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SECURITIES AND EXCHANGE COMMISSION

(Mark One)

Commission File Number 0-19402

VANS, INC.

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

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

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

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

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

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PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

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

See accompanying notes to condensed consolidated financial statements.

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

See accompanying notes to condensed consolidated financial statements

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

See accompanying notes to condensed consolidated financial statements

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VANS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

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

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

Basis of Presentation

     The condensed consolidated financial statements included herein are unaudited and reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of the interim periods presented. The results of operations for the current interim period are not necessarily indicative of results to be expected for the current year.

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

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

Use of Estimates

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

Revenue Recognition

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

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

Cash Equivalents

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

Inventories

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

Goodwill and Long-Lived Assets

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

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

Other Assets

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

Contingent Consideration

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

Income Taxes

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

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

Stock-Based Compensation

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

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

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

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

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

Reclassifications

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

Recent Accounting Pronouncements

     In July 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 146, “Accounting For Costs Associated With Exit or Disposal Activities” (“SFAS 146”), which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” (“EITF 94-3”). SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. As a result of the implementation of SFAS 146, the accounting for amounts recorded in connection with our decision to substantially exit the skatepark business was materially impacted. Under the

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

     In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (“SFAS 148”), which permits two additional transition methods for companies that elect to adopt the fair-value-based method of accounting for stock-based employee compensation. The statement also expands the disclosure requirements for stock-based compensation. The provisions of this statement apply to financial statements for fiscal years ending after December 15, 2002. The adoption of SFAS 148 had no material financial impact to our consolidated financial statements. We have provided the additional disclosures required by SFAS 148 for the thirteen and twenty-six week periods ended November 29, 2003, and November 30, 2002, elsewhere in Note 1.

     In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 requires a company to consolidate a variable interest entity if it is designated as the primary beneficiary of that entity even if the company does not have a majority of voting interests. A variable interest entity is generally defined as an entity that has insufficient equity to finance its activities or the owners of the entity lack the risk and rewards of ownership. The provisions of this statement apply at inception for any entity created after January 31, 2003. For an entity created before February 1, 2003, the provisions of this Interpretation must be applied at the beginning of the first interim or annual period beginning after December 15, 2003. We will adopt the provisions of FIN 46 in the quarter ending February 28, 2004, for existing entities that are within the scope of this Interpretation. The statement also has disclosure requirements, some of which are required to be included in financial statements issued after January 31, 2003. Since we do not currently have any variable interest entities, the adoption of the provisions of FIN 46 is not expected to have a material impact on our financial position or results of operations.

2. SUPPLEMENTAL FINANCIAL INFORMATION

Goodwill and Identifiable Intangible Assets

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

     Goodwill is comprised of $12.7 million associated with the acquisition of our predecessor company; $6.2 million associated with the acquisition of Mosa Extreme Sports, Inc., now known as Pro-tec, Inc. (“Pro-tec”); $5.8 million related to the acquisition of Global Accessories Limited (now known as Vans Inc. Limited), our U.K. distributor; $4.9 million associated with our acquisition of a majority interest in the VANS Warped Tour®; $2.1 million associated with the acquisition of Compagnie Sunspot SA (“Sunspot”),

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

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

Computation of Earnings Per Share

     Basic earnings per share represents net income divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share represents net income divided by the weighted-average number of shares outstanding, inclusive of all potentially dilutive common shares. The reconciliations of basic to diluted weighted average shares are as follows:

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

Other Comprehensive Income

     Other comprehensive income refers to revenue, expenses, gains and losses that are recorded as an element of stockholders’ equity but are excluded from net income. Accumulated other comprehensive income is comprised of: (i) unrealized gains and losses on derivative instruments qualifying as cash flow hedges; and (ii) foreign currency translation adjustments. The components of other comprehensive income for the thirteen and twenty-six week periods ended November 29, 2003, and November 30, 2002, were as follows:

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3. ACQUISITIONS

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

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

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

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

4. COMMITMENTS AND CONTINGENCIES

Litigation

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

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

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

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

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

Derivatives and Hedging

     We are exposed to foreign currency risk primarily through our wholly-owned subsidiaries, Vans Europe BV (“VEBV”), whose functional currency is the euro, and Vans Inc. Limited (“VIL”), whose functional currency is the British sterling. This currency risk is primarily related to purchases of inventory by our subsidiaries which are priced and settled in U.S. dollars. To hedge this risk, our subsidiaries enter into cash flow hedges of forecasted inventory purchases, thereby fixing the cost of the product and the associated gross margins in their functional currency. As of November 29, 2003, our subsidiaries hedged approximately 70% of forecasted inventory purchases through the first quarter of Fiscal 2005.

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

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

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

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

Inventory purchase commitments.

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

5. DISCONTINUED OPERATIONS

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

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

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

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

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

     Summarized operating results for our discontinued operations were as follows:

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

6. SEGMENT DISCLOSURES

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

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     Summary information by segment follows: