,980,529              8.46        7.77        1,472,517           7.55
                          =========                                     ==========
</TABLE>

  In September 1998, options to purchase 1,803,650 shares of common stock were
repriced from a weighted average exercise price of $19.65 to a weighted average
exercise price of $9.625 which was equal to market value at the date of
repricing.  Options issued to certain of the Company's outside Directors and
certain other individuals were not included in the repricing.

  Employee Stock Purchase Plan.  The 1996 Employee Stock Purchase Plan (the
"Employee Plan"), adopted in May 1996, reserves a total of 150,000 shares of
common stock for issuance. Under the Employee Stock Purchase Plan, eligible
full-time employees can choose to have up to 10% of their annual base earnings
withheld to purchase the company's common stock.  The purchase price of the
stock is 85% of the lower of the beginning of the offering period or end of the
offering period market price.  During 1999 and 1998, employees purchased
approximately 24,300 and 17,100 shares respectively at an average price of $6.55
and $15.28, respectively.  At December 31, 1999, 87,706 shares are available for
future issuance.

  Pro Forma Stock Option Information.  The Company accounts for its stock- based
awards using the intrinsic value method in accordance with Accounting Principles
Board Opinion No. 25, "Accounting For Stock Issued To

                                       42
<PAGE>

Employees" and its related interpretations. No compensation cost has been
recognized in the financial statements for employee stock arrangements.

  Had compensation cost for the Company's stock-based compensation plans been
recorded in accordance with the fair value method of SFAS 123, the Company's net
income (loss) and net income (loss) per share for 1999, 1998 and 1997 would
approximate the following pro forma amounts (in thousands, except per share
data):

                                           1999       1998    1997
                                        -----------  ------  ------

Net income (loss):
 As reported                             $(100,481)  $3,592  $7,955
 Pro forma                                (105,007)   1,442   6,957

Diluted net income (loss) per share:
 As reported                             $   (7.90)  $ 0.29  $ 0.69
 Pro forma                                   (8.66)  $ 0.13  $ 0.61

  For purposes of computing the above pro forma amounts, the fair value of each
option granted during 1999, 1998, and 1997 was estimated as of the date of grant
using the Black-Scholes option-pricing model.  This model requires subjective
assumptions, including future stock price volatility and expected date of
exercise, which greatly affects the calculated values.  The following weighted
average assumptions were used in calculating the fair value of the options
granted: (i) dividend yield of 0% for 1999, 1998 and 1997; (ii) expected
volatility of 85.5% for 1999, 78.5% for 1998, and 58.6% for 1997; (iii) risk-
free interest rate of 6.01%, 5.32% and 6.56% for 1999, 1998 and 1997,
respectively; and (iv) expected life from vesting to exercise of 6 months for
1999, 1998 and 1997.  Forfeitures are recognized as they occur.

  The effects of applying SFAS 123 in this pro forma disclosure may not be
indicative of future pro forma amounts, because the fair value method has not
been applied to awards granted prior to 1995.

14.  Segment Information

  The Company manages its business segments primarily based on sales
distribution channels.  The Company's reportable segments are wholesale and
Company-operated retail.  Sales to wholesale customers include sales to the U.S.
government.  Both operating segments sell products as further described in Note
1.

  The accounting policies of the segments are the same as those described in the
"Summary of Significant Accounting Policies" in Note 2.  The Company evaluates
the performance of its segments based solely on net sales and gross profit.  The
Company does not separately identify assets or liabilities of the segments for
management reporting purposes.

