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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended February 3, 1996
[ ] 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
incorporation or organization) Identification No.)
461 From Road, Paramus, New Jersey 07652
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201)262-7800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $.10 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
[X]
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As of April 15, 1996, the aggregate market value of voting stock held
by non-affiliates of the registrant was $7,383,688,000.
As of April 15, 1996, 273,469,926 shares of the registrant's sole class
of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
The following documents, or portions thereof, have been incorporated
herein by reference: (i) portions of the registrant's Annual Report to
Stockholders for the fiscal year ended February 3, 1996 (the "Annual Report")
are incorporated by reference into Parts I and II hereof; and (ii) portions of
the registrant's definitive proxy statement for the 1996 Annual Meeting of
Stockholders (the "Proxy Statement") are incorporated by reference into Part
III hereof.
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PART I
Item 1. Business
As of April 15, 1996, Toys "R" Us, Inc. and its subsidiaries 1 are
principally engaged in the operation of 1,203 children's specialty retail
stores consisting of 651 U.S. and 338 international toy stores under the
name "Toys 'R' Us" and 214 children's clothing stores under the name
"Kids 'R' Us".
Worldwide Restructuring
On February 1, 1996, the Company announced a restructuring of its
worldwide operations and the early adoption of Financial Accounting Standards
Board ("FAS No. 121"), "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of". The restructuring program consists of
costs associated with the strategic repositioning of our inventory assortment.
In response to changes in the retailing market place, our merchandise assortment
will be streamlined by more than 20%, further enhancing our selection advantage
and improving overall store productivity and profitability. The restructuring
program also consists of the closings of 3 Toys "R" Us (2 of which have been
closed to date) and 12 Kids "R" Us stores in the United States, the franchising
or closings of 10 toy stores in Europe, and costs to consolidate 3 distribution
centers and 7 administrative facilities in the United States and Europe. The
restructuring plan and the adoption of FAS No. 121 resulted in charges of $396.6
million ($269.1 million, or
- -------------------
1 When used in this report the term "Company" refers to Toys "R" Us,
Inc. and its subsidiaries, the term "Toys "R" Us" refers only to the Toys
"R" Us U.S.A. toy specialty retail chain and the term "registrant" refers
only to Toys "R" Us, Inc., a Delaware corporation.
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$.98 cents per share, each net of tax benefits). The Company anticipates
that the majority of this charge will be utilized throughout 1996 as elements
of the restructuring are completed. In addition to the benefits from
streamlining our merchandise selection as described above, the restructuring
will also benefit the Company in two other important ways. First, the
restructuring will have a positive cash impact and improve the Company's
working capital. Second, the restructuring should enable the Company to achieve
operating efficiencies resulting in improved operating earnings in 1996 and
beyond. The Company estimates the restructuring should provide at least a $50
million benefit to operating earnings in 1996 and a greater amount in 1997 and
thereafter.
New Store Concepts
The Company is planning to open approximately 10 Babies "R" Us stores
in the United States in 1996. These stores will target the newborn to preschool
market in an approximate 45,000 square foot prototype that will offer dominant
assortments in juvenile furniture such as cribs and dressers as well as
playards, strollers and carseats. The center of the store will carry over 8,000
square feet of clothing and the store will also carry a wide range of feeding
supplies, health and beauty aids and infant care products. The store will also
offer a computerized baby registry service.
"Concept 2000" is the new floor plan for all new and remodeled 46,000
square foot Toys "R" Us stores in the United States. These stores will feature
a spacious 14-foot center aisle and a 10-foot wide racetrack oval aisle,
replacing the "supermarket" style layout
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of the previous stores. The center of the store will feature low gondolas
and various life-size icons that will permit instant identification of product
categories. These stores will include seasonal areas that will change
periodically, such as Warner Kids Shops and special Barbie presentations.
The stores will also feature Lego Shops, Learning Centers and a video game
section that will be displayed by game system. The Bike Shop will include an
assembly window, which will allow customers to view bicycles being assembled.
Furthermore, the center of the store will be highlighted by a large
skylight.
The Company's new superstore concept will combine elements of the
"Concept 2000", the Babies "R" Us and the Kids "R" Us stores into one large
store. These stores will encompass approximately 85,000 to 95,000 square feet
with a single checkstand area. This concept will also include licensed
operations for a national quick service food chain, snack bar, hair cutting
center, photo studio and party room.
Toys "R" Us - United States
The Company believes that Toys "R" Us is the largest operation of its
type in the country in terms of sales and earnings. The overall merchandising
philosophy of Toys "R" Us is the development of strong consumer recognition and
acceptance of its name by the use of mass media advertising that promotes its
broad selection and everyday low prices. Toys "R" Us operates in 48 states and
Puerto Rico and sells children's and adult's toys, games, bicycles and other
wheel goods, sporting goods, electronic and video games, small pools, books,
infant's and juvenile furniture and similar items. In 1995, the Company added
educational and entertainment computer software for children in its Toys "R" Us
stores.
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Most of the Toys "R" Us stores conform to a prototype design consisting
of approximately 46,000 square feet, with 30,000 and 20,000 square foot stores
being opened in smaller markets, and are generally freestanding units or located
in strip centers. As an integral part of its long-range growth plans, Toys "R"
Us has been increasing its total toy store square footage by approximately 35 to
40 new toy stores each year. At April 15, 1996, Toys "R" Us utilized 16
warehouse/distribution centers and a large fleet of tractors and trailers, which
it owns and maintains, to service its 651 stores. Toys "R" Us believes that the
flexibility afforded by its warehouse/distribution system and by ownership of
its own fleet of trucks provides maximum efficiency and capacity, particularly
in light of the seasonality of its business.
Toys "R" Us employs a computerized inventory system which allows
management to constantly monitor the current activity and inventory in each
region and in each store. This system permits management to allocate the
proper amount of merchandise to each store and to keep the stores adequately
stocked at all times.
The regional locations of Toys "R" Us stores and warehouse/distribution
centers are listed in Item 2.
Toys "R" Us utilizes demographic information in determining which
markets to enter. During the fiscal year ended February 3, 1996, the Company
opened 35 new Toys "R" Us stores.
Plans for the fiscal year ending February 1, 1997 call for approximately
35 new Toys "R" Us stores in the United States. The Company will unveil its
new "Concept 2000" toy store design in 16 locations,
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4 of which will be retrofits of existing toy stores. The Company will also
open 2 new superstores, one of which will be a retrofit of an existing
Toy "R" Us and Kids "R" Us store (see "New Store Concepts").
Toys "R" Us - International
During the fiscal year ended February 3, 1996, Toys "R" Us International
continued its expansion by opening 42 stores in the following countries:
Australia (4 stores), Canada (2 stores), France (8 stores), Germany (4 stores),
Japan (13 stores), Malaysia (1 store), the Netherlands (1 store), Singapore
(1 store), Spain (6 stores) and the United Kingdom (2 stores). The Company
also closed one store in the United Kingdom in 1995. Stores located in foreign
countries are serviced by executive and buying offices and warehouse/
distribution centers (see Item 2-Properties). At April 15, 1996, Toys "R"
Us-International utilized 12 warehouse/distribution centers and a large fleet
of tractors and trailers, which it owns and maintains, to service its' stores.
The Toys "R" Us-International stores generally conform to prototypical
designs similar to those used in the United States. Toys "R" Us - International
utilizes demographic information in determining which markets to enter and
employs computerized inventory systems similar to those utilized by Toys "R" Us.
In 1993, the Company initiated a franchising division to provide for
the opening of franchised stores in additional parts of the world. Franchise
agreements have been signed in Israel (one store opened in 1995),
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Indonesia, Saudi Arabia, Scandinavia, South Africa, Turkey and the United
Arab Emirates (one store).
The Company also operates, through 50%-owned joint ventures, four stores
in Hong Kong and six stores (including two which opened in 1995) in Taiwan.
In 1996, the Company plans to open approximately 55 new international
toy stores, including approximately 20 franchise stores, 13 of which will be
conversions of existing stores not owned by the Company. In addition, 4 stores
located in Scandinavia, which were operated by the Company, will be converted
into franchise stores.
Financial information relating to foreign and domestic operations is
hereby incorporated by reference to page 16 of the Company's Annual Report.
Kids "R" Us
In 1995, the Company continued its development of the Kids "R" Us
children's clothing store division which was inaugurated in 1983. These stores
feature brand name and private label first quality children's clothing. Nine
additional stores were opened during 1995. In 1996, the Company plans to open
about 10 stores and convert one existing store, along with an existing toy
store, into a superstore. All stores are serviced from three existing
distribution centers and by a fleet of tractors and trailers, which Kids "R" Us
owns and maintains. Kids "R" Us utilizes demographic information in determining
which markets to enter.
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Competition
Retailing remains an intensely competitive industry and all of the
merchandise sold by the Company is available, in the markets in which the
Company operates, from various retailers at competitive prices.
Employees
The Company employed approximately 60,000 associates at the end of the
fiscal year. During the 1995 Holiday season, the number of associates
increased to approximately 111,000.
Seasonality and Working Capital
The Company's business is highly seasonal, with most of its earnings
occurring in the fourth quarter. See the quarterly financial data contained in
the Company's Annual Report, which section is incorporated herein by reference
to page 7 of the Company's Annual Report. For a discussion of the Company's
working capital requirements, see "Management's Discussion - Results of
Operations and Financial Condition - Liquidity and Capital Resources" included
in the Company's Annual Report, which section is incorporated herein by
reference to page 7 of the Company's Annual Report.
Corporate Developments
Effective January 1, 1996, the registrant adopted a holding company form of
organizational structure. The holding company organizational structure
was implemented by the merger (the "Merger") of a wholly-owned indirect
subsidiary of the registrant with and into Toys "R" Us, Inc. ("Predecessor"),
which was the surviving corporation, in accordance with Section 251(g) of the
Delaware General Corporation Law. As a result of this merger, each share
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of capital stock of the Predecessor issued and outstanding or held in its
treasury was converted into one share of capital stock of the registrant
(formerly known as Toys "R" Us-Headquarters, Inc.). The registrant became
the holding company for the Company's operating subsidiaries and the
Predecessor became a direct wholly-owned subsidiary of the registrant.
On the effective date of the Merger, the name of registrant was changed to
Toys "R" Us, Inc. and the name of the Predecessor was changed to Toys
"R" Us-Delaware, Inc.
Incorporation
The registrant was incorporated in Delaware in 1993 for the purpose of engaging
in the merger described above. The Predecessor was incorporated in Delaware in
1928.
Item 2. Properties
All information related to properties in Item 2 is as of
April 15, 1996.
Toys "R" Us - United States
Toys "R" Us operated 16 distribution centers, 14 of which are owned and
2 of which are leased. The distribution centers average approximately 443,000
square feet each in size.
Toys "R" Us operated 651 toy stores, 393 of which are owned and 258 of
which are leased. Most of these stores are approximately 46,000 square feet
and are typically freestanding units or located in strip centers. The Company
is also opening and operating 30,000 and 20,000 square foot stores in smaller
markets.
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A significant portion of the properties constructed by Toys "R" Us are
owned. Toys "R" Us plans to continue this policy in 1996. Where ownership
is not feasible, Toys "R" Us generally has long term leases with multiple
renewal options.
The following chart sets forth certain information concerning the operating
properties of Toys "R" Us:
Number of
Stores in
Distribution Center Region Serviced Region
- ------------------- ---------------------- ------------
Rialto, California Southern California/ 63
Arizona/Nevada/Hawaii
Joliet, Illinois Illinois/Wisconsin/ 62
Minnesota
Mount Olive, New Jersey New York/Northern New 55
Jersey
Atlanta, Georgia Georgia/South Carolina/ 51
Tennessee/Alabama
Landover, Maryland Virginia/Maryland/ 48
North Carolina
Orlando, Florida Florida/Puerto Rico 45
Houston, Texas Southern Texas/Louisiana/ 42
Mississippi
Stockton, California Northern California/Utah 40
Lees Summit, Missouri Kansas/Missouri/Iowa/ 39
Nebraska/Colorado
Northboro, New England 33
Massachusetts
Carrollton, Texas Northern Texas/Oklahoma/ 32
Arkansas/New Mexico
Fairfield, Ohio Central Ohio/Indiana/ 31
Kentucky
Youngstown, Ohio Northeastern Ohio/Western 30
Pennsylvania/Northwestern
New York
Fairless Hills, Pennsylvania/Delaware/ 29
Pennsylvania Southern New Jersey
Canton, Michigan Michigan/Northwestern Ohio 28
Kent, Washington Pacific Northwest/Alaska 23
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651
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The Company also leases corporate offices in Paramus and
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Rochelle Park, New Jersey and owns a data center in Parsipanny, New Jersey.
Kids "R" Us
Kids "R" Us operated 214 children's clothing stores, of which 103 are
owned and 111 are leased. The stores conform to prototypical designs consisting
of approximately 15,500 to 21,500 square feet. The clothing stores are typically
freestanding units or located in strip centers. Kids "R" Us operated three
distribution centers, all of which are owned. The distribution centers average
approximately 307,000 square feet each in size.
The following chart sets forth certain information concerning the
operating properties of Kids "R" Us:
Number of
Distribution Centers Stores Serviced
- -------------------- ---------------
Somerset, New Jersey 93
Southgate, Michigan 82
Irwindale, California 39
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Toys "R" Us-International
Toys "R" Us-International operated 12 distribution centers, 5 of which
are owned and 7 of which are leased. Toys "R" Us-International operated 326
stores, excluding 10 joint venture and 2 franchised stores, of which 106 are
owned and 220 of which are leased.
Toys "R" Us-International owns or leases properties in Australia,
Austria, Belgium, Canada, Denmark, France, Germany, Japan, Luxembourg, Malaysia,
the Netherlands, Portugal, Singapore, Spain, Sweden, Switzerland and the United
Kingdom.
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The Toys "R" Us-International stores generally conform to prototypical
designs similar to those used in the United States.
The following chart sets forth certain information concerning the
operating properties of Toys "R" Us-International, excluding joint venture
properties:
Number of
Executive and Distribution Stores
Buying Offices Centers Country Serviced Serviced
- -------------- ------------ ----------------- ----------
Germany Koln(2), Germany, Austria, 77
Trossingen, The Netherlands,
Harbke Switzerland
Canada Concord, Ontario Canada 58
United Kingdom Conventry United Kingdom, 54
Denmark, Sweden
France Evry France, Belgium, 42
Luxembourg
Japan Yokohama, Japan 37
Sakai
Spain Alcala de Henares Spain, Portugal 29
Australia Regents Park, NSW Australia 21
- Jurong Singapore, Malaysia 8
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See the Note, "Leases", in the Company's Notes to Consolidated Financial
Statements included on page 14 of the Company's 1995 Annual Report, which note
is incorporated herein by reference, for additional information with respect
to the Company's leases.
Item 3. Legal Proceedings
The Company is named as a defendant in legal proceedings in the ordinary
course of its business. The Company believes that none of these legal
proceedings are material to its business or financial condition.
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Item 4. Submission of Matters to a Vote
of Security Holders
None.
Item 4A. Executive Officers of the Company
as of April 15, 1996
(a) The following persons are the executive officers of the
Company, having been elected to their respective offices by the Board of
Directors of the Company to serve until the election and qualification of their
respective successors:
Name Age Office
Michael Goldstein 54 Vice Chairman of the Board and Chief
Executive Officer
Robert C. Nakasone 48 President and Chief Operating
Officer
Roger V. Goddu 45 Executive Vice President - President
of U.S. Toy Store Merchandising
Division
Louis Lipschitz 51 Executive Vice President and Chief
Financial Officer
Michael J. Madden 47 Executive Vice President - President
of U.S. Toy Store Operations
Division
Richard L. Markee 43 Executive Vice President - President
of Kids "R" Us and Babies "R" Us
Divisions
Gregory R. Staley 48 Executive Vice President - President
of Toys "R" Us International
Division
Joseph J. Lombardi 34 Vice President - Controller
(b) The following is a brief account of the business experience
during the past five years of each of the executive officers of the Company:
Mr. Goldstein has been employed by the Company for more than five years.
Effective February 1994, he became Vice Chairman of the Board and Chief
Executive Officer. From February 1993 to January 1994, he was Vice Chairman
of the Board and Chief Administrative Officer. From prior to 1991 to January
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1993, he was Vice Chairman of the Board and Chief Financial and Administrative
Officer.
