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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended May 31, 1996, or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ___________ to ___________
Commission file number: 0-19402
VANS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 33-0272893
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2095 Batavia Street, Orange, California 92865
(Address of principal executive offices) (Zip Code)
(714) 974 - 7414
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $.001 par value per share
(Title of Class)
Indicate by check mark whether 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 [X].
The approximate aggregate market value of the Common Stock held by
non-affiliates of registrant (computed based on the average bid and asked prices
of the Common Stock, as reported on the NASDAQ National Market System on August
6, 1996), is $152,416,057.
The number of shares of registrant's Common Stock outstanding at August 20, 1996
is 12,682,944.
Documents Incorporated By Reference:
Portions of registrant's Annual Report to Stockholders for the Fiscal Year Ended
May 31, 1996 are incorporated by reference into Part II of this report; portions
of registrant's definitive Proxy Statement for its 1996 Annual Meeting of
Stockholders are incorporated by reference into Part III of this report; and
certain exhibits are incorporated by reference into Part IV of this report.
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VANS, INC.
FORM 10-K
For the Fiscal Year Ended May 31, 1996
TABLE OF CONTENTS
Part I PAGE NO.
--------
Item 1. Business......................................................... 3
Item 2. Properties....................................................... 15
Item 3. Legal Proceedings................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders.............. 16
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................... 17
Item 6. Selected Financial Data.......................................... 17
Item 7. Management's Discussion and Analysis of Financial ...
Condition and Results of Operations........................... 17
Item 8. Financial Statements and Supplementary Data...................... 17
Item 9. Changes in and Disagreements With Accountants on ...
Accounting and Financial Disclosure........................... 17
Part III
Item 10. Directors and Executive Officers of the Registrant............... 18
Item 11. Executive Compensation........................................... 18
Item 12. Security Ownership of Certain Beneficial
Owners and Management........................................... 18
Item 13. Certain Relationships and Related Transactions................... 18
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................................... 19
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THE DISCUSSION IN THIS FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER THE
CAPTION "RISK FACTORS" ON PAGES 6 TO 12 OF THE COMPANY'S PROSPECTUS, DATED MAY
21, 1996, WHICH IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
ITEM 1. BUSINESS
OVERVIEW
Vans, Inc. (the "Company") is a leading designer, manufacturer and
distributor of a collection of high quality casual and active-casual footwear
for men, women and children, as well as performance footwear for enthusiasts
sports such as skateboarding, snowboarding and BMX bicycling. The Company was
founded in 1966 in Southern California as a domestic manufacturer of vulcanized
deck shoes (such as the Authentic(TM)). Today the Company markets its broad
footwear line worldwide to a target customer base of 12 to 24 year old young men
and women. The Company is incorporated in Delaware.
The Company has earned a reputation over its 30 year history for
quality, performance and value, particularly among participants in alternative
sports such as skateboarding and BMX bicycling. As a result of this reputation,
the Company has developed a strong brand image which the Company believes
represents the individualistic and enthusiast lifestyle of its target customer
base. The VANS brand image coincides with what the Company believes is a
fundamental shift in the attitudes and lifestyles of young people worldwide,
characterized by the rapid growth and acceptance of alternative, enthusiasts
sports and the desire to lead an individualistic, contemporary lifestyle. The
Company believes that underlying factors influencing young people include: (i)
programs broadcast worldwide on networks such as MTV, ESPN and ESPN2; (ii) the
growing international distribution and popularity of magazines such as Rolling
Stone, TransWorld SKATEboarding, Spin and Details; and (iii) the increased
independence and purchasing power of young people worldwide.
To capitalize on the strength of the VANS brand with young men and
women worldwide, the Company repositioned itself during fiscal 1996 from a
domestic manufacturer to a marketing-driven company. With a focus on
understanding the attitudes, lifestyle and product desires of its target
customer base, and by marketing and designing its product line accordingly, the
Company believes it is well-positioned to further the growth of the VANS brand
in this market.
Led by a new management team including Walter E. Schoenfeld, the
Company's Chairman and Chief Executive Officer and the founder of Britannia
Sportswear Company, and Gary H. Schoenfeld, the Company's President and Chief
Operating Officer, the Company has implemented a number of strategic and
operational initiatives. In particular, the Company: (i) began sourcing new
products from overseas; (ii) leveraged its brand equity with young people into
products centered around increasingly popular alternative sports, such as the
Company's snowboard boot line, and into products that have a lifestyle
orientation, such as the Company's successful International Collection of casual
and active-casual shoes; (iii) designed a marketing strategy to promote the VANS
brand and stay close to the product desires of its target customers; (iv)
restructured its operations which culminated with the July 1995 closing of its
underutilized Orange, California manufacturing facility (the "Orange Facility")
and the consolidation of the production of its traditional vulcanized shoes at
its smaller Vista, California manufacturing facility (the "Vista Facility"); and
(v) enhanced its management information and inventory control systems to better
control costs and increase operational efficiencies. Each of these initiatives
has been an important ingredient of the Company's heightened commitment to its
customers.
BUSINESS STRATEGY
The Company's long-term objective is to become a leading lifestyle
company offering a complementary array of footwear, apparel and accessory
products worldwide by capitalizing on the strength of the VANS brand name. The
Company's operating and growth strategies are aimed at achieving this long-term
objective while maintaining the authenticity and credibility of the VANS brand
image.
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OPERATING STRATEGY
The Company seeks to be the brand of choice for lifestyle and
alternative sport footwear by continually listening and responding to the
product desires of its target customers. The Company's core customers are 12 to
24 year old young men and women who are active enthusiasts of alternative sports
and/or on the forefront of fashion and contemporary lifestyle trends. The
breadth of the Company's product line is intended to appeal both to these core
trend setters as well as to mainstream customers who similarly identify with the
lifestyle image of the VANS brand. The Company's operations are directly tied to
this strategy and are intended to provide the necessary framework for staying
close to these customers. Key elements of the Company's operating strategy
include:
- Promote the VANS Brand Image through Grassroots Marketing Efforts.
The Company promotes its brand image through a grassroots marketing
effort that includes the sponsorship of alternative sporting and
entertainment events, sports teams and individual athletes. An
example of one of the Company's event sponsorships is the "VANS
Warped Tour '96," a festival combining concerts with a
skateboarding contest in approximately 40 cities throughout the
United States, Canada, Europe and Japan. In addition, the Company
sponsors over 100 of the world's top athletes in skateboarding,
snowboarding and BMX bicycling. The Company believes its event
sponsorships and athletic endorsements reinforce the Company's
authenticity and credibility with its core customer base and can
generate valuable media exposure on networks such as MTV and ESPN2,
as well as in alternative sport and lifestyle magazines. The
Company believes this media coverage increases the overall
awareness of the VANS brand image among its broader target market
worldwide. The VANS image is further enhanced through print and
advertising campaigns which depict youthful, active lifestyles and
attitudes and have been carried on networks such as MTV and Prime
Sports, on outdoor billboards and in magazines such as Rolling
Stone, TransWorld SKATEboarding, TransWorld SNOWboarding, Spin and
Details. The Company's grassroots marketing approach enables it to
stay close to its core target customers, while promoting the VANS
brand globally as the choice for alternative sport and active
lifestyle footwear.
- Provide Authentic and Design-Distinctive Products. The Company
designs and develops high quality products that embody the VANS
image. The Company's performance and casual footwear products
incorporate distinctive fabrics, cutting-edge styles and colors and
dependable construction designed to appeal to alternative sports
enthusiasts seeking performance footwear and to other more
mainstream consumers seeking footwear that represents youth,
individuality and independence. The Company believes the technical
features of its skate performance shoes and snowboard boots as well
as the Company's Signature Skate Shoe Series, a line endorsed by
top alternative sport athletes worldwide, reinforce the
authenticity and credibility of the VANS brand name.
- Distribute through Selected National Retailers and Independent
Accounts. The Company sells its products through carefully selected
national retailers, including Kinney Shoe Corporation (which
includes Foot Locker, Lady Foot Locker, Kids Foot Locker, Kinney
Shoe Stores and Champs Sporting Goods), Nordstrom, Inc., Gadzooks,
Inc., and Mervyn's. Recently, the Company has significantly
expanded its business with new and existing accounts, including
J.C. Penney Company, Inc., R.H. Macy & Co., The Bon Marche,
Journey's and Foot Action, Inc. The Company also sells its products
through independent retailers such as skateboard and surf shops to
maintain its authenticity and stay close to its core customer base.
The Company believes that it is strengthening its relationships
with these national and independent retailers through: (i) the
introduction and expansion of the International Collection; (ii)
more frequent availability of new stock keeping units to keep
inventory fresh; (iii) maintenance of the quality image of its
retail account base; and (iv) the quality of its products and
timeliness of deliveries.
- Select International Distributors that Build the VANS Brand Name.
Recognizing significant opportunities internationally, the Company
in fiscal 1996 upgraded and expanded its international distributor
base and focused on selecting and maintaining relationships with
distributors who understand both how to build the VANS brand as
well as the tastes and preferences of their local markets. The
Company now focuses its international efforts through a Hong Kong
subsidiary that was recently formed. See "Sales and Distribution-
-International Sales."
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- Execute a Retail Strategy that Complements the Company's Overall
Brand Strategy. The Company operated 83 retail stores as of August
22, 1996 (comprised of 54 conventional mall and free standing
stores, 24 factory outlet stores and 5 clearance stores). Such
stores enhance the Company's presence in Southern California in
addition to providing it with an important outlet for slower moving
inventory and a forum to test new products and obtain feedback from
customers.
- Maintain Flexibility in Manufacturing to Enhance Market
Responsiveness. Central to the success of the Company's operating
strategy is the ability to respond quickly to changing trends
within its target market. The Company believes it minimizes lead
times and capital expenditures and maximizes quality and product
variety by utilizing a combination of third-party foreign
manufacturers and its own domestically located facility. With
relatively short lead times (8-12 weeks) and the ability to
manufacture in small lots in South Korea, the Company believes that
it can generally keep its inventory fresh by adding the latest
designs to its offering mix while eliminating slower moving styles.
- Execute Well-Conceived Product Testing Process. The Company has
developed a product testing process to stay close to its customers
and gauge product acceptance in the marketplace. In addition to
placing new products and samples in its own retail stores, the
product testing process includes: (i) previewing product prototypes
with independent and key retailers prior to the introduction of
such product; (ii) testing products and new concepts with selected
national accounts; and (iii) conducting its "first edition" test
program in which the Company chooses and introduces one new style
roughly every six to eight weeks for distribution on a preview
basis to a group of key independent retailers and several of the
Company's retail stores.
- Utilize Selective Licensing. The Company believes that selective
licensing of the VANS name and trademarks for use on non-footwear
product lines, such as apparel and accessories, has provided an
opportunity to promote the VANS brand while significantly reducing
capital outlays and operating expenses. The Company has the right
to approve the design, manufacturing specifications, advertising
and distribution of its licensed products and maintains a practice
of evaluating its licensing arrangements to ensure consistent
presentation of the VANS brand.
GROWTH STRATEGY
The Company has developed a growth strategy that it believes will
maximize its long-term opportunities while simultaneously enhancing and
protecting its valuable brand image. The Company's growth strategy is focused
on: (i) expanding its product-line beyond the Company's core men's footwear
styles to include more women's styles, as well as related products, such as
apparel and other accessories; (ii) capitalizing on the growing snowboarding
market; (iii) increasing the penetration of its existing domestic account base;
and (iv) pursuing a global marketing initiative to increase sales in existing
and new international markets.
- Expand the VANS Product Line
- Women's and Youth's Footwear. The Company's traditional
footwear products have expanded from a line of basic,
vulcanized style shoes to a collection of lifestyle fashions,
including a line of women's contemporary lifestyle footwear. In
the second quarter of fiscal 1996, the Company expanded its
International Collection to include a line of women's fashion
styles through the introduction of casual-athletic shoes in
innovative materials such as hologram, vinyl, satin and patent
leather. The Company intends to continue to broaden its
customer base and believes that one of its next logical
extensions is to provide more products in youth's sizes
targeted at 8 to 12 year olds whose families are already
purchasing VANS products.
- Apparel and Accessories. Leveraging off the Company's growing
reputation for fashion-forward designs and high-quality
products, the Company intends to increase its production and
distribution of brand-name apparel and accessories. These
products may include T-shirts, sweatshirts, shorts, caps,
backpacks and other accessories to be distributed in geographic
locations where the Company does not have existing licensing
agreements. In addition, the
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Company may produce and distribute alternative sports apparel,
such as snowboarding outerwear. The Company currently has all
of the international rights outside of Japan and Italy to
produce and distribute its own apparel, and all of the domestic
and international rights to develop and distribute alternative
sports apparel, such as snowboarding outerwear.
- Capitalize on the Growing Snowboarding Market. The Company entered
the snowboard boot market approximately two years ago and believes
that today it is among the top four market share leaders worldwide
based on the number of snowboard boots sold. The Company believes
that a substantial growth opportunity exists in the snowboarding
market and believes it is well-positioned to increase its market
share of the snowboard boot market. In fiscal 1996, the Company
entered into a licensing agreement with Switch Manufacturing to
utilize Switch's innovative and convenient step-in boot binding
system. Switch is a leading manufacturer of snowboard boot bindings
and the Company believes its affiliation with Switch reinforces the
Company's credibility among snowboard boot customers, further
establishing the Company's position in the snowboard boot market.
Switch is involved in certain litigation regarding the patent for
its system. See Item 3. "Legal Proceedings." The Company has
increased the number of snowboard boots offered from five styles in
the 1995/1996 season to 11 styles in the 1996/1997 season. The
Company believes further opportunities exist to leverage its brand
into snowboarding apparel and accessories.
- Increase Penetration of Existing National Retail and Independent
Accounts. Building upon the Company's operating strategy described
above, the Company believes significant growth opportunities exist
within its current national account base. The Company intends to
grow its account base through its broadened product line which it
believes will enable it to increase: (i) the number of stores for
which its existing national and regional chains purchase products;
and (ii) the number of stock-keeping units sold through each store.
- Expand Internationally by Increasing Penetration of Existing
Markets and Entering New Markets. International markets represent a
substantial area of growth for the Company since the Company
believes that many of its target customers of 12 to 24 year olds
around the world similarly identify with the lifestyles of their
counterparts in the United States. The Company, through its Hong
Kong subsidiary, intends to continue its international expansion
through a global marketing initiative designed to increase VANS
brand awareness worldwide. This marketing strategy includes: (i)
increasing the number of international alternative sport and
entertainment event sponsorships; (ii) more extensive touring
abroad by internationally recognized athletes and alternative
sports teams which endorse the VANS brand; (iii) generating media
coverage in international markets through increased participation
in promotional activities; (iv) previewing products at
international trade shows; and (v) working with international
distributors who understand their local markets and providing them
with sales tools and promotional materials to enable them to
effectively market the VANS brand.
MARKETING AND PROMOTION
The Company's global marketing strategy is to further enhance the image
and awareness of the VANS brand by associating its products with the sports,
music, fashion and contemporary lifestyle trends established by young people in
the U.S. and abroad. The Company's core customers are 12 to 24 year olds in the
forefront of trends in alternative sports and contemporary lifestyles, while
much of the Company's sales volume is driven by its broader target market of
mainstream customers who desire to live a lifestyle consistent with the VANS
brand.
The Company markets its brand through the sponsorship of alternative
sport and entertainment events, print and television advertising and alternative
sport athletic endorsements. In addition, point-of-purchase merchandising used
by the Company's customers, as well as the design of the Company's retail stores
and factory outlets, further promote the VANS brand.
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ALTERNATIVE SPORTS AND ENTERTAINMENT EVENT SPONSORSHIPS
The Company's marketing and promotion strategy includes the sponsorship
of alternative sporting and entertainment events. The Company believes these
events and sponsorships reinforce the Company's authenticity and credibility
with its core customer base and create significant brand loyalty among
participants in these sports. Through these sponsorships, the Company has
received media coverage on networks such as MTV, ESPN2 and Fox, and in
alternative sport and contemporary lifestyle magazines. The Company believes
this media coverage is seen or read by its broader target market throughout the
world and increases overall awareness of the VANS brand name.
Among the events and activities the Company has sponsored are the 1995
World Championships of Skateboarding (with The Hard Rock Cafe), skateboard
contests such as the Venice Street Grind, Battle of the Bay and Slam City Pro,
the Brooklyn Bridge Skate Ramp, the Wild Women's Snowboarding Camp, the National
Bike League and the American Bike League. The Company also sponsors snow, skate
and surf videos and "demo days" at ski and snowboard resorts around the country
and in Japan, and participates in college campus tours organized by magazines
such as Spin and Details.
The Company is the exclusive title sponsor of the "VANS Warped Tour
'96." This event visits approximately 40 top young adult markets throughout the
U.S., Canada, Europe and Japan. The tour is an affordable daytime lifestyle,
music and sports festival for teenagers and young adults, with skateboarding,
biking and climbing events, retailer booths, video games, prize giveaways and
performances by emerging alternative bands. It also features an amateur
skateboarding competition in selected locations, with the winners being invited
to participate in the 1996 World Championships of Skateboarding, which will
again be sponsored by the Company and The Hard Rock Cafe. The tour is being
promoted through local radio, print, poster and flyer distribution, supplemented
by national promotion via television, print and the Internet. The Company has
compiled a "VANS Warped Tour '96" CD, featuring certain bands performing on the
tour, to be used as a gift with a VANS product purchase. The tour and the CD
promotion are designed to coincide with the "Back to School" season.
ATHLETIC ENDORSEMENTS
As with event sponsorship, the Company believes the endorsement of
alternative sports teams and individual athletes reinforces the Company's
authenticity and credibility with its core customers and creates significant
brand loyalty among participants. The Company's sponsored athletes aid in the
design of the Company's shoes, make promotional appearances, wear the Company's
products exclusively and increase overall consumer awareness of the VANS brand.
The Company supports its sports marketing with print and television advertising
featuring its sponsored athletes.
The Company sponsors over 100 of the world's top male and female
athletes through the VANS Skateboarding Team, the VANS Snowboarding Team and the
VANS BMX Team. Selected members of the VANS teams include:
Skateboarding
Steve Caballero--Big Air World Title Holder, Signature Pro Model
Mike Carroll--Skater of the Year, Thrasher, 1994, Signature Pro Model
Salman Agah--Skater of the Year, Thrasher, 1993, Signature Pro Model
Simon Woodstock--2nd Place Street Champion Holder, Munster Competition/
1995
Snowboarding
Jamie Lynn--World Champion, 2nd Place Big Air, Innsbruck, Austria/1996,
Signature Pro Model
Shaun Palmer--World Champion 1988-89, 15 year competitor, Signature
Pro Model
Circe Wallace--Recognized Top Five Female Snowboarder: TransWorld
SNOWboarding
Rachel Furiel--#1 Place Senior Women's Pipe USASA Nationals, 1996
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BMX Bicycling
Pete Loncarevich--Top BMX rider
John Purse--National Bike League, #1 Pro BMX, #2 American Bike League,
1996
Kiyomi Waller--#1 ABA Pro 24 Cruiser, 1996
PRINT AND TELEVISION ADVERTISEMENTS
The VANS alternative sports image is enhanced by print and advertising
campaigns which depict youthful, contemporary lifestyles and attitudes and are
carried on networks such as MTV, Prime Sports and ESPN2, on billboards and in
magazines such as TransWorld SKATEboarding, Thrasher and TransWorld
SNOWboarding. The Company promotes its lifestyle image through advertisements in
a number of magazines that appeal to its target customer group, including
Rolling Stone, BMX Plus, BAM, Spin, Vibe, Option, Bikini, and Details. In
addition, the Company selectively advertises in widely circulated fashion and
lifestyle magazines, such as Seventeen and YM. The Company develops much of its
advertising in-house, which the Company believes allows it to respond more
quickly and with a greater degree of creative and cost control.
WORLD WIDE WEB SITE
Since September 1995, the Company has marketed its products and image
through its interactive home page on the World Wide Web to customers who
directly access the Internet. The Web site includes a product catalog, photos,
interviews, sound and video clips of bands who wear VANS products, profiles and
interviews with members of the Company's sports teams, information on
Company-sponsored events, celebrities who wear VANS products and the Company's
history.