                                       43
<PAGE>

  Summary information by segment for the years ended December 31, 1998, 1997 and
1996 is as follows (in thousands):

                              1999      1998      1997
                            --------  --------  --------

Net sales:
 Wholesale                  $184,284  $202,747  $168,543
 Company-operated retail      53,693    44,349    34,704
                            --------  --------  --------

  Total                     $237,977  $247,096  $203,247
                            ========  ========  ========

Gross profit:
 Wholesale                  $ 58,054  $ 88,542  $ 73,542
 Company-operated retail      25,637    23,420    18,941
                            --------  --------  --------

  Total                     $ 83,691  $111,962  $ 92,483
                            ========  ========  ========

  Net sales and long-lived assets related to operations in the United States,
Canada and Europe as of and for the years ended December 31, 1999, 1998 and 1997
are as follows (in thousands):

                        1999      1998      1997
                      --------  --------  --------

Net sales:
 United States        $172,369  $186,443  $150,798
 Canada                 14,775    14,546    12,661
 Europe                 50,833    46,107    39,788
                      --------  --------  --------

  Total               $237,977  $247,096  $203,247
                      ========  ========  ========

Long-lived assets:
 United States        $ 37,513  $ 63,319  $ 46,195
 Canada                  1,589     1,798     1,665
 Europe                  3,618     2,608     1,628
                      --------  --------  --------

  Total               $ 42,720  $ 67,725  $ 49,488
                      ========  ========  ========

    Net sales relating to major product types for the years ended December 31,
1999, 1998 and 1997 are as follows (in thousands):

                1999      1998      1997
              --------  --------  --------

Outerwear     $113,973  $123,212  $ 98,291
Equipment       38,211    35,829    40,235
Tekware(R)      29,873    33,072    24,130
Other           55,920    54,983    40,591
              --------  --------  --------

              $237,977  $247,096  $203,247
              ========  ========  ========

                                       44
<PAGE>

15.  Subsequent Events

   In February 2000, the Company's bank credit facility was amended to increase
the borrowing limit to the available collateral plus $16.0 million and to
reflect certain changes in the financial and reporting covenants, among other
things.  In addition, the interest rate increased by 0.5% under this amendment.
The Company was charged an amendment fee of $1.0 million which was paid upon the
signing of the amendment and a deferred fee of $3.5 million which is payable on
the earlier of (1) the sale of at least 51% of the outstanding shares or assets
of the Company or (2) June 15, 2000.  In April 2000, the Company and the lender
signed a waiver and agreement reducing the deferred fee from $3.5 million to
$876,000.

  In March 2000, the Company's bank credit facility expiration date was extended
from March 31, 2000 to April 15, 2000.

  In April 2000, the Company executed the VF Merger Agreement providing for the
acquisition of all the outstanding shares of the Company by VF for $2.00 per
share. As a first step in the transaction, a subsidiary of VF will commence a
cash tender offer for all the outstanding shares of the Company at $2.00 per
share. The offer will be conditioned, among other things, upon a majority of the
issued and outstanding shares being tendered and not withdrawn prior to the
expiration of the offer. Following successful completion of the tender offer,
the VF subsidiary will be merged into The North Face and each outstanding share
will be converted into the right to receive $2.00 in cash.

  The Company's difficulties in meeting its loan agreement covenants and
financing needs, its losses from operations, its negative working capital
position and the scheduled expiration of its credit facility on April 15, 2000
have raised substantial doubt about its ability to continue as a going concern.
As a consequence, if, for any reason, the tender offer and merger contemplated
by the VF Merger Agreement are not consummated, the Company will be required to
consider seeking protection under Chapter 11 of the Bankruptcy Code.

  On January 13, 2000 the Company sold its 20% interest in La Sportiva S.p.A. to
the majority shareholders for 4.3 billion lira ($2.3 million).

  In February 2000, the Company closed its Carbondale, Colorado administrative
facility and relocated those employees to its headquarters facility in San
Leandro, California.  The Company expects to incur approximately $2.6 million in
2000 in operating expenses related to the closure of its Carbondale, Colorado
facility and the relocation of its employees to its San Leandro facility.