Mr. Nakasone has been employed by the Company for more than five years.
Effective February 1994, he became President and Chief Operating Officer.
From prior to 1991 to January 1994, he was Vice Chairman of the Board and
President of Worldwide Toy Stores.
Mr. Goddu has been employed by the Company for more than five years.
Effective February 1996, he became Executive Vice President of the Company
and President of U.S. Toy Store Merchandising Division. From prior to 1991
to January 1996, he was Executive Vice President - General Merchandise
Manager - U.S. Toy Store Division.
Mr. Lipschitz has been employed by the Company for more than five years.
Effective February 1996, he became Executive Vice President and Chief Financial
Officer of the Company. From February 1993 to January 1996, he was Senior Vice
President - Finance and Chief Financial Officer. From prior to 1991 to January
1993, he was Vice President - Finance and Treasurer.
Mr. Madden has been employed by the Company for more than five years.
Effective February 1996, he became Executive Vice President of the Company and
President of U.S. Toy Store Operations Division. From March 1995 to January
1996, he was Group Vice President of Store Operations - U.S. Toy Store Division.
From February 1993 to February 1995, he was Senior Vice President, Regional
Operations and Distribution - U.S. Toy Store Division. From prior to 1991
to January 1993, he was Vice President, Physical Distribution - U.S. Toy Store
Division.
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Mr. Markee has been employed by the Company for more than five years.
Effective February 1996, he became Executive Vice President of the Company
and has served as President of Kids "R" Us Division since March 1993 and Babies
"R" Us Division since its inception in September 1995. From prior to 1991 to
February 1993, he was Vice President - General Merchandise Manager for Kids "R"
Us Division.
Mr. Staley has been employed by the Company for more than five years.
Effective February 1996, he became Executive Vice President of the Company and
has served as President of Toys "R" Us International Division since August 1995.
From October 1991 to July 1995, he was Senior Vice President - General
Merchandise Manager of Toys "R" Us International Division. From prior to 1991
to September 1991, he was Vice President - Divisional Merchandise Manager -
U.S. Toy Store Division.
Mr. Lombardi has been employed by the Company since August 1995 as Vice
President - Controller. From October 1994 to July 1995, he was a Partner with
Ernst & Young, LLP, a public accounting firm, and was a Senior Manager with
Ernst & Young, LLP, since prior to 1991 to September 1994.
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PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters
Market prices and other information with respect to the Company's
common stock are hereby incorporated by reference to page 7 of the Company's
Annual Report.
Item 6. Selected Financial Data
Selected financial data are hereby incorporated by reference to page 1
of the Company's Annual Report.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's discussion and analysis of financial condition and
results of operations is hereby incorporated by reference to pages 6
and 7 of the Company's Annual Report.
Item 8. Financial Statements and Supplementary Data
The following financial statements and supplementary data are hereby
incorporated by reference to pages 8 to 17 of the Company's Annual Report.
(i) Consolidated Balance Sheets at February 3, 1996 and
January 28, 1995
(ii) Consolidated Statements of Earnings for each of the
three years in the period ended February 3, 1996;
(iii) Consolidated Statements of Cash Flows for each of
the three years in the period ended February 3, 1996;
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(iv) Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended February 3, 1996;
(v) Notes to Consolidated Financial Statements; and
(vi) Opinion of Ernst & Young LLP.
Individual financial statements of the registrant's subsidiaries are not
furnished because consolidated financial statements are furnished. The
registrant is primarily a holding company and all subsidiaries are at least 80%
owned.
Financial statements of 50%-owned joint ventures are not submitted
because such companies, considered in the aggregate, are not considered a
significant subsidiary as defined in Regulation S-X.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to the directors of the Company is hereby
incorporated herein by reference to the section, "Election of Directors",
in the Company's Proxy Statement.
Information with respect to the executive officers of the Company is
set forth in Item 4A of Part I hereof.
Item 11. Executive Compensation
Information with respect to executive compensation is hereby
incorporated herein by reference to the sections, "Election of Directors
Compensation of Directors", "- Executive Compensation", "- Summary Compensation
Table", "- Option Grants in Last Fiscal Year" and "- Aggregated Option Exercises
in Last Fiscal Year and Fiscal Year-End Option Values", in the Company's Proxy
Statement. The sections, "- Report of the Compensation Committee on Executive
Compensation" and "- Five-Year Stockholder Return Comparison", in the Company's
Proxy Statement are not incorporated by reference herein. Such sections are
furnished solely for information and shall not be deemed to be soliciting
material or to be "filed" as a part of this report.
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Information with respect to security ownership of certain beneficial
owners and management is hereby incorporated by reference to the sections,
"Principal Stockholders" and "Election of Directors", in the Company's Proxy
Statement.
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Item 13. Certain Relationships and Related Transactions
Information with respect to certain relationships and related
transactions is hereby incorporated herein by reference to the section,
"Election of Directors - Certain Transactions", in the Company's Proxy
Statement.
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PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
(a) (1) The response to this portion of Item 14 is set forth
in Item 8 of Part II hereof.
(2) Financial Statement Schedules have been omitted because they
are inapplicable, not required, or the information is included elsewhere in
the financial statements or notes thereto.
(3) See accompanying Index to Exhibits. The Company will furnish
to any stockholder, upon written request, any exhibit listed in the accompanying
Index to Exhibits upon payment by such stockholder of the Company's reasonable
expenses in furnishing any such exhibit.
(b) On February 1, 1996, the Company filed a Form 8-K in connection
with the worldwide restructuring which was announced in the press release dated
the same.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14(a)(2) above.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TOYS "R" US, INC.
(Registrant)
By Louis Lipschitz
Executive Vice President
and Chief Financial Officer
Date: April 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 25th day of April, 1996.
Signature Title
- ------------------- ------------------------------------------------
Charles Lazarus Chairman of the Board
Michael Goldstein Director, Vice Chairman of the
Board and Chief Executive Officer
(Principal Executive Officer)
Louis Lipschitz Executive Vice President and Chief
Financial Officer (Principal Financial Officer)
Joseph J. Lombardi Vice President - Controller
(Principal Accounting Officer)
Robert A. Bernhard Director
Milton S. Gould Director
Shirley Strum Kenny Director
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Reuben Mark Director
Norman S. Matthews Director
Howard W. Moore Director
Robert C. Nakasone Director
Norman M. Schneider Director
Harold M. Wit Director
The foregoing constitute all of the Board of Directors and the Principal
Executive, Financial and Accounting Officers of the Registrant.
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INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this Report:
Exhibit
No. Document
- ------- -------------------------------------------
2 Agreement and Plan of Merger, dated as of
December 8, 1995, by and among registrant,
Toys "R" Us - Delaware, Inc. (f/k/a Toys "R"
Us, Inc.) and TRU Interim, Inc. Incorporated
herein by reference to Exhibit 2.1 to
registrant's Registration of Securities of
Certain Successor Issuers on Form 8-B dated
January 3, 1996 (the "Form 8-B").
3A Restated Certificate of Incorporation of
registrant (filed on January 2, 1996).
Incorporated herein by reference to
Exhibit 3.1 to the Form 8-B.
3B Amended and Restated By-Laws of registrant
(as of January 1, 1996). Incorporated
herein by reference to Exhibit 3.2 to the
Form 8-B.
4 i) Form of Indenture dated as of January 1, 1987
between registrant and United Jersey Bank, as
Trustee, pursuant to which securities in one
or more series in an unlimited amount may be
issued by registrant. Incorporated herein
by reference to Exhibit 4(a) to registrant's
Registration Statement No. 33-11461.
ii) Form of the registrant's 8 1/4% Sinking Fund
Debentures due 2017. Incorporated herein by
reference to Exhibit 4(b) to Registration
Statement No. 33-11461.
iii) Form of Indenture between registrant and
United Jersey Bank, as Trustee, pursuant to
which one or more series of debt securities
up to $300,000,000 in principal amount may
be issued by registrant. Incorporated herein
by reference to Exhibit 4 to registrant's
Registration Statement No. 33-42237.
iv) Form of registrant's 8 3/4% Debentures due
2021. Incorporated herein by reference to
Exhibit 4 to registrant's Report on Form 8-K
dated August 29, 1991.
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Exhibit
No.