PRODUCT DESIGN AND DEVELOPMENT
The Company's product design and development efforts are centered
around leading edge trends in the youth culture, including such areas as
alternative music and enthusiasts sports, television, movies and clothing. The
Company's products are then designed and refined based on consumer and retailer
feedback through multiple product reviews. The Company's designers work to
monitor subtle changes in the music, sports, media and fashions which appeal to
the Company's core customers.
The Company traditionally designs and merchandises three lines of
footwear products per year for the annual Spring, "Back to School" and Holiday
seasons. The standard product development cycle takes approximately one year
from design concept through production and rollout. However, in response to
changes in trends or consumer demand, the Company will develop new products for
immediate introduction (in as little as 1-2 months) or accelerate the planned
release of new designs. The product design cycle begins by understanding the
consumer, which is accomplished through a study of current trends in fashion,
magazines and markets both by the design staff and through the use of market
forecasting services. The design team then typically develops three or four
themes based on this marketing analysis and produces product concept boards for
the review of management and the sales and marketing staff. The design team then
refines the designs, prepares specification sheets and orders samples. The
Company's design staff works with sales and marketing personnel as well as with
the Company's alternative sports teams and athletes in all aspects of this
design process. One or more cycles of prototype products are reviewed by the
design team and focus groups composed of the target consumers, and the design
team may eliminate some designs based on the feedback received. Key retailers,
sales representatives and customers typically will also review the line prior to
the final preparation of specifications and samples. The product is then
typically reviewed again by key retailers and additional changes may be made
prior to the presentation of the products at trade shows to a broader range of
retailers. Product previews have proven critical to the manufacturing process by
providing indications as to whether a new design will be successful and
therefore produced. Product lines are released in multiple deliveries over the
course of a season and product life cycles vary from as short as one season (3-6
months) to 2-3 years or more.
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PRODUCTS
The Company produces a wide variety of casual, active-casual and
performance footwear products and snowboard boots, all of which are designed to
appeal to alternative sport enthusiasts seeking performance footwear and
mainstream consumers seeking footwear that represents youth, individuality and
independence. The average retail prices for the Company's footwear products
range from $35 to $70 for casual and performance footwear, and from $140 to $250
for snowboard boots. The Company also offers a variety of apparel and
accessories bearing the VANS brand name through its own retail stores as well as
through licensing arrangements with third parties.
The Company's shoes and snowboard boots can generally be categorized by
the manufacturing process used. The Company's International Collection line
primarily consists of foreign-sourced shoes manufactured through a cold-cured
process in which the upper and sole are sewn and cemented together. This
manufacturing process allows for the combination of a number of different
outsoles, fabrics and styles. The Company's domestically produced shoes,
including the traditional VANS deck shoes, are vulcanized, a manufacturing
process utilizing heat and pressure that binds the sole and upper together.
MEN'S FOOTWEAR
Classics, Casual and Casual Skate. The Company's classics, casual and
casual skate line include many styles within the International Collection, a
wide variety of cold-cured suede, leather and canvas shoes, as well as
traditional slip-on and laced canvas vulcanized footwear. The styles are offered
in a wide variety of colors, fabrics, designs and outsoles. Some of the
Company's casual and skate-influenced styles are the Razor(TM), Fracture(TM),
Wally(TM), Rail(TM), Blunt(TM), Blur(TM), Old Skool(TM), and Mel(TM). Some of
the classics styles are the Era(TM), Classic Slip-on and the Authentic(TM).
Performance Skate. Throughout its 30-year history, the VANS brand name
has long been associated with skateboarding. The Company's performance skate
line of footwear is designed to provide skaters with the style and technical
features they demand. The Company offers performance skate shoes in a variety of
colors and styles with many of the same features described above as well as a
double layer of suede or leather on the ollie area for extra durability, double
and triple stitching for durability, padded tongues and collars and grippy gum
rubber bottoms. The Company also offers Signature Skate Shoe Series, and works
with top skaters, such as Steve Caballero and Salman Agah, to develop high
performance skate footwear. The Company believes the identification of its shoes
with top skaters helps to increase sales of its performance footwear. Some of
the Company's performance skate shoes are the Fairlane(TM), Ratz(TM) and
Pudge(TM), as well as the Lo Cab(TM), Half Cab(R), Mike Carroll(TM) and Salman
Agah(TM) signature shoes.
WOMEN'S FOOTWEAR
The Company's footwear products for women include casual,
fashion-oriented products within the International Collection (introduced in the
second quarter of fiscal 1996), and classic deck shoes. Many of the products in
the women's line incorporate fundamental features of the Company's skate shoes
with fashion-conscious detailing, colors and fabrics. The core line of women's
footwear includes active-casual suede, leather, nylon, canvas, vinyl and patent
leather sport and casual shoes in a wide variety of colors. The line includes
vulcanized shoes, as well as cemented, skate-oriented, cup-soled shoes. Some of
the Company's women's shoes include the Lucy(TM), Ethel(TM), Trounce(TM),
Blunt(TM), Croodle(TM) and Old Skool.
SNOWBOARD BOOTS
For the 1996/1997 season, the Company has expanded its snowboard boot
line to include 11 styles offering unique combinations of a number of technical
innovations at various price points. Featured in this season's line are: (i)
five styles of lighter weight linerless boots; (ii) four styles which are
compatible with the Switch Autolock(TM) system, an innovative and convenient
step-in boot binding system; and (iii) three styles designed specifically for
women.
In the 1995/1996 season, the Company offered five styles of snowboard
boots, including the Lemming(TM), a lightweight linerless boot, and the
Voltaire(TM), its first Switch-compatible boot. In the 1995/1996 season, the
Company sold approximately 95,000 pairs of boots. In the 1994/1995 season, the
first season in which the Company sold snowboard boots, the Company offered two
boot styles and sold approximately 4,000 pairs of boots.
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The Company believes that the Switch step-in binding system is
currently the most proven and accepted version of the new step-in binding
systems, and believes that its licensing arrangement with Switch further
enhances the Company's credibility and reputation in the snowboard boot market.
Step-in bindings provide added convenience by reducing the amount of time
required to mount and dismount the board before and after each run.
SANDALS
In the last quarter of fiscal 1995, the Company began offering a
limited number of stylish leather and nubuck sandals. The Company believes
sandals represent a logical product line extension and are consistent with the
VANS image. Current sandals offered by the Company include the Monk(TM), Caesar
Sport(TM) and Mahatma(TM).
APPAREL AND ACCESSORIES
The Company offers certain apparel and accessories at its Company-owned
retail stores, including T-shirts, hats, backpacks, shorts, sweatshirts, socks
and wallets. Most products carry the VANS brand logo and are designed to appeal
to the styles and trends of the Company's target consumer group. Products sold
in the Company's stores are designed by the Company and manufactured by third
parties. In addition, the Company has selectively licensed its trademarks to
certain distributors. See "--Licensing."
SALES AND DISTRIBUTION
The Company has three primary distribution channels for its products:
(i) national sales through national and regional retailers, as well as
independent specialty stores, including skate and surf shops; (ii) international
sales through its wholly-owned foreign subsidiary; and (iii) sales through
Company-operated retail and factory outlet stores.
NATIONAL SALES
The Company sells its products through approximately 3,500 active
accounts, including Kinney Shoe Corporation (which includes Foot Locker, Lady
Foot Locker, Kids Foot Locker, Kinney Shoe Stores and Champs Sporting Goods),
Nordstrom, Gadzooks, Inc. and Mervyn's. Recently, the Company has significantly
expanded its business with certain new and existing accounts, including J.C.
Penney Company, Inc., R.H. Macy & Co., Inc., The Bon Marche, Journey's and Foot
Action, Inc. The Company also sells its products through independent retailers
such as skateboard and surf shops to maintain its authenticity and to stay close
to its core customers. The Company intends to execute its growth strategy
through marketing and product development in order to further increase sales
through its existing accounts.
The Company strives to maintain the integrity of the VANS image by
controlling the distribution channels for its products based on criteria which
include the retailer's image and ability to effectively promote the Company's
products. The Company works with its retailers to display, stock and sell a
greater volume of the Company's products.
The Company's distribution strategy is to differentiate the product
offerings of independent specialty stores and larger national accounts through
the breadth of its product lines and the staggered release of certain products.
The expansion of the Company's product line has also enhanced the Company's
ability to distribute its products through a larger number of major accounts
while maintaining variety across these accounts. In addition, the Company
staggers the release of certain products to select independent retailers or
national accounts to test product acceptance, as well as to increase the variety
of products offered. As an example, the Company generally releases its new
performance skate shoes to independent accounts 60 days before making them more
broadly available.
The Company sells products to its national accounts primarily through
independent sales representatives. Several of the Company's larger accounts are
managed by Company officers and sales executives. The Company typically engages
its independent sales representatives pursuant to agreements with terms ranging
from one to three years in length. Compensation of independent sales
representatives is generally limited to commissions on sales.
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INTERNATIONAL SALES
The Company believes that a significant opportunity exists for
increased sales of its products to existing international markets, and, to a
more limited extent, expansion into new international markets. The Company
believes that because of the global reach of music, fashion, media and
alternative sports, the styles and trends among the Company's target customer
group internationally are similar in many ways to those in the United States.
The Company licenses the right to sell VANS products internationally to its Hong
Kong subsidiary, Vans Far East Limited ("VFEL"), which in turn sells VANS
products to distributors for resale in 65 foreign countries.
International distributors of VANS products receive a discount on the
wholesale price of footwear products and are granted the right to resell such
products in defined territories, usually a country or group of countries.
Distribution agreements generally are exclusive, restrict the distributor's
ability to sell competing products, have a term of one to three years, provide a
minimum sales threshold which increases annually, and generally require the
distributor to spend up to 5% of its revenues on marketing. VFEL receives
payment from all its distributors in United States dollars.
Financial information about the Company's export sales is included in
Note 13 to the Company's Financial Statements, which are included in the
Company's 1996 Annual Report to Stockholders, filed as Exhibit 13 hereto.