                                       45
<PAGE>


                         INDEPENDENT AUDITORS' REPORT

To the Board of Directors and the Stockholders of The North Face, Inc.:

We have audited the accompanying consolidated balance sheets of The North Face,
Inc. and its subsidiaries as of December 31, 1999 and 1998 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999.  These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of The North Face (Europe)
Limited (a consolidated subsidiary), which statements reflect total assets
constituting 21% and 16% respectively, of consolidated total assets as of
December 31, 1999 and 1998, and total revenues constituting 21%, 19%, and 20%,
respectively, of consolidated total revenues for each of the three years in the
period ended December 31, 1999. Those statements were audited by other auditors
whose reports (which include an explanatory paragraph expressing substantial
doubt about The North Face (Europe) Limited's ability to continue as a going
concern) have been furnished to us, and our opinion, insofar as it relates to
the amounts included for The North Face (Europe) Limited, is based solely on the
reports of such other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, such
consolidated financial statements present fairly, the financial position of The
North Face, Inc. and its subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 1 to the
financial statements, the Company's 1999 loss, negative working capital at
December 31, 1999, and the expiration of its bank credit facility on April 15,
2000 raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note 1.  The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
San Francisco, California
April 12, 2000

                                       46


<PAGE>


THE NORTH FACE (EUROPE) LIMITED

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and the Shareholders of The North Face (Europe)
Limited:

We have audited the accompanying consolidated balance sheet of The North Face
(Europe) Limited (the "Company") and its subsidiary undertaking (together, the
"Group") as of December 31, 1999 and the related consolidated statements of
profit and loss account for the year then ended, expressed in pounds sterling,
which, as described in the financial statements of The North Face (Europe)
Limited (pages 1 to 19) have been prepared on the basis of accounting principles
generally accepted in the United Kingdom. These financial statements are the
responsibility of the Directors of the Company. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally auditing standards in the
United Kingdom, which are substantially the same as auditing standards generally
accepted in the United States. These standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examination, on a test
basis, of evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in
all material aspects, the consolidated financial position of The North Face
(Europe) Limited and its subsidiary as of December 31, 1999 and their
consolidated results of operations for the year then ended, in conformity with
accounting principles generally accepted in the United Kingdom.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, The North Face Inc. (the parent company) will recognise a
significant loss in 1999, has negative working capital at December 31, 1999 and
its current bank credit facility expires on April 15, 2000, all of which raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

United Kingdom accounting principles vary in certain material respects from
accounting principles generally accepted in the United States. The application
of the latter would have affected the determination of consolidated
shareholders' equity and consolidated financial position as of December 31, 1999
and the determination of consolidated net income for the year then ended to the
extent summarized in Notes 23 and 24 to the consolidated financial statement of
The North Face (Europe) Limited.

/s/ Grant Thornton

Grant Thornton
Chartered Accountants
Glasgow, Scotland
April 12, 2000


<PAGE>


THE NORTH FACE (EUROPE) LIMITED

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and the Shareholders of The North Face (Europe)
Limited:

We have audited the accompanying consolidated balance sheet of The North Face
(Europe) Limited (the "Company") and its subsidiary undertaking (together, the
"Group") as of December 31, 1998 and December 31, 1997 and the related
consolidated statements of profit and loss account for the years then ended,
expressed in pounds sterling, which, as described in the financial statements
of The North Face (Europe) Limited (pages 1 to 19) have been prepared on the
basis of accounting principles generally accepted in the United Kingdom. These
financial statements are the responsibility of the Directors of the Company. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United Kingdom, which are substantially the same as auditing standards
generally accepted in the United States. These standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examination, on
a test basis, of evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material aspects, the consolidated financial position of The North Face
(Europe) Limited and its subsidiary as of December 31, 1998 and December 31,
1997 and their consolidated results of operations for the years then ended, in
conformity with accounting principles generally accepted in the United Kingdom.

United Kingdom accounting principles vary in certain material respects from
accounting principles generally accepted in the United States. The application
of the latter would have affected the determination of consolidated
shareholders' equity and consolidated financial position as of December 31, 1998
and December 31, 1997 and the determination of consolidated net income for the
years then ended to the extent summarized in Notes 23 and 24 to the consolidated
financial statement of The North Face (Europe) Limited.


/s/ Grant Thornton


Grant Thornton
Chartered Accountants
Glasgow, Scotland
April 12, 2000

<PAGE>

                              FINANCIAL REPORTING

  Management of The North Face, Inc. is responsible for the information and
representations contained in this report. The financial statements have been
prepared in conformity with the generally accepted accounting principles we
considered appropriate in the circumstances and include some amounts based on
our best estimates and judgments. Other financial information in this report is
consistent with these financial statements.

