UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 4, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-11609
TOYS "R" US,INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3260693
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
461 From Road, Paramus, New Jersey 07652
(Address of principal executive offices) (Zip Code)
(201)262-7800
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months(or for such shorter period
that the registrant has required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 28, 1996, 273,675,604 shares of common stock were outstanding.
<PAGE>
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets........................ 3
Condensed Consolidated Statements of Earnings................ 4
Condensed Consolidated Statements of Cash Flows.............. 5
Condensed Notes to Consolidated Financial Statements......... 6
Item 2. Management's Discussion - Results of Operations and Financial
Condition.................................................... 7
PART II - OTHER INFORMATION............................................... 8
SIGNATURES .......................................................... 9
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<TABLE>
Page 3
TOYS "R" US, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
<CAPTION>
May 4, April 29, February 3,
1996 1995 1996
<S> <C> <C> <C>
ASSETS (Unaudited) (Unaudited)
Current Assets:
Cash and cash equivalents................................ $ 378.0 $ 248.8 $ 202.7
Accounts and other receivables........................... 150.2 100.9 128.9
Merchandise inventories.................................. 2,343.8 2,393.6 1,999.5
Prepaid expenses and other current assets................ 110.6 63.7 87.8
Total current assets................................ 2,982.6 2,807.0 2,418.9
Property and equipment, net and other assets................ 4,214.3 4,233.6 4,318.6
$ 7,196.9 $ 7,040.6 $ 6,737.5
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings.................................... $ 985.1 $ 902.2 $ 332.8
Accounts payable......................................... 1,278.1 1,186.4 1,182.0
Accrued expenses and other current liabilities........... 336.9 305.8 438.1
Income taxes payable..................................... 83.2 74.5 139.9
Total current liabilities........................... 2,683.3 2,468.9 2,092.8
Long-term debt.............................................. 717.2 828.4 826.8
Deferred income taxes....................................... 237.0 242.1 228.7
Other liabilities........................................... 131.4 95.6 156.9
Stockholders' equity........................................ 3,428.0 3,405.6 3,432.3
$ 7,196.9 $ 7,040.6 $ 6,737.5
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
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<TABLE>
Page 4
TOYS "R" US, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share data)
<CAPTION>
13 Weeks Ended
May 4, April 29,
1996 1995
<S> <C> <C>
Net sales............................................. $ 1,645.5 $ 1,493.0
Costs and expenses:
Cost of sales....................................... 1,124.4 1,017.3
Selling, advertising, general & administrative...... 422.6 386.0
Depreciation and amortization....................... 49.0 44.5
Interest expense - net.............................. 19.8 15.9
1,615.8 1,463.7
Earnings before taxes on income....................... 29.7 29.3
Taxes on income....................................... 11.0 10.9
Net earnings.......................................... $ 18.7 $ 18.4
Earnings per share.................................... $.07 $.07
Common and common equivalent shares................... 275.5 280.9
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
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<TABLE>
Page 5
TOYS "R" US, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
<CAPTION>
13 Weeks Ended
May 4, April 29,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings......................................................... $ 18.7 $ 18.4
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization.................................... 49.0 44.5
Deferred income taxes............................................ 5.0 4.9
Changes in operating assets and liabilities:
Accounts and other receivables................................. (21.9) 15.0
Merchandise inventories........................................ (349.7) (394.5)
Prepaid expenses and other operating assets.................... (27.1) (16.9)
Accounts payable and other operating liabilities............... (86.5) (352.8)
Net cash used in operating activities......................... (412.5) (681.4)
Cash flows from investing activities:
Capital expenditures, net............................................ (58.5) (119.4)
Cash flows from financing activities:
Short-term borrowings, net........................................... 647.0 779.5
Long-term debt repayment............................................. (3.3) (1.4)
Exercise of stock options............................................ 5.9 3.6
Long-term borrowings................................................. - 7.4
Share repurchase program............................................. - (91.4)
Net cash provided by financing activities..................... 649.6 697.7
Effect of exchange rate changes on cash and cash equivalents......... (3.3) (17.9)
Cash and cash equivalents:
Increase/(decrease) during period.................................... 175.3 (121.0)
Beginning of period.................................................. 202.7 369.8
End of period........................................................ $ 378.0 $ 248.8
Supplemental disclosures of cash flow information:
Income taxes paid.................................................... $ 58.1 $ 134.1
Interest paid (net of amounts capitalized)........................... $ 23.0 $ 22.2
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
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Page 6
TOYS "R" US, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim Reporting
The interim financial statements are unaudited and are subject to
year-end adjustments. However, in the opinion of management, all known
adjustments (which consist only of normal recurring accruals) have been
made to present fairly the consolidated operating results for the
unaudited periods. Because of the seasonal nature of the Company's
business, results for interim periods are not indicative of results to
be expected for the fiscal year.
2. Earnings Per Share
Earnings per share for the thirteen weeks ended May 4, 1996 and April
29, 1995 are computed by dividing net earnings by the weighted average
number of common shares outstanding, after reduction for treasury
shares and assuming exercise of dilutive stock options computed by the
treasury stock method using the average market price during the period.