RETAIL SALES
The Company currently operates 83 retail stores, 72 of which are
located in California. The Company's retail stores are divided into three store
groups, including conventional mall and freestanding stores, factory outlet
stores and clearance stores. Currently, the number of stores in each store group
is 54, 24 and 5, respectively. The Company's retail stores carry a wide variety
of the Company's footwear products, along with apparel and accessory items, most
of which bear the VANS brand name and logo.
The standard Company retail store is between approximately 1,400 to
2,000 square feet. A typical Company store is open seven days a week, for an
average of eleven hours per day, and has two or three employees in the store
during business hours. The Company sells factory seconds and discontinued shoes
at discounted prices through factory outlets and clearance stores. The Company
opened eight factory outlets during the fiscal 1996. The Company continually
works to upgrade the design and layout of its retail stores as part of its
overall marketing plan and remodels older stores as its resources permit to
further promote the VANS brand image. The Company intends to open new factory
outlet stores only in the leading outlet centers throughout the country. The
Company does not intend to significantly increase the number of its other retail
stores.
DISTRIBUTION FACILITIES
Domestic distribution of products is currently centralized in the
Company's approximately 127,000 square foot distribution center in the City of
Industry, California. See Item 2. "Properties - City of Industry Distribution
Center." Upon receipt from overseas manufacturers, the Company's products are
inspected, sorted, packaged and shipped to retail accounts in the United States
and abroad. While foreign-sourced footwear for domestic accounts is generally
shipped to the City of Industry facility, such footwear for international sales
is typically shipped directly from the overseas manufacturers to VFEL's
international distributors. In addition, pursuant to a snowboard boot financing
arrangement with Ssangyong (U.S.A.) Inc. ("Ssangyong U.S.A"), Ssangyong U.S.A.
administers the warehousing and shipping of the Company's snowboard boots
through March 1997.
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MANAGEMENT INFORMATION SYSTEMS
During fiscal 1996, the Company significantly upgraded its management
information capabilities. This included the redesign of its order entry system
and implementation of an enhanced order processing and a warehouse management
system. The Company is currently implementing a Distribution Requirements
Planning program (DRP) and is in the process of selecting an automated shipping
program. Additionally, the Company is in the process of upgrading its
Company-wide payroll system as well as investing in updated point-of-sale
technology at its retail stores. All of these improvements are designed to
improve operational efficiencies and allow the Company to better track its
sourcing, distribution and customer service processes.
SOURCING AND MANUFACTURING
Historically, the Company manufactured its products at two
Company-operated domestic manufacturing facilities. In fiscal 1995, in
connection with the Company's strategic redirection, the Company shifted a
significant portion of its manufacturing to independent manufacturers located in
South Korea to produce the International Collection, which can only be
manufactured in significant commercial quantities abroad.
The Company sources the International Collection and snowboard boots
from VFEL, which in turn contracts with contractors in South Korea. During
fiscal 1996, approximately 76% of the Company's shoes and 100% of the Company's
snowboard boots were manufactured offshore by third party manufacturers. VFEL
utilizes one sourcing agent for footwear and one sourcing agent for snowboard
boots in South Korea who assist the Company in selecting and overseeing third
party contractors, ensuring quality, sourcing fabrics and monitoring quotas and
other trade regulations. The Company's and VFEL's production staff and
independent sourcing agents together oversee all aspects of manufacturing and
production. As is common in the industry, there are no agreements between VFEL
and any of its contractors or suppliers, however, the Company is advised that
VFEL believes that its relationships with its contractors and suppliers are
good. The Company is advised that VFEL is now sourcing sandals through
manufacturers outside of South Korea.
The Company manufactures vulcanized footwear at its 90,400 square foot
Vista Facility. The Vista Facility allows the Company to produce a broader line
of its vulcanized footwear products for its retail stores as well as its
domestic and international accounts. The Vista Facility was established in 1992
to apply integrated cellular manufacturing techniques to the traditional method
of shoemaking. These new techniques have led to the reduction of manufacturing
cycle times at the Vista Facility from nine days to three, with cycle times for
some of the Company's most popular styles reduced to one day. The Company
currently operates two shifts a day at the Vista Facility. Manufacturing
generally operates on a five-day week, although Saturday shifts are common
during periods of peak production, primarily in the Spring and "Back To School"
seasons. The Company has recently implemented an incentive bonus plan for
employees at its Vista Facility which provides for a monthly bonus payment based
on achieving certain production quality and quantity standards.
The Company's quality control program is designed to ensure that all
goods bearing its trademarks meet the Company's standards. With respect to
products manufactured by independent contractors, the Company ensures that VFEL
develops and inspects prototypes of each product prior to manufacture by such
contractors, establishes fittings based on the prototype, inspects samples and,
through its employees or sourcing agents, inspects materials prior to
production. VFEL or its sourcing agents inspect the final product prior to
shipment to the Company's City of Industry distribution center. With respect to
licensed products, the Company oversees the quality control programs of its
licensees and regularly inspects samples of their products.
A wide range of materials are used in the domestic and offshore
production of the Company's footwear. The Company has not experienced a
significant manufacturing delay caused by the unavailability of raw materials,
however, there can be no assurance that difficulties in obtaining raw materials,
particularly specialized materials used in certain women's shoes, will not arise
in the future or that any such difficulties would not have a material adverse
effect on the Company's business. To date, the Company has not experienced any
significant safety or health problems from the use or handling of these raw
materials.
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Dependence on international manufacturers subjects the Company to the
general conditions and risks of doing business internationally, including
reduction in the availability of production capacity, errors in complying with
product specifications, inability to obtain sufficient raw materials,
insufficient quality control, failure to meet production deadlines or increases
in manufacturing costs. The Company cannot predict whether the conditions under
which it currently does business abroad will remain favorable or whether any
events will occur which could adversely affect the availability of independent
offshore manufacturing on terms satisfactory to the Company. Although the
Company is advised that VFEL believes that it could develop alternative sources
of supply for the products obtained from its present suppliers outside the
United States, there can be no assurance that such alternative sources would be
available on terms satisfactory to the Company, or at all.
LICENSING
The Company has licensed certain of its trademarks for apparel and
accessory products where the Company believed such arrangements would promote
the VANS brand name and image consistent with the Company's overall marketing
and promotion plan.
Currently, the Company has license agreements with five third party
licensees. The licensees have the exclusive right to manufacture and sell
certain products under the Company's trademarks in specified territories. The
licenses provide for a royalty payment to the Company and typically establish
minimum annual royalty amounts. In Japan, the Company's license agreements cover
footwear, caps, sports bags, snowboards, apparel, watches and sunglasses. In
Germany, the license agreement covers a variety of bags and, in Italy, the
Company's license agreement covers apparel. The Company is generally permitted
to sell its licensed products through its retail stores and its distributors.
The Company's licenses have varying expiration dates, and are generally
extendable at the option of the licensee, provided certain conditions have been
met.
The Company believes additional opportunities exist to increase sales
of apparel and accessories bearing the VANS brand name and intends to expand the
product line in the future. The Company believes its licensing arrangements to
date have allowed it to best use its current resources while promoting a
consistent image for the VANS name worldwide. By moving to bring the apparel and
accessory business in-house, as appropriate, the Company believes it will be
able to enhance the designs of its casual apparel and accessories, as well as to
develop a line of functional apparel appropriate for use in alternative sports,
such as snowboarding. In connection with this strategy, in July 1996, the
Company terminated a license agreement with Oneita Industries, Inc. which
covered the manufacture and sale of caps, wovens (shorts), shirts and socks in
the United States, and established an in-house apparel group.
COMPETITION
The athletic and casual footwear industry is highly competitive. The
Company competes with a number of domestic and foreign manufacturers of
footwear. Many of the Company's competitors, such as Nike, Inc., Reebok
International Ltd., adidas AG and Fila Holding SpA, have significantly greater
financial resources than the Company, have full lines of product offerings,
compete with the Company and VFEL in the Far East for manufacturing sources and
spend substantially more on product advertising than the Company. The general
availability of offshore shoe manufacturing capacity allows for rapid expansion
by competitors and new entrants in the footwear market. In the casual footwear
market, the Company competes with a number of companies, such as Airwalk,
Converse Inc. and Stride Rite Corporation (Keds), many of which may have
significantly greater financial and other resources than the Company.
The Company is a relatively new entrant in the snowboard boot business.
Although the Company has experienced strong initial sales of its line of
snowboard boots, it faces strong competition from well-established competitors,
most notably Airwalk and Burton Snowboards, Inc., the domestic industry leaders.
Snowboarding is a relatively new sport and there can be no assurance that it
will continue to grow at the rate experienced in recent years, or that its
popularity will not decline. Moreover, the market for snowboards is
characterized by image-conscious consumers. The failure by the Company to
accurately predict and target future trends or to maintain its progressive image
could have a material adverse effect on its snowboard boot sales. The Company
believes that its future success in the snowboard boot market will depend, in
part, on its ability to introduce innovative, well-received products, and there
can be no assurance of its ability to do so.
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The Company competes primarily on the basis of brand image, design,
price, performance, quality, style and color selection and manufacturing and
delivery performance. While the Company believes that it generally competes
favorably with respect to such factors, any failure to do so could have a
material adverse impact on the Company's business, financial condition and
results of operations.
BACKLOG
As of August 20, 1996, the Company's backlog of orders for delivery in
the second quarter of fiscal 1997 was approximately $13.0 million, as compared
to approximately $8.8 million as of August 20, 1995. The Company's backlog
amounts exclude orders from the Company's retail stores. The Company has
recently expanded its futures program which offers the Company's national
accounts a discount for placing orders early. In addition, increased
international sales have contributed to backlog as such sales typically have
longer lead times. The Company's backlog also depends upon a number of other
factors, including the timing of trade shows, during which a significant
percentage of the Company's orders are received, the timing of shipments,
product mix of customer orders and the amount of in-season orders. As a result
of these and other factors, period-to-period comparisons of backlog may not
necessarily be meaningful.
In addition, the Company has historically shipped less than all orders
in its backlog and a large portion of its products late in the quarter. As a
result, the Company may not learn of sales shortfalls until late in any
particular fiscal quarter, which could result in an immediate and adverse effect
on the Company's business, financial condition and results of operations.
INTELLECTUAL PROPERTY
The Company holds trademarks, copyrights and patents on its products,
brand names and designs which the Company believes are material to its business.