  The Company's accounting systems include controls designed to reasonably
assure that assets are safeguarded from unauthorized use or disposition and
which provide for the preparation of financial statement in conformity with
generally accepted accounting principles. These systems are supplemented by the
selection and training of qualified financial personnel and an organizational
structure providing for appropriate segregation of duties.

  The Board of Directors pursues its responsibilities for these financial
statements through its Audit Committee, presently consisting of two outside
directors of the Company. The Audit Committee is responsible for recommending to
the Board of directors the appointment of the independent auditors and reviews
with the independent auditors and management the scope and the results of the
annual audit, the effectiveness of the accounting control system and other
matters relating to the financial affairs of the company as they deem
appropriate. The independent auditors have full access to the committee, with
and without the presence of management, to discuss any appropriate matters.


/s/  Geoffrey D. Lurie          /s/  Michael A. Leinwand
     Geoffrey D. Lurie               Michael A. Leinwand
     Chief Executive Officer         Acting Chief Financial Officer

                                       47
<PAGE>

Item 9.  Changes in and Disagreements With Accountants on Accounting and
 Financial Disclosure

  None.

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant.

   The information required by this item is incorporated by reference from
registrant's definitive proxy statement to be filed pursuant to Regulation 14a.

Section 16(a) Beneficial Ownership Reporting Compliance.

   One required Report on Form 4 or Form 5 was not filed on a timely basis by
Mr. Simon in 1998 or 1999, respectively. One required Report on Form 4 or Form 5
was not filed on a timely basis by Mr. Fifield in 1998 or 1999, respectively. To
the Company's knowledge, based solely upon its review of the Forms submitted to
the Company by Mr. Simon and Mr. Fifield, neither Mr. Simon nor Mr. Fifield have
failed to file a Form required by Section 16(a) of the Exchange Act.

Item 11.  Executive Compensation.

   The information required by this item is incorporated by reference from
registrant's definitive proxy statement to be filed pursuant to Regulation 14a.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

   The information required by this item is incorporated by reference from
registrant's definitive proxy statement to be filed pursuant to Regulation 14a.

Item 13.  Certain Relationships and Related Transactions.

   The information required by this item is incorporated by reference from
registrant's definitive proxy statement to be filed pursuant to Regulation 14a.

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

   (a) 1. INDEX TO FINANCIAL STATEMENTS

Financial Statements:

   Consolidated Balance Sheets as of December 31, 1998 and 1997
   Consolidated Statements of Operations for the
     Years Ended December 31, 1998, 1997 and 1996
   Consolidated Statements of Shareholders' Equity for the
     Years Ended December 31, 1998, 1997 and 1996
   Consolidated Statements of Cash Flows for the
     Years Ended December 31, 1998, 1997 and 1996
   Notes to Consolidated Financial Statements
   Independent Auditors' Reports

                                       48
<PAGE>

  2.  Financial Statement Schedules

  All schedules are omitted because of the absence of the conditions under which
they are required or because the required information is set forth in the
condensed consolidated financial statements and notes thereto.

                                       49
<PAGE>

  3. Exhibits

Exhibit No.           Description
-----------           -----------

2.1(6)    Stock Purchase Agreement, dated as of July 1, 1998, among The North
Face, Inc. and  La Sportiva USA, Inc..

2.2(6)    Registration Rights Agreement dated as of July 1, 1998, among The
North Face, Inc. and the stockholders of La Sportiva USA, Inc.

2.3       Agreement and Plan of Merger by and among VF Corporation, Sequoia
Acquisition, and The North Face, Inc.

3.1(2)    Amended and Restated Certificate of Incorporation of The North Face,
Inc.

10.1(1)** Management Stock Purchase and Non-Competition Agreement, dated as of
June 6, 1994, among TNF Holdings Company, Inc.,* Marsden S. Cason and William A.
McFarlane, as amended by Amendment No.  1, dated as of June 22, 1995.