- -------
4 v) Substantially all other long-term debt of
registrant (which other debt does not exceed
on an aggregate basis 10% of the total assets
of the registrant and its subsidiaries on a
consolidated basis) is evidenced by, among
other things, (i) industrial revenue bonds
issued by industrial development authorities
and guaranteed by registrant, (ii) mortgages
held by third parties on real estate owned
by registrant, (iii) stepped coupon
guaranteed bonds held by a third party and
guaranteed by registrant and (iv) an
agreement under which registrant guaranteed
certain yen-denominated loans made by a
third party to a subsidiary of registrant.
Registrant will file with the Securities and
Exchange Commission (the "Commission")
copies of constituent documents relating to
such upon request of the Commission.
10A* Stock Option Plan of the registrant, as
amended as of April 22, 1993. Incorporated
herein by reference to Exhibit 10A to
registrant's Annual Report on Form 10-K for
the year ended January 30, 1993.
10B* Employment Agreement dated March 14, 1978
between registrant and Charles Lazarus and
an amendment thereto dated November 20, 1979
(incorporated herein by reference to Exhibit
2 to a Schedule 13D dated February 1, 1980
filed by Charles Lazarus, et al).
An amendment dated March 23, 1982 to such
employment agreement (incorporated herein by
reference to Exhibit 10B to registrant's
Annual Report on Form 10-K for the year
ended January 31, 1982, Commission File
Number 1-1117). An amendment dated December
7, 1982 to such employment agreement
(incorporated herein by reference to Exhibit
10B to registrant's Annual Report on Form
10-K for the year ended January 30, 1983,
Commission File Number 1-1117). An amendment
dated April 10, 1984 to such employment
agreement (incorporated herein by reference
to Exhibit 10B to registrant's Annual Report
on Form 10-K for the year ended January 29,
1989, Commission File Number 1-1117).
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) hereof.
25
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<PAGE>
Exhibit
No.
- -------
10C* Form of Indemnification Agreement between
registrant and each director. Incorporated
herein by reference to Exhibit 10F to
registrant's Annual Report on Form 10-K for
the year ended February 1, 1987, Commission
File Number 1-1117.
10D* Stock Option Agreement dated as of February
1, 1988 between registrant and Robert
Nakasone. Incorporated herein by reference
to Exhibit 10G to registrant's Annual Report
on Form 10-K for the year ended January 31,
1988, Commission File Number 1-1117. The
first amendment dated as of April 1, 1989
to such agreement (incorporated herein by
reference to Exhibit 10G to registrant's
Annual Report on Form 10-K for the year
ended January 29, 1989, Commission File
Number 1-1117). The second amendment dated
as of September 19, 1989 to such agreement
(incorporated herein by reference to Exhibit
10G to registrant's Annual Report on Form
10-K for the year ended January 28, 1990,
Commission File Number 1-1117).
10E* Stock Option Agreement dated as of February
1, 1988 between registrant and Michael
Goldstein (incorporated herein by reference
to Exhibit 10H to registrant's Annual Report
on Form 10-K for the year ended January 31,
1988, Commission File Number 1-1117). The
first amendment dated as of April 1, 1989 to
such agreement (incorporated herein by
reference to Exhibit 10H to registrant's
Annual Report on Form 10-K for the year
ended January 29, 1989, Commission File
Number 1-1117). The second amendment dated
as of September 19, 1989 to such agreement
(incorporated herein by reference to Exhibit
10H to registrant's Annual Report on Form
10-K for the year ended January 28, 1990,
Commission File Nuimber 1-1117).
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) hereof.
26
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<PAGE>
Exhibit
No.
- -------
10F* Stock Option Plan and Agreement dated as
of March 14, 1989 between registrant and
Charles Lazarus, and a First Amendment
thereto dated as of September 19, 1989.
Incorporated by reference to Exhibit 10I to
registrant's Annual Report on Form 10-K for
the year ended January 28, 1990, Commission
File Number 1-1117.
10G* Non-Employee Directors' Stock Option Plan
as adopted by the Board of Directors on
September 19, 1990 and approved by the
registrant's stockholders on June 3, 1991.
Incorporated herein by reference to Exhibit
10H to registrant's Annual Report on Form
10-K for the year ended February 1, 1992.
10H* Stock Option Plan and Agreement dated as of
December 2, 1992 between the registrant and
Robert C. Nakasone. Incorporated herein by
reference to Exhibit 10I to registrant's
Annual Report on Form 10-K for the year
ended January 30, 1993.
10I* Stock Option Plan and Agreement dated as of
December 2, 1992 between the registrant and
Michael Goldstein. Incorporated herein by
reference to Exhibit 10J to registrant's
Annual Report on Form 10-K for the year
ended January 30, 1993.
10J* Toys "R" Us, Inc. 1994 Stock Option and
Performance Incentive Plan effective
November 1, 1993, as amended. Incorporated
herein by reference to Exhibit 4.1 to
registrant's Registration Statement
No. 33-64315.
10K* Toys "R" Us Inc. Management Incentive
Compensation Plan adopted March 28, 1994
(incorporated herein by reference to Exhibit
10L to registrant's Annual Report on Form
10-K for the year ended January 29, 1994).
The first amendment to such plan adopted on
April 20, 1995 (incorporated herein by
reference to Exhibit 10.11 to the Form 8-B).
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) hereof.
27
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<PAGE>
Exhibit
No.
- -------
10L* Toys "R" Us, Inc. Partnership Group Deferred
Compensation Plan effective as of May 17,
1995. Incorporated herein by reference to
Exhibit 10.13 to the Form 8-B.
10M* Toys "R" Us, Inc. Grantor Trust Agreement
dated as of October 1, 1995 between
registrant and American Express Trust
Company. Incorporated herein by reference
to Exhibit 10.14 to the Form 8-B.
10N* Toys "R" Us Inc. Supplemental Executive
Retirement Plan, effective as of December 6,
1995, (is filed herewith).
13 Registrant's Annual Report to Stockholders
for the year ended February 3, 1996. Except
for the portions thereof that are expressly
incorporated by reference into this report,
such Annual Report is furnished solely for
the information of the Commission and is not
to be deemed "filed" as part of this report.
21 Subsidiaries of registrant.
23 Consent of Independent Auditors, Ernst &
Young LLP.
27 Financial Data Schedule
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14 (c) hereof.
28
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EXHIBIT 10N
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Toys "R" Us, Inc.
Supplemental Executive Retirement Plan
Effective as of December 6, 1995
- --------------------------------------------------------------------------------
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TOYS "R" US, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Table of Contents
-----------------
<TABLE>
<CAPTION>
Article Page
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<S> <C> <C>
I PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
III ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IV ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . 9
V NOTIONAL CONTRIBUTIONS AND INTEREST CREDITS AND DEBITS. . . . . . . 9
VI VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
VII RETIREMENT DATES. . . . . . . . . . . . . . . . . . . . . . . . . . 13
VIII DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
IX DEATH BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
X SOURCE AND PAYMENT OF BENEFITS. . . . . . . . . . . . . . . . . . . 16
XI AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . 17
XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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ARTICLE I
PURPOSE
Toys "R" Us, Inc. adopted the Toys "R" Us, Inc. Supplemental Executive
Retirement Plan (the "Plan") effective as of December 6, 1995. The purpose of
the Plan is to provide a supplemental retirement benefit for certain eligible
executives and their beneficiaries which is in excess of the limitations imposed
by Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended,
on certain contributions to the "TRU" Partnership Employees' Savings and Profit
Sharing Plan.
The Plan is intended to constitute an unfunded deferred compensation plan
for a select group of management and highly compensated employees.
ARTICLE II
DEFINITIONS
When used herein the following terms shall have the meanings set forth
below:
2.1 "Account" means the unfunded bookkeeping account established for each
Participant in accordance with Section 5.4.
2.2 "Administrative Committee" means the committee appointed by the
Compensation Committee to administer the Plan.
2.3 "Beneficiary" means the person designated in writing by a Participant
to receive the amount, if any, payable under the Plan upon the Participant's
death. If a Participant does not designate a person to receive the amount
payable under the Plan upon his or her death, "Beneficiary" means the person
designated by the Participant to receive benefits which may be due under the
Savings Plan upon his or her death.
2.4 "Board of Directors" means the Board of Directors of the Company or
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a duly appointed committee thereof.
2.5 "Compensation Committee" means the Management Compensation and Stock
Option Committee of the Board of Directors.