The Company has made federal, state and international filings with respect to
its material intellectual property, and intends to keep these filings current.
The Company believes that its rubber "Off the Wall" sole design, the VANS
trademark, and the logo incorporating the VANS trademark are significant to its
business as they have been in use for many years and have gained acceptance
among consumers and in the footwear industry. The Company is aware of
potentially conflicting trademark claims in the United States, as well as
certain countries in Europe, South America and the Far East, and is currently
engaged in, or contemplating trademark opposition or other legal proceedings,
with respect to these claims. There can be no assurance that the Company will be
able to use all of its trademarks in any of the jurisdictions where conflicts
exist. The Company regards its trademarks and other proprietary rights as
valuable assets and believes that they have significant value in the marketing
of its products. The Company vigorously protects its trademarks against
infringement both in the United States and internationally, including through
the use of cease and desist letters, administrative proceedings and lawsuits.
ENVIRONMENTAL MATTERS
In the ordinary course of business, the Vista Facility generates a
small amount of hazardous waste which is stored on-site and transported off-site
by registered waste haulers for disposal at permitted disposal facilities. The
Company holds permits from local jurisdictions for discharging waste water,
storing hazardous materials, emitting air pollutants, and operating an air
pollution control system and certain other machinery. The Company believes that
it is in substantial compliance with all applicable rules and regulations of
federal, state and local environmental regulatory agencies.
EMPLOYEES
As of August 17, 1996, the Company had 1,092 employees. Of the
Company's 1,092 employees, 896 are full-time employees and 196 are part-time
employees (most of whom work at the Company's retail stores). The Company
considers its employee relations to be satisfactory. The Company has never
suffered a material interruption of business caused by labor disputes.
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ITEM 2. PROPERTIES
Vista, California Manufacturing Facility. The Company leases
the 90,400 square foot Vista Facility. The term of the lease is eleven years and
six months, with two consecutive five-year extension options. The rental
structure under the lease is triple net. The current monthly base rent under the
lease is $39,107. Every 24 months a cost of living increase occurs with a
minimum of six percent (three percent per year) and a maximum of twelve percent
(six percent per year) increase. The monthly rent for each new period of two
years is adjusted by the percentage increase in the C.P.I. Index (LA/Long Beach)
for the two-year period immediately preceding.
City of Industry Distribution Center. The Company leases
approximately 127,000 square feet in the City of Industry, California which
house its warehouse operations. The lease has an initial term of five years and
the Company has one option to extend the lease an additional three years. The
rental structure under the lease is triple net. The current monthly base rent is
$31,680, which will increase to $34,848 in the thirty-third month of the lease.
If the option to extend the lease is exercised, the monthly base rent will be
adjusted by the percentage increase in the C.P.I. Index (Long Beach, Anaheim,
Riverside), capped at 112.5% of the rent payable for the month immediately
preceding the date for rent adjustment. The Company intends to sublease the City
of Industry facility and relocate its warehouse operations to the Company's new
Santa Fe Springs facility in June 1997. See "Corporate Headquarters," below.
Retail Stores. Of the Company's 83 retail stores, two are
owned by the Company. Of the Company's 83 stores, 81 are leased (with an average
remaining term of 41 months), and 15 are on a month-to-month basis. The leases
have an annual rent of approximately $25 per square foot, with a majority of
these leases containing annual cost of living increases. Of the Company's 81
retail leases, 74 have terms that include renewal options, and 60 provide for
the payment of percentage rent in addition to a fixed monthly charge. The
Company leases two of its retail stores from the Company's founders. The Company
does not have any franchised stores.
Corporate Headquarters. The Company has entered into
agreements to lease its Orange, California facility to two companies. In
connection with these agreements, the Company is negotiating a lease for
approximately 180,000 square feet of space in Santa Fe Springs, California which
will house the Company's corporate headquarters and warehouse operations. The
proposed lease would commence as of March 1, 1997 with respect to the office
space, and June 1, 1997 with respect to the warehouse space. The term of the
proposed lease would be 10 years. The rental structure under the proposed lease
would be triple net. The initial monthly rent would be $66,600 per month. Such
rent would be adjusted according to the C.P.I. Index throughout the term of the
lease.
The Company believes that its operating facilities and retail
space are adequate for its current needs.
ITEM 3. LEGAL PROCEEDINGS
SECURITIES LITIGATION. In June 1995, a class action lawsuit
was filed in the Federal District Court for the Central District of California
alleging violations of the Federal securities laws by the Company and certain of
its present and former officers and directors and seeking unspecified damages.
On February 6, 1996, the Company reached an agreement-in- principle to settle
this lawsuit. The settlement provides for the Company's insurance carrier to pay
$1,000,000, which comprises the entire settlement amount. The Company paid no
portion of the settlement amount and admitted no liability in connection
therewith. On July 22, 1996, the Court entered an order approving the settlement
and dismissing this case with prejudice.
SWITCH PATENT LITIGATION. The Company has been advised that
Switch has been sued for patent infringement by Mark Raines, Gregory Deeney and
Preston Binding Company ("Preston"), a division of Ride, Inc. ("Ride"). The suit
alleges that the Switch binding system infringes the patent of a binding system
developed by Messrs. Raines and Deeney which was subsequently assigned to
Preston. Switch has responded to the suit by filing an answer denying such
allegations and a complaint against Preston and Ride seeking a declaratory
judgment of patent non-infringement and damages for alleged bad faith
allegations of patent infringement.
Additionally, the Company has been advised by Switch that K2
Corporation ("K2") has notified Switch that, in its opinion, Switch's binding
system infringes certain allowed claims in a U.S. patent application filed by
K2. To the Company's knowledge, no litigation has commenced in this matter.
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The Company has not been named as a defendant in the Preston
suit or threatened with litigation in either of the foregoing matters; however,
there can be no assurance that the Company will not be named in the Preston suit
or any potential litigation which might arise between Switch and K2, and there
can be no assurance as to the outcome of the litigation between Switch and
Preston and Ride or any potential litigation between Switch and K2. In the event
Switch is found liable in the Preston suit or in any suit that may be filed by
K2, the Company may be unable to use the Switch step-in boot binding system,
which could adversely impact the Company's competitive position in the snowboard
boot market.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by
reference to the disclosure under the caption "Stock Data" on page 36 of the
Company's 1996 Annual Report to Stockholders, which Report is attached hereto as
Exhibit 13 and will be furnished to the Securities and Exchange Commission (the
"Commission") and the Company's stockholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein
by reference to the disclosure under the caption "Selected Financial Data" on
page 35 of the Company's 1996 Annual Report to Stockholders, which Report is
attached hereto as Exhibit 13 and will be furnished to the Commission and the
Company's stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated herein
by reference to the disclosure under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on page 8 of the
Company's 1996 Annual Report to Stockholders, which Report is attached hereto as
Exhibit 13 and will be furnished to the Commission and the Company's
stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Financial Statements and the Notes
thereto, listed in the Index set forth at page F-1 hereof, are incorporated
herein by reference to pages 17-32 of the Company's 1996 Annual Report to
Stockholders, which Report is attached hereto as Exhibit 13 and will be
furnished to the Commission and the Company's stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated herein
by reference to the captions "Proposal 1 Election of Directors," Information
Relating to Executive Officers" and "Section 16(a) Beneficial Ownership
Reporting Compliance" on pages 3, 7, and 15 of the Proxy Statement for the
Company's 1996 Annual Meeting of Stockholders, which will be filed with the
Commission within 120 days after the end of the fiscal year covered by this
report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein
by reference to the caption "Executive Compensation and Other Information" on
page 9 of the Proxy Statement for the Company's 1996 Annual Meeting of
Stockholders, which will be filed with the Commission within 120 days after the
end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein
by reference to the caption "Security Ownership of Management and Certain
Beneficial Owners" on page 2 of the Proxy Statement for the Company's 1996
Annual Meeting of Stockholders, which will be filed with the Commission within
120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein
by reference to the disclosure under the caption "Certain Transactions" on page
15 of the Proxy Statement for the Company's 1996 Annual Meeting of Stockholders,
which will be filed with the Commission within 120 days after the end of the
fiscal year covered by this Report.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The Company's Financial Statements and the Notes thereto,
listed in the Index to Financial Information located at page
F-1 of this report, are incorporated into Item 8 of this
report by reference to pages 17-32 of the Company's 1996
Annual Report to Stockholders, which is attached hereto as
Exhibit 13 and will be furnished to the Commission and to the
Company's stockholders.
(2) FINANCIAL STATEMENT SCHEDULES
The Financial Statement Schedule and the report of independent
auditors thereon are set forth at pages F-2 and F-3 of this
report.
(3) EXHIBITS
EXHIBIT NO. EXHIBIT DESCRIPTION
(8) 2.1 Agreement of Merger between the Registrant and Van Doren Rubber, dated July 31,
1991
(2) 2.1 Certificate of Ownership and Merger (Delaware) of Van Doren Rubber into the
Registrant, dated August 19, 1991
(2) 2.2 Certificate of Ownership (California) of the Registrant and Van Doren Rubber, dated
August 19, 1991
(2) 3.1 Restated Certificate of Incorporation of the Registrant, dated August 30, 1991
(2) 3.1.1 Certificate of Retirement of Class A and Class B Preferred Stock
of the Registrant, dated August 29, 1991
(2) 3.2 Restated By-laws of the Registrant
(6) 3.2.1 Amendment No. 1 of Restated By-laws of the Registrant
(6) 3.2.2 Amendment No. 2 of Restated By-laws of the Registrant
(8) 3.3 Certificate of Designation of Preferences and Rights of Series A Junior
Participating Preferred Stock of the Registrant
4.1 Reference is made to Exhibits 3.1 and 3.2
(8) 4.2 Specimen Stock Certificate
(2) 4.12 Note Purchase Agreement, dated as of August 21, 1991, between the Registrant and
holders of the Registrant's Senior Notes due August 1, 1999 (executed composite)
(6) 4.12.1 Amendment No. 1 to the Note Purchase Agreement, dated as of August 5, 1993,
by and between the Registrant and Teachers Insurance and Annuity Association
(the "Teachers Note Agreement") re: Fixed Charge Coverage Ratio
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EXHIBIT NO. EXHIBIT DESCRIPTION
(6) 4.12.2 Amendment No. 2 to Note Purchase Agreement, dated as of August 9, 1993,
by and among the Registrant and Connecticut General Life Insurance
Company, Connecticut General Life Insurance Company, on behalf of
one or more separate accounts, and Life Insurance Company of North America
(the "CIGNA Note Agreement") re: Fixed Charge Coverate Ratio
(4) 4.12.3 Amendment No. 2 to the Teachers Note Agreement, dated as of December 15,
1993, re: Fixed Charge Coverage Ratio
(4) 4.12.4 Amendment No. 2 to the CIGNA Note Agreement, dated as of December 20,
1993, re: Fixed Charge Coverage Ratio
(9) 4.12.5 Amendment No. 3 to the Teachers Note Agreement, dated as of May 13,
1994, re: Fixed Charge Coverage Ratio
(9) 4.12.6 Amendment No. 3 to the CIGNA Note Agreement, dated as of May 23, 1994,
re: Fixed Charge Coverage Ratio
(10) 4.12.7 Modification Letter, dated as of July 1, 1995, by and among the Registrant,
Teachers and Cigna, regarding amending the Teachers and Cigna Note Agreements.