10.2(7)** Management Stock Pledge Agreement, dated as of May 13, 1998, among The
North Face, Inc., and James G.  Fifield.

10.3(1)   Stock Purchase Agreement, dated as of December 28, 1993, between TNF
Holdings Company, Inc.* and Kabushiki Kaisha Goldwin, as amended by Memorandum,
dated as of March 29,1994, among TNF Holdings Company, Inc.* and Kabushiki
Kaisha Goldwin, and Memorandum No.  2, dated as of May 20, 1994, between TNF
Holdings Company, Inc.* and Kabushiki Kaisha Goldwin.

10.4(1)   Securityholders Agreement, dated as of June 7, 1994, among TNF
Holdings Company, Inc.,* Marsden S. Cason, William A. McFarlane, J.H. Whitney &
Co., Whitney 1990 Equity Fund, L.P., Whitney Subordinated Debt Fund, L.P.,
Richard T. Peery, Jack L. Richardson, Philip S. Schlein and Kenneth F. Siebel,
as amended by Amendment No. 1, dated as of June 22, 1995.

10.5(1)   Registration Rights Agreement, dated as of June 7, 1994, among TNF
Holdings Company, Inc.,* J.H. Whitney & Co., Whitney 1990 Equity Fund, L.P.,
Whitney Subordinated Debt Fund, L.P., Marsden S. Cason and William A. McFarlane,
as amended by Amendment No. 1, dated as of June 22, 1995, and Amendment No. 2,
dated as of May 20, 1996.

10.6(1)   Amended and Restated Loan and Security Agreement, dated as of March 1,
1995, between The North Face, Inc. and Heller Financial, Inc., as Agent and as a
Lender, as amended by First Amendment, dated as of May 4, 1995, Second
Amendment, dated as of August, 1995, Third Amendment, dated as of March 27,
1996, and Fourth Amendment, dated May 8, 1996.

10.6A(1)  Second Amended and Restated Loan and Security Agreement, dated as of
June, 1996, between The North Face, Inc. and Heller Financial, Inc., as Agent
and as a Lender.

10.6B(3)  Third Amended and Restated Loan and Security Agreement, dated as of
April 7, 1997, between The North Face, Inc. and Heller Financial, Inc., as Agent
and as a Lender.

10.7(2)** TNF Holdings Company, Inc.* 1994 Stock Incentive Plan, as amended.

10.8(5)** The North Face, Inc. 1995 Stock Incentive Plan, as amended.

                                       50
<PAGE>

10.9(1)**  The North Face, Inc. 1996 Stock Incentive Plan.

10.9A**    The North Face, Inc. 1996 Stock Incentive Plan, as amended September
1, 1998.

10.10(1)** The North Face, Inc. 1996 Employee Stock Purchase Plan.

10.11(1)** The North Face, Inc. 1996 Directors' Stock Option Plan.

10.12(9)** The North Face, Inc. 1998 Nonstatutory Stock Option Plan.

10.13(1)   Trademark License, dated October 29, 1993, between The North Face and
W.L. Gore & Associates, Inc.

10.14(10)  Trademark License, dated September 30, 1998, between The North Face,
Inc. and Youngone Corporation.

10.15(8)   Loan Agreement dated as of September 2, 1998 (the "Loan Agreement")
between The North Face, Inc., The North Face (Europe) Limited and The North
Face, Hong Kong, Limited as Borrowers, The Industrial Bank of Japan, Limited,
New York Branch and IBJ Schroder Business Credit Corporation as Arrangers, The
Industrial Bank of Japan, Limited, New York Branch as Syndication Agent,
Documentation Agent and as a Lender, IBJ Schroder Business Credit Corporation as
Administrative Agent, Collateral Agent and as a Lender, and Certain Financial
Institutions.

10.15A(8)  Amendment to the Loan Agreement, dated as of September 11, 1998.

10.16(4)   First Amendment and Purchase Agreement dated June 15, 1998 by and
between The North Face, Inc., Gianinetti Investment Corp., R.P. Sewell &
Company, a Colorado Partnership, Richard Bradley and David F. Baggerman and
Agreement to Amend/Extend Contract dated December 24, 1998 by and between The
North Face, Inc., Gianinetti Investment Corp., R.P. Sewell & Company, a Colorado
Partnership, Richard Bradley and David F. Baggerman.