2.6 "Declared Rate of Interest" means the percentage rate of interest
(rounded, at the Administrative Committee's option, to the nearest tenth of a
percent) equal to the aggregate percentage yield (gain or loss) on a portfolio
of investments which is selected by the Administrative Committee, in its sole
discretion, and which reflects each Participant's investment preferences as
indicated by his or her investment elections under the Savings Plan.
2.7 "Disability Period" means, for purposes of Section 5.5, the period
commencing on the date a Participant is determined to be disabled pursuant to
the terms of the Savings Plan and ending on such Participant's Normal Retirement
Date, Early Retirement Date, date of death or the date as of which the
Participant is no longer disabled under the terms of the Savings Plan.
2.8 "Early Retirement Date" means the Early Retirement Date of a
Participant as defined in Section 7.2.
2.9 "Effective Date" means December 6, 1995.
2.10 "Eligible Earnings" means that portion of a Participant's Total
Compensation that exceeds the compensation limitation under Section 401(a)(17)
of the Code, as determined under the terms of the Savings Plan as of the end of
any Plan Year.
2.11 "Employer" means the Company and any corporation which, with the
consent of the Board of Directors, adopts the Plan and becomes subject to its
terms by filing with the Company a certified copy of a resolution of its board
of directors adopting the Plan.
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2.12 "Enhanced Rate of Interest" means for any Plan Year, a percentage rate
of interest equal to 120% of the Declared Rate of Interest for such Plan Year
(rounded, at the Administrative Committee's option, to the nearest tenth of a
percent); provided, however, that in no event shall the Enhanced Rate of
Interest for any Plan Year be less than the Declared Rate of Interest or greater
than a rate of interest which is 4% above the Declared Rate of Interest for such
Plan Year.
2.13 "Enhancement Period" means the period of years during which a
Participant shall be eligible to receive an Enhanced Rate of Interest on his
Account balance as established under Section 5.2. Such period shall equal the
lesser of (i) the number of Years of Service completed by the Participant prior
to February 1, 1996, rounded to the next higher whole year, or (ii) 10 years.
2.14 "Normal Retirement Date" means the retirement date of a Participant as
defined in Section 7.1.
2.15 "Notional Contribution" shall equal the amount to be credited to a
Participant's Account in accordance with the provisions of Section 5.1.
2.16 "Participant" means any Employee who becomes eligible for and
commences participation in the Plan, as provided in Article IV.
2.17 "Plan" means the Toys "R" Us, Inc. Supplemental Executive Retirement
Plan, as the same may be amended from time to time.
2.18 "Plan Year" means the short Plan Year commencing December 6, 1995 and
ending January 31, 1996. Thereafter, "Plan Year" shall mean each February 1
through January 31.
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2.19 "Savings Plan" means the "TRU" Partnership Employees' Savings and
Profit Sharing Plan, as amended and restated as of October 1, 1993, as the same
may be amended from time to time.
2.20 "Target Cash Compensation" means (a) for a Participant who dies as of
the last day of a Plan Year, an amount equal to the sum of such Participant s
(i) cash wages, (ii) bonuses, and (iii) awards granted under the Toys "R" Us,
Inc. Management Incentive Compensation Plan (the "Management Incentive Plan")
during such Plan Year, or (b) for a Participant who dies other than on the last
day of a Plan Year, an amount equal to (i) cash wages, (ii) bonuses, and (iii)
awards granted under the Management Incentive Plan during such Plan Year, which
the Administrative Committee projects and determines, under rules uniformly
applicable to all Participants, the Participant would have received had he or
she not died prior to the end of such Plan Year.
Other capitalized terms used herein shall have the same meaning when used
in this Plan as ascribed to them under the terms of the Savings Plan. Whenever
appropriate, words used in the singular shall include the plural or the plural
may include the singular, and words used in the masculine may include the
feminine or the feminine may include the masculine.
ARTICLE III
ADMINISTRATION
3.1 The Compensation Committee or the Administrative Committee (subject to
the ability of the Compensation Committee to restrict the Administrative
Committee) shall administer the Plan in accordance with its terms, and shall
have all powers necessary to
4
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<PAGE>
accomplish such purpose, including the power and authority to construe and
interpret the Plan, to define the terms used herein, to prescribe, amend and
rescind rules and regulations, agreements, forms, and notices relating to the
administration of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan including, without limitation,
determination of Participant benefit claims in accordance with rules uniformly
applicable to all Participants. Any actions of the Compensation Committee or the
Administrative Committee with respect to the Plan shall be conclusive and
binding upon all persons interested in the Plan, except that any action of the
Administrative Committee will not be binding on the Compensation Committee. The
Compensation Committee and Administrative Committee may each appoint agents and
delegate thereto powers and duties under the Plan, except as otherwise limited
by the Plan.
3.2 The Administrative Committee shall consist of such number of
Participants as shall be determined by the Compensation Committee, each of whom
shall be appointed by, shall remain in office at the will of, and may be
removed, with or without cause, by the Compensation Committee. Any Participant
of the Administrative Committee may resign at any time. No Participant of the
Administrative Committee shall be entitled to act on or decide any matter
relating solely to himself or herself or any of his or he rights or benefits
under the Plan. The Participants of the Administrative Committee shall not
receive any special compensation for serving in their capacities as Participants
of the Administrative Committee but shall be reimbursed for any reasonable
expenses incurred in connection therewith. No bond or other security need be
required of the Administrative Committee or any Participant thereof in any
jurisdiction.
5
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3.3 Each Participant of the Compensation Committee and the Administrative
Committee shall be entitled to, in good faith, rely or act upon any report or
other information furnished to him or her by any officer or other employee of
the Company or any subsidiary of the Company, the Company's independent
certified public accountants, or any executive compensation consultant, legal
counsel, or other professional retained by the Company to assist in the
administration of the Plan. To the maximum extent permitted by law, no
Participant of the Compensation Committee or the Administrative Committee, nor
any person to whom ministerial duties have been delegated, shall be liable to
any person for any action taken or omitted in connection with the interpretation
and administration of the Plan. To the maximum extent permitted by law, the
Company shall indemnify the Participants of the Compensation Committee and the
Administrative Committee against any and all claims, losses, damages, expenses,
including any counsel fees and costs, incurred by them, and any liability,
including any amounts paid in settlement with their approval, arising from their
action or failure to act.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
Employees who are designated by the Compensation Committee as members of
the Partnership Group and who are Participants in the Savings Plan shall be
eligible to participate in the Plan for any Plan Year.
ARTICLE V
NOTIONAL CONTRIBUTIONS AND INTEREST CREDITS AND DEBITS
5.1 (a) For each Plan Year, each Participant who is an Employee on the last
day of the Plan Year shall have credited to his or her Account a Notional
Contribution
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equal to 11% of such Participant's Eligible Earnings. Such Notional Contribution
shall be credited to the Participant's Account under the Plan as soon as
practicable, but in no event later than 120 days, following the end of the
applicable Plan Year.
(b) In addition to the Notional Contribution amount determined under
Section 5.1(a), each Participant who is an Employee on the last day of the Plan
Year beginning on the Effective Date shall receive an additional Notional
Contribution which shall equal, in the aggregate, 11% of such Participant's
Eligible Earnings, if any, determined for each of the Plan Years, respectively,
beginning February 1, 1993, and February 1, 1994.
5.2 In addition to the Notional Contribution determined under Section 5.1,
each Participant's Account shall be credited or debited each Plan Year with an
interest amount determined under either Section 5.2(a) or (b) hereto:
(a) Each Participant's Account shall be credited or debited with an
Enhanced Rate of Interest for each Plan Year, if any, commencing during the
Participant's Enhancement Period. The amount to be credited or debited shall
equal the "product" determined by multiplying (i) the Participant's Account
balance as of the last day of the immediately preceding Plan Year, by (ii) the
Enhanced Rate of Interest established for the applicable Plan Year. The amount
of interest to be credited or debited under this Section 5.2(a) shall be
calculated and credited or debited to the Participant's Account during the 120
day period following the end of each applicable Plan Year.