(14) 4.12.8 Modification Letter No.2 , dated as of August 25, 1995, by and among the Registrant,
Teachers and Cigna
(15) 4.12.9 Modification Letter No.3, dated as of March 29, 1996, by and among the Registrant,
Teachers and Cigna
(7) 4.13 Form of Preferred Stock Purchase Rights Certificate
(7) 4.14 Rights Agreement, dated as of February 22, 1994, by and between the Registrant and
Chemical Trust Company of California, as Rights Agent
(6) 10.1 Management Services Agreement, dated as of February 16, 1988, by and between Van
Doren Rubber Company, Inc., the Registrant's predecessor ("Van Doren Rubber"), and
McCown De Leeuw & Co.
(6) 10.1.1 Amendment to Management Services Agreement, dated as of July 11, 1991, by and between
Van Doren Rubber and MDC Management Company ("MDC Management Agreement")
(11) 10.1.2 Amendment No. 2 to the MDC Management Agreement
(6) 10.2 MDV Holdings, Inc. (now known as Vans, Inc.) Incentive Stock Option Plan
(6) 10.2.1 Amendment No. 1 to MDV Holdings, Inc. Incentive Stock Option Plan
dated June 28, 1991
(2) 10.3 Standard Industrial Lease-Net, dated as of May 27, 1992, by and between the Registrant
and Golden West Vista Associates (the "Vista Lease")
(9) 10.3.1 Amendment No. 1 to the Vista Lease
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EXHIBIT NO. EXHIBIT DESCRIPTION
(9) 10.3.2 Letter Agreement modifying Amendment No. 1 to the Vista Lease
(3) 10.4 Employment Agreement, dated as of July 1, 1992, by and between the Registrant
and Craig E. Gosselin
(6) 10.5 1991 Long-Term Incentive Plan
(2) 10.5.1 Amendment No. 1 to 1991 Long-Term Incentive Plan
(2) 10.5.2 Amendment No. 2 to 1991 Long-Term Incentive Plan
(9) 10.5.3 Amendment No. 3 to the 1991 Long-Term Incentive Plan
(11) 10.5.4 Amendment No. 4 to the 1991 Long-Term Incentive Plan
(11) 10.5.5 Amendment No. 5 to the 1991 Long-Term Incentive Plan
(6) 10.6 International Distributor Agreement, dated as of December 7, 1992, by and between W.
P. Lavori In Corso s.r.l. and the Registrant
(6) 10.7 Trademark License Agreement, dated as of December 7, 1992, by and between W. P.
Lavori In Corso s.r.l. and the Registrant (the "Lavori Trademark Agreement")
(1) 10.7.1 Letter of Agreement, dated December 3, 1995, amending the Lavori Trademark
Agreement
(6) 10.8 Software License Agreement, dated March 31, 1993, by and between the Registrant and
J.D. Edwards Software, Inc., and Addenda thereto
(6) 10.9 License Agreement for Software Products, dated July 29, 1993, by and between the
Island Pacific Systems Corporation and the Registrant
(6) 10.10 Software License Agreement, dated as of May 27, 1993, by and between the Registrant
and STR, Inc.
(9) 10.11 Incentive Stock Option Agreement, dated as of September 22, 1993, by and between the
Registrant and Walter E. Schoenfeld, covering 30,000 shares
(9) 10.12 Incentive Stock Option Agreement, dated as of September 22, 1993, by and between the
Registrant and Walter E. Schoenfeld, covering 100,000 shares
(10) 10.13 Agency Agreement, dated as of June 15, 1994, by and between the Registrant and Sung
Won International
(10) 10.14 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
William C. Mann
(9) 10.15 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
Sari K. Ratsula
(10) 10.16 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
Steven J. Van Doren
21
22
EXHIBIT NO. EXHIBIT DESCRIPTION
(11) 10.17 Separation Agreement, dated as of May 31, 1995, by and between the Registrant and
Karen J. Ratcliff
(9) 10.18 Employment Agreement, dated as of July 12, 1993, by and between the Registrant and
Marc Gold
(9) 10.18.1 Letter Agreement, dated as of April 13, 1994, modifying the Employment Agreement by
and between the Registrant and Marc Gold
(9) 10.19 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
Gordon C. Lee, Jr.
(9) 10.20 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
Robert E. Diamond
(11) 10.21 Separation Agreement, dated as of May 11, 1995, by and between Christopher G. Staff
and the Registrant
(11) 10.22 Loan and Security Agreement, dated as of July 1, 1995, by and between the Registrant
and Bank of the West
(14) 10.22.1 First Amendment to Loan and Security Agreement, dated as of August 25, 1995, by and
between the Registrant and Bank of the West
(1) 10.22.2 Second Amendment to Loan and Security Agreement, dated as of November 8, 1995, by
and between the Registrant and Bank of the West
(13) 10.22.3 Third Amendment to Loan and Security Agreement, dated as of March 29, 1996, by and
between the Company and Bank of the West
(15) 10.22.4 Fourth Amendment to Loan and Security Agreement, dated as of April 11, 1996, by and
between the Company and Bank of the West
(1) 10.22.5 Fifth Amendment to Loan and Security Agreement, dated as of July 16, 1996, by and
between the Company and Bank of the West
(11) 10.23 Intercreditor Agreement, dated as of July 1, 1995, by and among the Registrant,
Bank of the West and Teachers and Cigna
(11) 10.24 Agreement, dated as of April 19, 1995, by and between International Trading
Corporation and the Registrant
(11) 10.25 Agreement, dated as of April 26, 1995, by and between Ssanyong Corporation and the
Registrant
(11) 10.26 Employment Agreement, dated as of May 25, 1995, by and between the Registrant
and Gary L. Dunlap
(11) 10.27 Letter, dated August 16, 1995, from First Interstate Bank of California to the Registrant
re non-compliance with covenants under Credit Agreement
22
23
EXHIBIT NO. EXHIBIT DESCRIPTION
(1) 10.28 Tour Title Sponsorship Agreement, dated as of May 8, 1996, by and between the
Registrant and C.C.R.L., LLC
(12) 10.29 License Agreement dated as of August 10, 1995, by and between the Registrant and
Switch Manufacturing
(12) 10.30 Amendment, dated as of January 5, 1995, by and between the Registrant and Switch
Manufacturing
(12) 10.31 Trademark License Agreement, dated as of November 15, 1995, by and between the
Registrant and Oneita Industries
(12) 10.32 Employment Agreement, dated as of September 1, 1995, by and between the Registrant
and Gary H. Schoenfeld
(12) 10.33 Incentive Stock Option, dated as of September 1, 1995, by and between the Registrant
and Gary H. Schoenfeld
(13) 10.34 Employment Agreement dated as of December 1, 1995, by and between Walter E.
Schoenfeld and the Registrant
(13) 10.35 Incentive Stock Option Agreement, dated as of May 11, 1995, by and between Walter E.
Schoenfeld and the Registrant
(13) 10.36 Amendment to Incentive Stock Option of Walter E. Schoenfeld, dated as of January 8,
1996
(13) 10.37 Financing Agreement, dated as of March 29, 1996, by and between the Registrant and
Ssangyong (U.S.A.), Inc.
(13) 10.38 Letter, dated March 7, 1996, from Gary H. Schoenfeld to Ssangyong Corporation re the
Financing Agreement
(13) 10.39 Intercreditor Agreement, dated as of March 29, 1996, by and among the Registrant,
Ssangyong (U.S.A.), Inc., Bank of the West, Cigna and Teachers
(13) 10.40 Security Agreement, dated as of March 29, 1996, by and between the Registrant, and
Ssangyong (U.S.A.), Inc.
(13) 10.41 Security Agreement, dated as of March 29, 1996, by and between Vans Footwear
International, Inc. and Ssangyong (U.S.A.), Inc.
(13) 10.42 Trademark Security Agreement and Collateral Assignment of Trademarks, dated as of
March 29, 1996, by and among the Registrant, Cigna and Teachers
(11) 10.43 Security Agreement, dated as of March 29, 1996, by and among the Registrant, Cigna
and Teachers
(1) 10.44 Employment Agreement, dated as of February 14, 1996, by and between Kyle B.
Wescoat and the Registrant
(1) 10.45 Employment Agreement, dated as of January 22, 1996, by and between Robert H.
Camarena and the Registrant
23
24
EXHIBIT NO. EXHIBIT DESCRIPTION
(1) 10.46 Separation and Consulting Agreement, dated as of January 2, 1996, by and between
Joseph C. Gaspers and the Registrant
(1) 10.47 UCC-2 Termination Statement terminating the security interest of Cigna and Teachers
in certain assets of the Registrant
(1) 10.48 Release of Grant of Security Interest in the Registrant's Trademarks executed by Cigna
and Teachers
(1) 10.49 Employment Agreement, dated July 1, 1996, by and between the Registrant and John T.
Dickinson
(1) 10.50 Employment Agreement, dated July 1, 1996, by and between the Registrant and
Brentton Ji
(1) 10.51 Employment Agreement, dated July 1, 1996, by and between the Registrant and Charles
C. Kupfer
(1) 10.52 Standard Industrial/Commercial Single Tenant Lease - Gross, dated August 15, 1996,
by and between the Registrant and CAPCO, Inc.