21.1(10)   List of Subsidiaries of The North Face, Inc.

23.1       Consent of Deloitte & Touche LLP.

23.2       Consent of Grant Thornton.

27.1       Financial Data Schedule.

(1) Incorporated by reference to the Company's Registration Statement on Form S-
    1 (No. 333-04107) filed on May 20, 1996 and amendments thereto, filed with
    the Securities and Exchange Commission on June 3, 1996 and June 24, 1996.

(2) Incorporated by reference to the Company's Registration Statement on Form S-
    1 (No. 333-14945) filed with the Securities and Exchange Commission on
    October 28, 1996.

(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
    the fiscal year ended December 31, 1997 filed with the Securities and
    Exchange Commission on March 6, 1998.

(4) Incorporated by reference to the Company's Registration Statement on Form S-
    3 (No. 333-70405) filed with the Securities and Exchange Commission on
    January 11, 1999.

                                       51
<PAGE>

(5) Incorporated by reference to the Company's Annual Report on Form 10-K for
    the fiscal year ended December 31, 1996 filed with the Securities and
    Exchange Commission on March 28, 1997.

(6)  Incorporated by reference to the Company's Registration Statement on
     Form S-3 (No. 333-58629) filed with the Securities and Exchange Commission
     on July 7, 1998.

(7)  Incorporated by reference on Schedule 13D  filed with the Securities and
     Exchange Commission on May 13, 1998.

(8)  Incorporated by reference to the Company's Report on Form 10-Q for the
     period ended September 30, 1998 filed with the Securities and Exchange
     Commission on November 13, 1998.

(9)  Incorporated by reference to the Company's Registration Statement on
     Form S-8 (No. 59003) filed with the Securities and Exchange Commission on
     July 14, 1998.

(10) Incorporated by reference to the Company's Annual Report on Form 10-K for
     the fiscal year ended December 31, 1998 filed with the Securities and
     Exchange Commission on May 7, 1999.

(b)  Reports on Form 8-K: as filed with the Securities and Exchange Commission
     on July 7, 1998.

(c)  Reports on Form 8-K/A: as filed with the Securities and Exchange Commission
     on July 21, 1998.

(c)  The exhibits required by Item 601 are filed herewith.

(d)  The financial statement schedules required by Regulation S-X are filed
     herewith.

*    TNF Holdings Company, Inc., a Delaware corporation, changed its name to The
North Face, Inc. on June 8, 1994.

**   Indicates management contract or compensatory plan or arrangement.

                                       52

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

April 13, 2000                                  The North Face, Inc.
                                                (Registrant)

                                                By: /s/ Geoffrey D. Lurie
                                                --------------------------------
                                                        Geoffrey D. Lurie
                                                        Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert P. Bunje, Geoffrey D. Lurie, and
Michael A. Leinwand, and each of them, his true and lawful agent, proxy and
attorney-in-fact, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to (i) act on, sign
and file with the Securities and Exchange Commission any and all amendments to
this report on Form 10-K together with all schedules and exhibits thereto, (ii)
act on, sign and file such certificates, instruments, agreements and other
documents as may be necessary or appropriate in connection therewith, and (iii)
take any and all actions which may be necessary or appropriate to be done, as
fully for all intents and purposes as he might or could do in person, hereby
approving, ratifying and confirming all that such agent, proxy and attorney-in-
fact or any of his substitutes may lawfully do or cause to be done by virtue
thereof.