(b) In each Plan Year in which the Participant's Account is not credited
with an Enhanced Interest amount under Section 5.2(a), the Participant's Account
shall be credited or debited, whichever is applicable, with a Declared Interest
amount determined
7
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under this Section 5.2(b). The amount of such credit or debit shall equal the
"product" determined by multiplying (i) the Participant's Account balance as of
the last day of the immediately preceding Plan Year, by (ii) the Declared Rate
of Interest established for the applicable Plan Year. The amount of interest to
be credited or debited under this Section 5.2(b) shall be calculated and
credited or debited to the Participant's Account during the 120 day period
following the end of each applicable Plan Year.
(c) Notwithstanding the provisions of Sections 5.2(a) and (b), neither a
Declared Rate of Interest nor an Enhanced Rate of Interest shall be credited or
debited for periods commencing prior to the Effective Date.
5.3 The Administrative Committee shall establish or cause to be established
a separate, unfunded bookkeeping Account for each Participant showing the
Notional Contributions, Declared Interest, Enhanced Interest and other relevant
data pertaining thereto. Each Participant shall receive an annual statement of
his or her Account balance, which shall reflect Notional ontributions made
pursuant to Section 5.1 and interest credited or debited to his or her Account
pursuant to Section 5.2 during the applicable Plan Year.
5.4 The establishment and maintenance of, or allocations, debits or credits
to, the Account of any Participant shall not vest in that Participant or his or
her Beneficiary any right, title, or interest in and to any specific assets of
the Employer or in and to any trust fund maintained in connection with the Plan,
except at the time or times and upon the terms and conditions expressly set
forth in the Plan and any applicable trust document.
5.5 Notwithstanding the provisions of Sections 5.1 and 5.2, if a
Participant terminates employment on account of Disability during any Plan Year,
such Participant shall
8
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receive a Notional Contribution and a Declared Interest credit or debit or an
Enhanced Interest credit, if applicable, for each Plan Year ending within his or
her Disability Period; provided, however, that (a) for purposes of determining
the Notional Contribution under Section 5.1(a) to be made to such Participant,
such Participant's Total Compensation shall be deemed to be his or her Total
Compensation determined as of the last day of the Plan Year preceding the date
on which his or her Disability occurred, increased by 4% for each Plan Year
ending within the Disability Period; and (b) for purposes of determining his or
her Declared Rate of Interest or Enhanced Rate of Interest, if applicable, the
Administrative Committee shall assume that the Participant's Declared Rate of
Interest for each Plan Year ending within the Participant's Disability Period
shall equal the average aggregate yield (gain or loss) on all investment funds
maintained under the Trust Fund for the Savings Plan.
5.6 (a) The Company shall have the option to require the trust fund
maintained in connection with the Plan to bear all costs incident to the
operation of this Plan. f the Company requires that the trust fund maintained in
connection with the Plan bears any costs incident to the Plan's operation, each
Participant's Account shall be debited its proportionate share of such expense
in accordance with rules adopted by the Administrative Committee and uniformly
applicable to all Participants.
(b) If the Company does not exercise the option to charge the trust fund
maintained in connection with the Plan for costs incident to the Plan's
operation, each Employer shall pay such costs or such portion thereof with
respect to which said option has not been exercised. The proportion of such
costs to be paid by each Employer in a particular Plan Year shall be in the
ratio which the total of such Employer's Notional Contributions bears
9
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<PAGE>
to the total of the Notional Contributions of all of the Employers credited
during such Plan Year.
ARTICLE VI
VESTING
6.1 Each Participant who terminates employment on or after a Normal
Retirement Date, Early Retirement Date, or due to Disability, shall have a 100%
vested and non-forfeitable right to an amount equal to the Participant's Account
balance, as adjusted pursuant to the provisions of Article V, as of the date of
his or her termination of employment. The Beneficiary of any Participant who
dies while actively employed shall have a 100% vested and non-forfeitable right
to an amount equal to the Participant's Account balance, as adjusted pursuant to
the provisions of Article V, as of the date of the Participant's death.
6.2 (a) Subject to the provisions of Article XI, each Participant who
terminates employment with the Employer, other than as provided in Section 6.1,
shall not, except as provided in Section 6.2(b), be vested in, and shall forfeit
the right to, any benefit under the Plan.
(b) Notwithstanding the provisions of Section 6.2(a), a Participant who
has completed five Years of Service prior to his termination of employment with
an Employer and who is not vested as provided under Section 6.2(a) may apply to
the Compensation Committee to request full vesting of his or her Account
balance. If the Compensation Committee approves such request, the Participant
shall receive a 100% vested and non-forfeitable right to an amount equal to his
or her Account balance, as adjusted pursuant to the provisions of Article V, as
of the date of termination of employment and such amount shall
10
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be payable in accordance with the provisions of Section 8.2(b).
ARTICLE VII
RETIREMENT DATES
7.1 The Normal Retirement Date of each Participant shall be the first day
of any month coincident with or next following the date he or she terminates
employment with an Employer at or after attainment of age sixty (60) with five
or more Years of Service.
7.2 The Early Retirement Date of each Participant shall be the first day of
any month coincident with or next following the date he or she terminates
employment with an Employer at or after attainment of age fifty-five (55) with
five or more Years of Service.
7.3 A Participant whose service is terminated by reason of Disability may
retire as of any Normal Retirement Date or Early Retirement Date or, with the
consent of the Compensation Committee, may retire as of the first day of any
month coincident with or next following the calendar month in which the
Participant terminates employment on account of Disability.
ARTICLE VIII
DISTRIBUTIONS
8.1 A Participant may not receive a distribution from his or her Account
prior to the date he or she terminates employment with an Employer and shall
receive such distribution only as provided in this Article VIII.
8.2 (a) Subject to the terms of any applicable insurance policies
maintained under the provisions of Section 10.2 of the Plan, each Participant
who terminates employment with an Employer as of a Normal Retirement Date, Early
Retirement Date or on
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account of Disability as provided under Article VII, shall receive as soon as
practicable, but in no event later than 120 days following the date of the
Participant's termination of employment, a lump sum cash distribution equal to
the value of the Participant's Account, as adjusted pursuant to the provisions
of Article V, as of such date.
(b) In lieu of a lump sum cash distribution, any Participant who
qualifies for a distribution on attainment of a Normal Retirement Date may (i)
elect in accordance with rules established by the Administrative Committee, an
actuarially equivalent annuity to be paid out over a fixed number of years
commencing as of the date of the Participant's termination of employment, or
(ii) request that the Administrative Committee transfer to the Participant, in
lieu of any other payment under the Plan, the ownership of a life insurance
policy or policies on the life of the Participant in which an amount equal to
the value of the Participant's Account has been invested, such transfer to be
completed at such time and in such manner as the Administrative Committee and
the terms of the applicable policies shall require.
(c) If a Participant terminates employment other than on his Normal
Retirement Date and is entitled to a benefit under the Plan, such benefit shall
be payable in a lump sum as soon as practicable, but in no event later than 120
days following the date the Participant terminates employment, or, if
applicable, the date the Compensation Committee approves his or her request for
full vesting under Section 6.2(b); provided, however, that a Participant may
request and the Administrative Committee may approve an actuarially equivalent
form of payment if such actuarially equivalent form of payment does not result
in any additional cost to the Company.
12
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ARTICLE IX
DEATH BENEFITS
9.1 The Beneficiary of each Participant who dies while actively employed by
an Employer shall be entitled to receive a lump sum distribution equal to the
greater of (a) the value of such Participant's Account, as adjusted pursuant to
the provisions of Article V, as of the date of his or her death, or(b) an amount
equal to the lesser of (i) five times the Participant's current Target Cash
Compensation for the Plan Year in which his or her death occurred, or (ii) the
amount of insurance coverage maintained on the life of the Participant under the
terms of the Plan. Any benefit payable pursuant to this Section 9.1 shall be
paid to the Participant's Beneficiary as soon as practicable in accordance with
the applicable terms of any insurance policy maintained on the Participant's
life.
9.2 A Participant may change his or her Beneficiary at any time by filing a
new Beneficiary designation form with the Administrative Committee.
ARTICLE X
SOURCE AND PAYMENT OF BENEFITS
10.1 Benefits under the Plan are a contractual obligation of the
Participant's Employer and all payments under the Plan shall, unless paid in
accordance with Section 10.2, be made from the general assets of such Employer.
The rights of any person to receive benefits under the Plan shall be only those
of a general unsecured creditor. Notwithstanding the foregoing, nothing herein
shall prevent the transfer of funds to a trust for the purpose of paying
benefits under the Plan as provided in Section 10.2.