(1) 10.53 Standard Industrial/Commercial Single Tenant Lease - Net, dated July 22, 1996, by and
between the Registrant and Orange Engineering & Machine, Inc.
(1) 10.54 Trust Under Vans, Inc. Deferred Compensation Plan, dated as of June 1, 1996
(1) 10.55 Deferred Compensation Agreement for Walter Schoenfeld, dated as of June 1, 1996
(1) 13 1996 Annual Report to Stockholders
(1) 22 List of Subsidiaries
23.1 Consent of Independent Auditors re: Form S-8 Registration Statements is included in
their opinion set forth at page F-2 of this report
(1) 27 Financial Data Schedule
- -------------------------------------------------
(1) Filed herewith.
(2) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended May 31, 1992, and incorporated herein by this reference
(3) Filed as an exhibit to Amendment No. 1 to the Registrant's Annual Report on
Form 10-K for the year ended May 31, 1992, and incorporated herein by this
reference
(4) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended November 28,1993, and incorporated herein by this
reference
(5) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended February 27, 1994, and incorporated herein by this
reference
(6) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended May 31, 1993, and incorporated herein by this reference
24
25
(7) Filed as an exhibit to the Registrant's Form 8-A Registration Statement
(SEC File No. 0-19402), and incorporated herein by this reference
(8) Filed as an exhibit to the Registrant's Form 8-K, dated February 15, 1994,
and incorporated herein by this reference
(9) Filed as an exhibit to the Registrant's Form 10-K for the year ended May
31, 1994, and incorporated herein by this reference
(10) Filed as an exhibit to Amendment No.1 to the Registrant's Annual Report on
Form 10-K for the year ended May 31, 1994, and incorporated herein by this
reference
(11) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended May 31, 1995
(12) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended November 25, 1995, and incorporated herein by this
reference
(13) File as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended February 24, 1996, and incorporated herein by this
reference
(14) Filed as an exhibit to the Registrant's Form 8-K, dated October 17, 1995,
and incorporated herein by this reference
(15) Filed as an exhibit to the Registrant's Form S-3 Registrant Statement,
filed with the Securities and Exchange Commission on April 5, 1996 (File
No. 333-3272), and incorporated herein by this reference
25
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
VANS, INC.
(Registrant)
BY: /s/ Walter E. Schoenfeld Date: August 22, 1996
------------------------
Walter E. Schoenfeld
Chairman of the Board and Chief Executive Officer
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
on the dates indicated.
/s/ Walter E. Schoenfeld Date: August 22, 1996
- ------------------------
Walter E. Schoenfeld
Chairman of the Board, Chief Executive Officer
and Director (Principal Executive Officer)
/s/ Kyle B. Wescoat Date: August 22, 1996
- -------------------
Kyle B. Wescoat
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ George E. McCown Date: August 22, 1996
- --------------------
George E. McCown
Director
/s/ David E. De Leeuw Date: August 22, 1996
- ---------------------
David E. De Leeuw
Director
/s/ Gary H. Schoenfeld Date: August 22, 1996
- ----------------------
Gary H. Schoenfeld
Director
/s/ Philip H. Schaff, Jr. Date: August 22, 1996
- -------------------------
Philip H. Schaff, Jr.
Director
/s/ Wilbur J. Fix Date: August 22, 1996
- ------------------------------------
Wilbur J. Fix
Director
/s/ James R. Sulat Date: August 22, 1996
- ------------------
James R. Sulat
Director
/s/ Kathleen M. Gardarian Date: August 22, 1996
- -------------------------
Kathleen M. Gardarian
Director
26
27
/s/ Lisa M. Douglas Date: August 22, 1996
- -------------------
Lisa M. Douglas
Director
27
28
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE NO.
(8) 2.1 Agreement of Merger between the Registrant and Van Doren Rubber, dated July 31,
1991
(2) 2.1 Certificate of Ownership and Merger (Delaware) of Van Doren Rubber into the
Registrant, dated August 19, 1991
(2) 2.2 Certificate of Ownership (California) of the Registrant and Van Doren Rubber, dated
August 19, 1991
(2) 3.1 Restated Certificate of Incorporation of the Registrant, dated August 30, 1991
(2) 3.1.1 Certificate of Retirement of Class A and Class B Preferred Stock
of the Registrant, dated August 29, 1991
(2) 3.2 Restated By-laws of the Registrant
(6) 3.2.1 Amendment No. 1 of Restated By-laws of the Registrant
(6) 3.2.2 Amendment No. 2 of Restated By-laws of the Registrant
(8) 3.3 Certificate of Designation of Preferences and Rights of Series A Junior
Participating Preferred Stock of the Registrant
4.1 Reference is made to Exhibits 3.1 and 3.2
(8) 4.2 Specimen Stock Certificate
(2) 4.12 Note Purchase Agreement, dated as of August 21, 1991, between the Registrant and
holders of the Registrant's Senior Notes due August 1, 1999 (executed composite)
(6) 4.12.1 Amendment No. 1 to the Note Purchase Agreement, dated as of August 5, 1993,
by and between the Registrant and Teachers Insurance and Annuity Association
(the "Teachers Note Agreement") re: Fixed Charge Coverage Ratio
(6) 4.12.2 Amendment No. 2 to Note Purchase Agreement, dated as of August 9, 1993,
by and among the Registrant and Connecticut General Life Insurance
Company, Connecticut General Life Insurance Company, on behalf of
one or more separate accounts, and Life Insurance Company of North America
(the "CIGNA Note Agreement") re: Fixed Charge Coverate Ratio
(4) 4.12.3 Amendment No. 2 to the Teachers Note Agreement, dated as of December 15,
1993, re: Fixed Charge Coverage Ratio
(4) 4.12.4 Amendment No. 2 to the CIGNA Note Agreement, dated as of December 20,
1993, re: Fixed Charge Coverage Ratio
(9) 4.12.5 Amendment No. 3 to the Teachers Note Agreement, dated as of May 13,
1994, re: Fixed Charge Coverage Ratio
28
29
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE NO.
(9) 4.12.6 Amendment No. 3 to the CIGNA Note Agreement, dated as of May 23, 1994,
re: Fixed Charge Coverage Ratio
(10) 4.12.7 Modification Letter, dated as of July 1, 1995, by and among the Registrant,
Teachers and Cigna, regarding amending the Teachers and Cigna Note Agreements.
(14) 4.12.8 Modification Letter No.2 , dated as of August 25, 1995, by and among the Registrant,
Teachers and Cigna
(15) 4.12.9 Modification Letter No.3, dated as of March 29, 1996, by and among the Registrant,
Teachers and Cigna
(7) 4.13 Form of Preferred Stock Purchase Rights Certificate
(7) 4.14 Rights Agreement, dated as of February 22, 1994, by and between the
Registrant and Chemical Trust Company of California, as Rights Agent
(6) 10.1 Management Services Agreement, dated as of February 16, 1988, by and between Van
Doren Rubber Company, Inc., the Registrant's predecessor ("Van Doren Rubber"), and
McCown De Leeuw & Co.
(6) 10.1.1 Amendment to Management Services Agreement, dated as of
July 11, 1991, by and between Van Doren Rubber and
MDC Management Company ("MDC Management Agreement")
(11) 10.1.2 Amendment No. 2 to the MDC Management Agreement
(6) 10.2 MDV Holdings, Inc. (now known as Vans, Inc.) Incentive Stock Option Plan
(6) 10.2.1 Amendment No. 1 to MDV Holdings, Inc. Incentive Stock Option Plan
dated June 28, 1991
(2) 10.3 Standard Industrial Lease-Net, dated as of May 27, 1992, by and between the Registrant
and Golden West Vista Associates (the "Vista Lease")
(9) 10.3.1 Amendment No. 1 to the Vista Lease
(9) 10.3.2 Letter Agreement modifying Amendment No. 1 to the Vista Lease
(3) 10.4 Employment Agreement, dated as of July 1, 1992, by and between the Registrant
and Craig E. Gosselin
(6) 10.5 1991 Long-Term Incentive Plan
(2) 10.5.1 Amendment No. 1 to 1991 Long-Term Incentive Plan
(2) 10.5.2 Amendment No. 2 to 1991 Long-Term Incentive Plan
(9) 10.5.3 Amendment No. 3 to the 1991 Long-Term Incentive Plan
29
30
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE NO.
(11) 10.5.4 Amendment No. 4 to the 1991 Long-Term Incentive Plan
(11) 10.5.5 Amendment No. 5 to the 1991 Long-Term Incentive Plan
(6) 10.6 International Distributor Agreement, dated as of December 7, 1992, by and between W.
P. Lavori In Corso s.r.l. and the Registrant
(6) 10.7 Trademark License Agreement, dated as of December 7, 1992, by and between W. P.
Lavori In Corso s.r.l. and the Registrant (the "Lavori Trademark Agreement")
(1) 10.7.1 Letter of Agreement, dated December 3, 1995, amending the Lavori Trademark
Agreement
(6) 10.8 Software License Agreement, dated March 31, 1993, by and between the Registrant and
J.D. Edwards Software, Inc., and Addenda thereto
(6) 10.9 License Agreement for Software Products, dated July 29, 1993, by and between the
Island Pacific Systems Corporation and the Registrant
(6) 10.10 Software License Agreement, dated as of May 27, 1993, by and between the Registrant
and STR, Inc.
(9) 10.11 Incentive Stock Option Agreement, dated as of September 22, 1993, by and between the
Registrant and Walter E. Schoenfeld, covering 30,000 shares
(9) 10.12 Incentive Stock Option Agreement, dated as of September 22, 1993, by and between the
Registrant and Walter E. Schoenfeld, covering 100,000 shares
(10) 10.13 Agency Agreement, dated as of June 15, 1994, by and between the Registrant and Sung
Won International
(10) 10.14 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
William C. Mann
(9) 10.15 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
Sari K. Ratsula
(10) 10.16 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
Steven J. Van Doren
(11) 10.17 Separation Agreement, dated as of May 31, 1995, by and between the Registrant and
Karen J. Ratcliff
(9) 10.18 Employment Agreement, dated as of July 12, 1993, by and between the Registrant and
Marc Gold
(9) 10.18.1 Letter Agreement, dated as of April 13, 1994, modifying the Employment Agreement by
and between the Registrant and Marc Gold
(9) 10.19 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
Gordon C. Lee, Jr.