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

         Signature           Title or Capacity                    Date
         ---------           -----------------                    ----

/s/ Robert P. Bunje          Chairman                             April 13, 2000
---------------------
Robert P. Bunje

/s/ Geoffrey D. Lurie        Chief Executive Officer              April 13, 2000
---------------------
Geoffrey D. Lurie            and Director, (Principal Executive
                             Officer)

/s/ Michael A. Leinwand      Acting Chief Financial Officer       April 13, 2000
---------------------
Michael A. Leinwand          (Principal Financial and Accounting
                             Officer)

/s/ Karl Heinz Salzburger    President and Director               April 13, 2000
---------------------
Karl Heinz Salzburger

/s/ William N. Simon         Vice Chairman and Director           April 13, 2000
---------------------
William N. Simon

                                       53
<PAGE>

/s/ Michael F. Doyle         Director                             April 13, 2000
---------------------
Michael F. Doyle

                                       54
<PAGE>

                                 EXHIBIT INDEX


Exhibit No.           Description
-----------           -----------

2.1(6)    Stock Purchase Agreement, dated as of July 1, 1998, among The North
Face, Inc. and  La Sportiva USA, Inc..

2.2(6)    Registration Rights Agreement dated as of July 1, 1998, among The
North Face, Inc. and the stockholders of La Sportiva USA, Inc.

2.3       Agreement and Plan of Merger by and among of Corporation, Sequioa
Acquisition, and The North Face, Inc.

3.1(2)    Amended and Restated Certificate of Incorporation of The North Face,
Inc.

10.1(1)** Management Stock Purchase and Non-Competition Agreement, dated as of
June 6, 1994, among TNF Holdings Company, Inc.,* Marsden S. Cason and William A.
McFarlane, as amended by Amendment No. 1, dated as of June 22, 1995.

10.2(7)** Management Stock Pledge Agreement, dated as of May 13, 1998, among The
North Face, Inc., and James G.  Fifield.

10.3(1)   Stock Purchase Agreement, dated as of December 28, 1993, between TNF
Holdings Company, Inc.* and Kabushiki Kaisha Goldwin, as amended by Memorandum,
dated as of March 29,1994, among TNF Holdings Company, Inc.* and Kabushiki
Kaisha Goldwin, and Memorandum No. 2, dated as of May 20, 1994, between TNF
Holdings Company, Inc.* and Kabushiki Kaisha Goldwin.

10.4(1)   Securityholders Agreement, dated as of June 7, 1994, among TNF
Holdings Company, Inc.,* Marsden S. Cason, William A. McFarlane, J.H. Whitney &
Co., Whitney 1990 Equity Fund, L.P., Whitney Subordinated Debt Fund, L.P.,
Richard T. Peery, Jack L. Richardson, Philip S. Schlein and Kenneth F. Siebel,
as amended by Amendment No. 1, dated as of June 22, 1995.

10.5(1)   Registration Rights Agreement, dated as of June 7, 1994, among TNF
Holdings Company, Inc.,* J.H. Whitney & Co., Whitney 1990 Equity Fund, L.P.,
Whitney Subordinated Debt Fund, L.P., Marsden S. Cason and William A. McFarlane,
as amended by Amendment No. 1, dated as of June 22, 1995, and Amendment No. 2,
dated as of May 20, 1996.

10.6(1)   Amended and Restated Loan and Security Agreement, dated as of March 1,
1995, between The North Face, Inc. and Heller Financial, Inc., as Agent and as a
Lender, as amended by First Amendment, dated as of May 4, 1995, Second
Amendment, dated as of August, 1995, Third Amendment, dated as of March 27,
1996, and Fourth Amendment, dated May 8, 1996.

10.6A(1)  Second Amended and Restated Loan and Security Agreement, dated as of
June, 1996, between The North Face, Inc. and Heller Financial, Inc., as Agent
and as a Lender.

10.6B(3)  Third Amended and Restated Loan and Security Agreement, dated as of
April 7, 1997, between The North Face, Inc. and Heller Financial, Inc., as Agent
and as a Lender.

10.7(2)** TNF Holdings Company, Inc.* 1994 Stock Incentive Plan, as amended.

10.8(5)** The North Face, Inc. 1995 Stock Incentive Plan, as amended.

                                       55
<PAGE>

10.9(1)**  The North Face, Inc. 1996 Stock Incentive Plan.

10.9A**    The North Face, Inc. 1996 Stock Incentive Plan, as amended September
1, 1998.

10.10(1)** The North Face, Inc. 1996 Employee Stock Purchase Plan.