10.2 Notwithstanding any provisions of Section 10.1 to the contrary, the
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Administrative Committee may establish a grantor trust or other arrangement
(including, but not limited to, insurance contracts) for the benefit of
Participants in the Plan. The assets of said trust or arrangement shall be held
separate and apart from other Employer funds and shall be used exclusively for
the purposes set forth in the Plan and the applicable documents establishing the
trust or other arrangement, subject to the following conditions: (a)the creation
of said trust or other arrangement shall not cause the Plan to be other than
"unfunded" for purposes of Title I of the Employee Retirement Income Security
Act of 1974, as amended;
(b) the Employer shall be treated as the "grantor" of any such trust
for purposes of Sections 671 and 677 of the Code; and
(c) the documents establishing the trust or other arrangement shall
provide that the assets held under the trust or other arrangement may be used to
satisfy claims of the Employer's general creditors, provided that the rights of
such general creditors are enforceable under federal and state law.
ARTICLE XI
AMENDMENT AND TERMINATION
The Compensation Committee may, with prospective or retroactive effect,
amend, alter, suspend, discontinue or terminate the Plan at any time without the
consent of Participants, stockholders or any other person; provided, however,
that, without the consent of a Participant, no such action shall materially and
adversely affect the rights of such Participant with respect to any rights to
payment of amounts credited to such Participant's Account. Notwithstanding the
foregoing, the Compensation Committee may, in its sole discretion,
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terminate the Plan as of any date and distribute to the Participants an amount
equal to their Account balances, as adjusted pursuant to the provisions of
Article V, as of such date.
ARTICLE XII
MISCELLANEOUS
12.1 No person entitled to a benefit under the Plan shall have any power to
assign, transfer, pledge, hypothecate or otherwise encumber the right to receive
such payment and any attempt to do so shall be void and will not be recognized
by the Administrative Committee.
12.2 The Company or any Employer shall have the right to deduct from
amounts otherwise payable in settlement of an Account any sums that federal,
state, local or foreign tax law requires to be withheld with respect to such
payment.
12.3 Nothing in this Plan shall be construed to confer upon any person any
legal right to be continued as an Employee of any Employer, and each Employer
expressly reserves the right to discharge any Employee whenever the interest of
the Company or Employer in its sole judgment may so require, without any
liability on the part of the Company, the Employer, the Compensation Committee
or the Administrative Committee.
12.4 Any final payment or distribution to the Participant or Beneficiary or
their legal representative shall be in full satisfaction of all claims against
the Plan, the Administrative Committee, the Compensation Committee and the
Employer.
12.5 If the Administrative Committee finds that the Participant or other
person entitled to a benefit under the Plan is unable to care for his or her
affairs because of illness or accident or because he or she is a minor, the
Administrative Committee may direct that any
15
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<PAGE>
benefit due him or her be paid to his or her spouse, a child, a parent or other
blood relative or a person with whom he or she resides, unless a claim has been
made for the benefit by a duly appointed legal representative. Any payment made
under the provisions of this Section 12.5 shall be a complete discharge of the
liabilities of the Plan for that benefit.
12.6 A Participant and his or her Beneficiary shall assume all risk in
connection with any decrease in the value of an Account and neither the Plan,
the Employer, the Compensation Committee nor the Administrative Committee shall
be liable or responsible therefor.
12.7 In the event that any provision of the Plan shall be declared illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of the Plan but shall be fully severable, and the Plan
shall be construed and enforced as if said illegal or invalid provision had
never been inserted herein.
12.8 This Plan shall be construed and administered in accordance with the
laws of the State of New York.
16
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BABIES "R" US (TRADE MARK SYMBOL)
OUR NEWEST ARRIVAL
"Delivering the service, selection and low prices you expect"
Babies"R"Us is an exciting new juvenile retailing strategy which will enable
Toys"R"Us to focus on a key customer base and increase our overall market share
by attracting new moms, dads and mothers-to-be from the time before their baby's
birth through the early years of their child's growth. For the first time
Toys"R"Us can now offer to new parents and mothers-to-be an expansive 45,000 sq.
ft. store with everything for baby all under one roof. Expectant and new parents
will be able to do all their shopping from diapers to baby furniture to clothing
and have the opportunity to design their dream nursery, aided by our in-store
experts, all within their budget. With a selection of products second to none,
they will be able to choose from aisles and aisles of top name strollers, car
seats, carriages, bumper seats, high chairs, cribs, playards, health and baby
care products, accessories, over 40 room settings of furniture, more than 5,000
sq. ft. of specialty name brand clothing... even infant, toddler and pre-school
toys... all at everyday low prices. The store was designed with the customer in
mind... an open, airy, customer-friendly environment with low merchandise
displays in the center of the store providing a sweeping view of our entire
merchandise selection from any location in the store; a special Mother's Room
for nursing baby, complete with changing tables; and a state of the art Baby
Registry that will help put an end to duplicate gifts and unnecessary returns.
Our Baby Registry is just one of the many services that Babies"R"Us will provide
for its customers. In fact, everything about Babies"R"Us is service oriented.
All of our store associates will be trained to answer questions and provide all
the services a new parent needs when making important decisions. By offering
new parents and mothers-to-be the low prices they want and the service they
need, Babies"R"Us adds another dimension to Toys"R"Us' preeminence in the
marketplace.
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TOYS"R"US (TRADE MARK SYMBOL)
NOW RE-DESIGNED
"Shopping at Toys"R"Us has never been easier"
Toys"R"Us has reinvented the shopping experience with a completely redesigned
toy store for the 21st century...Concept 2000. It's an innovative new store
format that combines the ultimate in shopping convenience and aesthetics.
The store provides the customer with a sweeping panoramic view of all major
categories from any location through the use of low merchandise displays in
the center of the store. This new and innovative concept was designed to satisfy
our customer's needs by making it not only easier to shop, but more fun and
exciting and pleasing to the eye...in other words, a much more enjoyable
shopping experience. Customers will enter a 14 foot wide main aisle that runs
down the center of the store. This main aisle will be connected to an "oval
race track" that circles the store and accesses every major category, each one
color coded for ease of shopping. In addition, Concept 2000 adds visual
excitement to the shopping experience with fun, animated icons standing 12 foot
high, a huge skylight in the center of the store and a bike assembly shop that
allows customers to actually see their bike being assembled. Operationally,
we've redesigned the way merchandise is presented to the customer. It includes
a game alcove that surrounds the customer with the newest and most exciting
games, a Warner Kids shop, as well as a special Barbie and Lego presentation.
And we have expanded the use of promotional power tables that are designed to
increase impulse purchases, shopping convenience and profits. In addition,
through the use of innovative storage systems, we have been able to convert
5,000 sq. ft. of storeroom space to sales floor space. The Concept 2000 store
adds fun and excitement, ease and convenience of shopping, while maintaining
the Toys"R"Us standard of everyday low prices, for a completely new and unique
toy shopping experience.
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TOYS"R"US (TRADE MARK SYMBOL)
SUPERSTORE
"Superstore, the ultimate kids shopping experience"
In the era of superstores and mega size wholesalers, the time is right for
Toys"R"Us to enter this arena with a superstore of its own. This prototype
superstore will encompass 90,000 sq. ft. and will be an open, easy to
shop, friendly store with 30 foot ceiling heights and a huge skylight the
center of the store. From a strategic point of view, Toys will now be able to
offer its three retailing strategies under one roof... Toys"R"Us, Kids"R"Us and
Babies"R"Us. Our superstore will quickly become the destination store for baby
and kid related toys and products, emphasizing customer service, fun, excitement
and huge selection in a great environment. In addition to the three retailing
operations, we will also offer new and exciting opportunities for our
customers. They will include licensed operations for a national quick service
food chain, snack bar, haircutting center, photo studio and shoe department.
To add even more fun and excitement, kids will be able to ride on a carousel,
take computer courses in our Little Red School House, try on clothing in
fitting rooms designed like castles, have birthday parties in our party room
and participate in scheduled promotions including such fun activities as face
painting and balloon sculpting. We have made shopping easier for parents too,
as boys' and girls' toy sections will be located directly adjacent to their
respective clothing sections. Our superstore will offer the consumer the widest
selection of toys, clothes and infant needs in the industry at our traditional
everyday low prices.