3. Reclassification
Certain amounts in the April 29, 1995 Condensed Consolidated Balance
Sheet have been reclassified to conform with the May 4, 1996 presentation.
4. Contingencies
See Part II - Item I - Legal Proceedings
<PAGE>
Page 7
MANAGEMENT'S DISCUSSION - RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations
Comparable USA toy store sales increased by 7% in the first quarter of 1996,
primarily driven by strong sales of video hardware, juvenile furniture, dolls
and consumables. International toy stores and Kids "R" Us children's clothing
stores also experienced an increase in comparable store sales. Total sales
increased by approximately $153 million or 10.2% in the first quarter of 1996 as
compared with the first quarter of 1995, primarily due to sales from new toy and
children's clothing stores and an overall increase in comparable store sales.
Cost of sales, as a percentage of sales, increased to 68.3% in the first quarter
of 1996 from 68.1% in the first quarter of 1995, primarily due to a shift in the
sales mix to lower margin video hardware products and consumables.
Selling, advertising, general and administrative expenses as a percentage of
sales decreased to 25.7% for the first quarter of 1996 versus 25.9% for the
first quarter of 1995, primarily as a result of overall comparable store sales
increases and effective expense management.
Net interest expense increased in the first quarter of 1996 compared to the
first quarter of 1995, principally as a result of higher average short-term
borrowings during most of the quarter.
The effective tax rate remained constant at 37% for both the first quarters of
1996 and 1995.
Since February 3, 1996, foreign currency exchange rates have experienced
fluctuations; however, the impact on net earnings was not significant.
Financial Condition
The Company will open approximately 14 redesigned "Concept 2000" toy stores
in the United States in 1996, 3 of which will be retrofits of existing toy
stores. Including the "Concept 2000" format, the Company will open
approximately 35 new toy stores in the United States this year. Internationally,
the Company will add approximately 55 toy stores this year, including
approximately 20 franchise stores, 13 of which were added during the first
quarter of 1996. The Company opened its first Babies "R" Us store in Westbury,
Long Island in May,1996 and plans to open an additional 7 to 9 stores this year.
The Company's new KidsWorld superstore design, combining all of the "R" Us
concepts under one roof will be showcased in 2 locations in 1996, one of which
will be a retrofit of a side by side Toys "R" Us and Kids "R" Us location.
Finally, the Company will open 8 to 10 new Kids "R" Us stores in the United
States this year.
Annual capital expenditures for new and existing facilities are estimated to be
approximately $550 million. Cash requirements for operations, capital
expenditures, lease commitments and the share repurchase program will be met
primarily through operating activities, borrowings under the $1 billion
revolving credit facility, issuance of short-term commercial paper and bank
borrowings by foreign subsidiaries.
<PAGE>
Page 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 22, 1996, the Staff of the Federal Trade Commission
(the "FTC") filed an administrative complaint against the
Company alleging that the Company is in violation of Section 5
of the Federal Trade Commission Act for its practices relating
to warehouse clubs. The complaint alleges that the Company
reached understandings with various suppliers that such
suppliers not sell to the clubs the same items that they sell
to the Company. The complaint also alleges that the Company
"facilitated understandings" among manufacturers that such
manufacturers not sell to clubs. The complaint seeks an order
that the Company cease and desist from this practice. Since
the filing of the FTC complaint, several class action suits
have been filed against the Company, alleging that the Company
has violated certain state competition laws as a consequence
of the behavior alleged in the FTC complaint. These class
action suits seek damages in unspecified amounts and other
relief under state law. The Company believes that both its
policy and its conduct in connection with the foregoing are
within the law and plans to contest the actions vigorously.
The Company also believes that these actions will not have a
material adverse effect on its business or financial condition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) The Company was not required to file any reports on Form 8-K
during the 13 weeks ended May 4, 1996.
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Page 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 14, 1996 Toys "R" Us, Inc.
-----------------
(Registrant)
s/Louis Lipschitz
(Signature)
Louis Lipschitz
Executive Vice President and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
The following is a list of all exhibits files as part of this document:
<TABLE>
<CAPTION>
Exhibit No. Page No. Document
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Earnings as reported
in the Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 378,000
<SECURITIES> 0
<RECEIVABLES> 150,200
<ALLOWANCES> 0
<INVENTORY> 2,343,800
<CURRENT-ASSETS> 2,982,600
<PP&E> 4,973,300
<DEPRECIATION> 1,124,700
<TOTAL-ASSETS> 7,196,900
<CURRENT-LIABILITIES> 2,683,300
<BONDS> 717,200
<COMMON> 30,000
0
0
<OTHER-SE> 3,398,000
<TOTAL-LIABILITY-AND-EQUITY> 7,196,900
<SALES> 1,645,500
<TOTAL-REVENUES> 1,645,500
<CGS> 1,124,400
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 49,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,800
<INCOME-PRETAX> 29,700
<INCOME-TAX> 11,000
<INCOME-CONTINUING> 18,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,700
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