30
31
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE NO.
(9) 10.20 Employment Agreement, dated as of June 15, 1994, by and between the Registrant and
Robert E. Diamond
(11) 10.21 Separation Agreement, dated as of May 11, 1995, by and between Christopher G. Staff
and the Registrant
(11) 10.22 Loan and Security Agreement, dated as of July 1, 1995, by and between the Registrant
and Bank of the West
(14) 10.22.1 First Amendment to Loan and Security Agreement, dated as of August 25, 1995, by and
between the Registrant and Bank of the West
(1) 10.22.2 Second Amendment to Loan and Security Agreement, dated as of November 8, 1995, by
and between the Registrant and Bank of the West
(13) 10.22.3 Third Amendment to Loan and Security Agreement, dated as of March 29, 1996, by and
between the Company and Bank of the West
(15) 10.22.4 Fourth Amendment to Loan and Security Agreement, dated as of April 11, 1996, by and
between the Company and Bank of the West
(1) 10.22.5 Fifth Amendment to Loan and Security Agreement, dated as of July 16, 1996, by and
between the Company and Bank of the West
(11) 10.23 Intercreditor Agreement, dated as of July 1, 1995, by and among the Registrant,
Bank of the West and Teachers and Cigna
(11) 10.24 Agreement, dated as of April 19, 1995, by and between International Trading
Corporation and the Registrant
(11) 10.25 Agreement, dated as of April 26, 1995, by and between Ssanyong Corporation and the
Registrant
(11) 10.26 Employment Agreement, dated as of May 25, 1995, by and between the Registrant
and Gary L. Dunlap
(11) 10.27 Letter, dated August 16, 1995, from First Interstate Bank of California to the Registrant
re non-compliance with covenants under Credit Agreement
(1) 10.28 Tour Title Sponsorship Agreement, dated as of May 8, 1996, by and between the
Registrant and C.C.R.L., LLC
(12) 10.29 License Agreement dated as of August 10, 1995, by and between the Registrant and
Switch Manufacturing
(12) 10.30 Amendment, dated as of January 5, 1995, by and between the Registrant and Switch
Manufacturing
(12) 10.31 Trademark License Agreement, dated as of November 15, 1995, by and between the
Registrant and Oneita Industries
31
32
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE NO.
(12) 10.32 Employment Agreement, dated as of September 1, 1995, by and between the Registrant
and Gary H. Schoenfeld
(12) 10.33 Incentive Stock Option, dated as of September 1, 1995, by and between the Registrant
and Gary H. Schoenfeld
(13) 10.34 Employment Agreement dated as of December 1, 1995, by and between Walter E.
Schoenfeld and the Registrant
(13) 10.35 Incentive Stock Option Agreement, dated as of May 11, 1995, by and between Walter E.
Schoenfeld and the Registrant
(13) 10.36 Amendment to Incentive Stock Option of Walter E. Schoenfeld, dated as of January 8,
1996
(13) 10.37 Financing Agreement, dated as of March 29, 1996, by and between the Registrant and
Ssangyong (U.S.A.), Inc.
(13) 10.38 Letter, dated March 7, 1996, from Gary H. Schoenfeld to Ssangyong Corporation re the
Financing Agreement
(13) 10.39 Intercreditor Agreement, dated as of March 29, 1996, by and among the Registrant,
Ssangyong (U.S.A.), Inc., Bank of the West, Cigna and Teachers
(13) 10.40 Security Agreement, dated as of March 29, 1996, by and between the Registrant, and
Ssangyong (U.S.A.), Inc.
(13) 10.41 Security Agreement, dated as of March 29, 1996, by and between Vans Footwear
International, Inc. and Ssangyong (U.S.A.), Inc.
(13) 10.42 Trademark Security Agreement and Collateral Assignment of Trademarks, dated as of
March 29, 1996, by and among the Registrant, Cigna and Teachers
(13) 10.43 Security Agreement, dated as of March 29, 1996, by and among the Registrant, Cigna
and Teachers
(1) 10.44 Employment Agreement, dated as of February 14, 1996, by and between Kyle B.
Wescoat and the Registrant
(1) 10.45 Employment Agreement, dated as of January 22, 1996, by and between Robert H.
Camarena and the Registrant
(1) 10.46 Separation and Consulting Agreement, dated as of January 2, 1996, by and between
Joseph C. Gaspers and the Registrant
(1) 10.47 UCC-2 Termination Statement terminating the security interest of Cigna and Teachers
in certain assets of the Registrant
(1) 10.48 Release of Grant of Security Interest in the Registrant's Trademarks executed by Cigna
and Teachers
(1) 10.49 Employment Agreement, dated July 1, 1996, by and between the Registrant and John T.
Dickinson
32
33
EXHIBIT NO. EXHIBIT DESCRIPTION PAGE NO.
(1) 10.50 Employment Agreement, dated July 1, 1996, by and between the Registrant and
Brentton Ji
(1) 10.51 Employment Agreement, dated July 1, 1996, by and between the Registrant and Charles
C. Kupfer
(1) 10.52 Standard Industrial/Commercial Single Tenant Lease - Gross, dated August 15, 1996,
by and between the Registrant and CAPCO, Inc.
(1) 10.53 Standard Industrial/Commercial Single Tenant Lease - Net, dated July 22, 1996, by and
between the Registrant and Orange Engineering & Machine, Inc.
(1) 10.54 Trust Under Vans, Inc. Deferred Compensation Plan, dated as of June 1, 1996
(1) 10.55 Deferred Compensation Agreement for Walter Schoenfeld, dated as of June 1, 1996
(1) 13 1995 Annual Report to Stockholders
(1) 22 List of Subsidiaries
23.1 Consent of Independent Auditors re: Form S-8 Registration Statements is included in
their opinion set forth at page F-2 of this report
(1) 27 Financial Data Schedule
- -------------------------------------------------
(1) Filed herewith.
(2) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended May 31, 1992, and incorporated herein by this reference
(3) Filed as an exhibit to Amendment No. 1 to the Registrant's Annual Report on
Form 10-K for the year ended May 31, 1992, and incorporated herein by this
reference
(4) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended November 28,1993, and incorporated herein by this
reference
(5) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended February 27, 1994, and incorporated herein by this
reference
(6) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended May 31, 1993, and incorporated herein by this reference
(7) Filed as an exhibit to the Registrant's Form 8-A Registration Statement
(SEC File No. 0-19402), and incorporated herein by this reference
(8) Filed as an exhibit to the Registrant's Form 8-K, dated February 15, 1994,
and incorporated herein by this reference
(9) Filed as an exhibit to the Registrant's Form 10-K for the year ended May
31, 1994, and incorporated herein by this reference
33
34
(10) Filed as an exhibit to Amendment No.1 to the Registrant's Annual Report on
Form 10-K for the year ended May 31, 1994, and incorporated herein by this
reference
(11) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended May 31, 1995
(12) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended November 25, 1995, and incorporated herein by this
reference
(13) File as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended February 24, 1996, and incorporated herein by this
reference
(14) Filed as an exhibit to the Registrant's Form 8-K, dated October 17, 1995,
and incorporated herein by this reference
(15) Filed as an exhibit to the Registrant's Form S-3 Registrant Statement,
filed with the Securities and Exchange Commission on April 5, 1996 (File
No. 333-3272), and incorporated herein by this reference
34
35
INDEX TO FINANCIAL INFORMATION
Data (i) attached hereto, and (ii) incorporated by reference from the Company's
1996 Annual Report to Stockholders:
ANNUAL REPORT TO
FORM 10-K STOCKHOLDERS
Consolidated Financial Statements:
Consolidated Balance Sheets as of May 31, 1996 and 1995 18
Consolidated Statements of Operations
for the Years Ended May 31, 1996, 1995 and 1994 19
Consolidated Statements of Stockholders' Equity
for the Years Ended May 31, 1996, 1995 and 1994 20
Consolidated Statements of Cash Flows
for the Years Ended May 31, 1996, 1995 and 1994 21
Notes to Consolidated Financial Statements 22
Independent Auditors' Report on Financial Statements 34
Report and Consent of Independent Auditors F-2
Schedule II - Valuation and Qualifying Accounts and F-3
Reserves
All other schedules are omitted because they are not required, are not
applicable, or the information is included in the Consolidated Financial
Statements or notes thereto.
F-1
36
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Vans, Inc.:
The audits referred to in our report dated July 19, 1996, included the
related financial statement schedule as of May 31, 1996, and for each of the
years in the three-year period ended May 31, 1996, incorporated by reference in
the registration statements on Form S-8 of Vans, Inc. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We consent to incorporation by reference in the registration statements
on Form S-8 of Vans, Inc. of our report dated July 19, 1996, relating to the
consolidated balance sheets of Vans, Inc. and subsidiaries as of May 31, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-year period ended May
31, 1996, and the related schedule, which report appears in the May 31, 1996
annual report on Form 10-K of Vans, Inc.
KPMG Peat Marwick LLP
Orange County, California
August 22, 1996
F-2
37
SCHEDULE II
Valuation and Qualifying Accounts and Reserves
Balance at
Beginning of Charged to Cost Deductions - Balance at
Period and Expenses Describe End of Period
------------ -------------- ------------ -------------
Year end May 31, 1994:
Allowance for
doubtful accounts $601,404 $ 518,593 $ 448,895(a) $ 671,102
Lower of cost or market
valuation allowance $825,772 $ $ 501,000(b) $ 324,772
Year end May 31, 1995:
Allowance for
doubtful accounts $671,102 $1,359,846 $1,218,317(a) $ 812,631
Lower of cost or market
valuation allowance $324,772 $ 275,228 $ $ 600,000
Year end May 31, 1996:
Allowance for
doubtful accounts $812,631 $ 762,295 $ 427,582(a) $1,147,344
Lower of cost or market
valuation allowance $600,000 $ $ $ 600,000
- ---------------------------------
(a) Charge-off of uncollectible accounts receivable.
(b) Reduction of specific reserves due to sale of related inventories.
F-3