10.11(1)** The North Face, Inc. 1996 Directors' Stock Option Plan.

10.12(9)** The North Face, Inc. 1998 Nonstatutory Stock Option Plan.

10.13(1)   Trademark License, dated October 29, 1993, between The North Face and
W.L. Gore & Associates, Inc.

10.14(10)  Trademark License, dated September 30, 1998, between The North Face,
Inc. and Youngone Corporation.

10.15(8)   Loan Agreement dated as of September 2, 1998 (the "Loan Agreement")
between The North Face, Inc., The North Face (Europe) Limited and The North
Face, Hong Kong, Limited as Borrowers, The Industrial Bank of Japan, Limited,
New York Branch and IBJ Schroder Business Credit Corporation as Arrangers, The
Industrial Bank of Japan, Limited, New York Branch as Syndication Agent,
Documentation Agent and as a Lender, IBJ Schroder Business Credit Corporation as
Administrative Agent, Collateral Agent and as a Lender, and Certain Financial
Institutions.

10.15A(8)  Amendment to the Loan Agreement, dated as of September 11, 1998.

10.16(4)   First Amendment and Purchase Agreement dated June 15, 1998 by and
between The North Face, Inc., Gianinetti Investment Corp., R.P. Sewell &
Company, a Colorado Partnership, Richard Bradley and David F. Baggerman and
Agreement to Amend/Extend Contract dated December 24, 1998 by and between The
North Face, Inc., Gianinetti Investment Corp., R.P. Sewell & Company, a Colorado
Partnership, Richard Bradley and David F. Baggerman.

21.1(10)   List of Subsidiaries of The North Face, Inc.

23.1       Consent of Deloitte & Touche LLP.

23.2       Consent of Grant Thornton.

27.1       Financial Data Schedule.

(1) Incorporated by reference to the Company's Registration Statement on Form S-
    1 (No. 333-04107) filed on May 20, 1996 and amendments thereto, filed with
    the Securities and Exchange Commission on June 3, 1996 and June 24, 1996.

(2) Incorporated by reference to the Company's Registration Statement on Form S-
    1 (No. 333-14945) filed with the Securities and Exchange Commission on
    October 28, 1996.

(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
    the fiscal year ended December 31, 1997 filed with the Securities and
    Exchange Commission on March 6, 1998.

(4) Incorporated by reference to the Company's Registration Statement on Form S-
    3 (No. 333-70405) filed with the Securities and Exchange Commission on
    January 11, 1999.

                                       56
<PAGE>

(5)  Incorporated by reference to the Company's Annual Report on Form 10-K for
     the fiscal year ended December 31, 1996 filed with the Securities and
     Exchange Commission on March 28, 1997.

(6)  Incorporated by reference to the Company's Registration Statement on
     Form S-3 (No. 333-58629) filed with the Securities and Exchange Commission
     on July 7, 1998.

(7)  Incorporated by reference on Schedule 13D filed with the Securities and
     Exchange Commission on May 13, 1998.

(8)  Incorporated by reference to the Company's Report on Form 10-Q for the
     period ended September 30, 1998 filed with the Securities and Exchange
     Commission on November 13, 1998.

(9)  Incorporated by reference to the Company's Registration Statement on
     Form S-8 (No. 59003) filed with the Securities and Exchange Commission on
     July 14, 1998.

(10) Incorporated by reference to the Company's Annual Report on Form 10-K for
     the fiscal year ended December 31, 1998 filed with the Securities and
     Exchange Commission on May 7, 1999.

(b) Reports on Form 8-K: as filed with the Securities and Exchange Commission on
    July 7, 1998.

(c) Reports on Form 8-K/A: as filed with the Securities and Exchange Commission
    on July 21, 1998.

(c) The exhibits required by Item 601 are filed herewith.

(d) The financial statement schedules required by Regulation S-X are filed
    herewith.

*    TNF Holdings Company, Inc., a Delaware corporation, changed its name to The
North Face, Inc. on June 8, 1994.

**   Indicates management contract or compensatory plan or arrangement.

                                       57