All three new store concepts, Babies"R"Us, Concept 2000 and our superstore,
will reshape the shopping experience and position the Toys"R"Us family of
stores as the premiere retailer of children's products for the 21st Century.
<PAGE>
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INTRODUCING
BABIES"R"US (TRADE MARK SYMBOL)
THE NEWLY DESIGNED
TOYS"R"US (TRADE MARK SYMBOL)
EVERYTHING FOR KIDS UNDER ONE ROOF
TOYS"R"US (TRADE MARK SYMBOL)
Superstore
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TABLE OF CONTENTS
1 Financial Highlights
2 Letter to Our Stockholders
6 Management's Discussion -
Results of Operations
and Financial Condition
7 Quarterly Financial Data and
Market Information
8 Financial Statements
17 Report of Management
17 Report of Independent Auditors
18 Directors and Officers
19 Corporate Data
STORE LOCATIONS
TOYS"R"US UNITED STATES - 653 LOCATIONS
Alabama - 7
Alaska - 1
Arizona - 12
Arkansas - 4
California - 80
Colorado - 11
Connecticut - 9
Delaware - 2
Florida - 41
Georgia - 17
Hawaii - 1
Idaho - 2
Illinois - 34
Indiana - 12
Iowa - 8
Kansas - 4
Kentucky - 8
Louisiana - 11
Maine - 2
Maryland - 18
Massachusetts - 18
Michigan - 24
Minnesota - 11
Mississippi - 5
Missouri - 12
Montana - 1
Nebraska - 3
Nevada - 4
New Hampshire - 5
New Jersey - 22
New Mexico - 3
New York - 44
North Carolina - 16
North Dakota - 1
Ohio - 29
Oklahoma - 4
Oregon - 8
Pennsylvania - 30
Rhode Island - 1
South Carolina - 8
South Dakota - 2
Tennessee - 12
Texas - 51
Utah - 5
Virginia - 20
Washington - 12
West Virginia - 3
Wisconsin - 11
Puerto Rico - 4
TOYS"R"US INTERNATIONAL - 337 LOCATIONS
Australia - 21
Austria - 7
Belgium - 3
Canada - 58
Denmark - 1
France - 37
<PAGE>
Germany - 57
Hong Kong - 4
Israel - 1
Japan - 37
Luxembourg - 1
Malaysia - 4
Netherlands - 9
Portugal - 3
Singapore - 4
Spain - 26
Sweden - 3
Switzerland - 4
Taiwan - 6
United Arab Emirates - 1
United Kingdom - 50
KIDS"R"US UNITED STATES - 213 LOCATIONS
Alabama - 1
California - 27
Connecticut - 6
Delaware - 1
Florida - 10
Georgia - 4
Illinois - 20
Indiana - 7
Iowa - 1
Kansas - 1
Maine - 1
Maryland - 8
Massachusetts - 6
Michigan - 13
Minnesota - 5
Missouri - 4
Nebraska - 1
New Hampshire - 2
New Jersey - 17
New York - 21
Ohio - 19
Pennsylvania - 14
Rhode Island - 1
Tennessee - 1
Texas - 9
Utah - 3
Virginia - 7
Wisconsin - 3
Toys"R"Us is the world's largest retailer of children's products in terms of
both sales and earnings. At February 3, 1996, the Company operated 653 toy
stores in the United States, 337 international toy stores and 213 Kids"R"Us
children's clothing stores.
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
TOYS"R"US, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Dollars in millions except per share information) Fiscal Year Ended
- ----------------------------------------------------------------------------------------------------------------------------------
Feb. 3, Jan. 28, Jan. 29, Jan. 30, Feb. 1, Feb. 2, Jan. 28, Jan. 29, Jan. 31, Feb. 1,
1996* 1995 1994 1993 1992 1991 1990 1989 1988 1987
------ ------- -------- -------- ------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Sales $ 9,427 $ 8,746 $ 7,946 $ 7,169 $ 6,124 $ 5,510 $ 4,788 $ 4,000 $ 3,137 $ 2,445
Net Earnings 148 532 483 438 340 326 321 268 204 152
Earnings Per Share .53 1.85 1.63 1.47 1.15 1.11 1.09 .91 .69 .52
FINANCIAL POSITION AT YEAR END:
Working Capital 326 484 633 797 328 177 238 255 225 155
Real Estate-Net 2,336 2,271 2,036 1,877 1,751 1,433 1,142 952 762 601
Total Assets 6,738 6,571 6,150 5,323 4,583 3,582 3,075 2,555 2,027 1,523
Long-Term Obligations 827 785 724 671 391 195 173 174 177 85
Stockholders Equity 3,432 3,429 3,148 2,889 2,426 2,046 1,705 1,424 1,135 901
NUMBER OF STORES AT YEAR END:
Toys"R"Us - United States 653 618 581 540 497 451 404 358 313 271
Toys"R"Us - International 337 293 234 167 126 97 74 52 37 24
Kids"R"Us - United States 213 204 217 211 189 164 137 112 74 43
</TABLE>
* After restructuring and other charges.
<TABLE>
<CAPTION>
CONSOLIDATED NET SALES (billions)
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
Fiscal Year 1986 2.4
1987 3.1
1988 4.0
1989 4.8
1990 5.5
1991 6.1
1992 7.2
1993 7.9
1994 8.7
1995 9.4
</TABLE>
1
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TO OUR STOCKHOLDERS
INTRODUCTION
In last year's letter to our stockholders, we addressed strategic initiatives
that were being taken to improve our long-term profitability and market share.
We further cautioned that these steps would adversely impact our ability to
achieve our historic earnings growth rate in 1995. These strategies, coupled
with a retailing environment that the media described as one of the most
difficult in decades, have resulted in Toys"R"Us not reporting record earnings
for the first time in our history as a public company.
One can argue that the decline in earnings is understandable given the
externalities which face our business: the abysmal retail climate, the
lack of exciting product and the transition to a new generation of video
games. We believe, however, such performance is not acceptable.
In the true Toys"R"Us tradition, we have taken the initiative to regain the
historic momentum we attained as a market leader and as one of the leading
growth-oriented retailers in the world. Beginning in 1995, we launched an
ambitious plan to not only restructure our operations, but to also grow our
business through the exciting new formats highlighted on the cover of this
report.
The highlights of our strategic plan are discussed in this letter. We hope
that when you read about our activities, you will be as excited as we are
about our future.
(Photo of Michael Goldstein, Vice Chairman and Chief Executive Officer and
Robert C. Nakasone, President and Chief Operating Officer.)
1995 FINANCIAL HIGHLIGHTS
We are pleased to report our 17th consecutive year of record sales since
Toys"R"Us became a public company. For the year, sales grew to $9.4 billion,
an 8% increase over the $8.7 billion in the prior year. However, before the
restructuring charge described below, operating earnings decreased 18%, while
net earnings fell to $417.2 million versus $531.8 million in 1994. Earnings per
share, before the restructuring, decreased to $1.51 compared to $1.85 a year
ago. As a result of the restructuring, net earnings for the year were $148.1
million or $.53 per share.
Our restructuring program will place Toys"R"Us in a
stronger position to generate significant earnings gains in 1996, and more
importantly, should improve our growth trends over the longer term. The four
main elements of the 1995 charge to earnings are:
1. Strategic Inventory Repositioning
In response to changes in the retailing market place, we will streamline the
number of items carried by more than 20%. We have learned from our customers
that the breadth of our assortment can sometimes make it cumbersome to shop in
our stores. By eliminating certain product, we will be able to display a more
in-depth merchandise presentation, further enhancing our selection advantage and
improving overall store productivity and profitability. Our inventory assortment
after this restructuring will continue to far exceed the selection of our
competitors.
2. Store Closings
We reviewed all of our more than 1,200 operating locations throughout the world
and have identified 25 stores which are not performing up to our expectations.
Our restructuring plan includes the closing of 3 Toys"R"Us and 12 Kids"R"Us
stores in the United States, and the franchising or closing of 10 toy stores in
Europe.
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3. Improved Administrative and Distribution Efficiencies
In order to enhance the profitability of our business units, we will
consolidate 3 distribution centers and 7 administrative facilities in the
United States and Europe.
4. Asset Impairment
In 1995, we elected early adoption of a new accounting pronouncement which
resulted in a $24 million charge relating to the write down of impaired
long-term assets. We are particularly proud that with over $4 billion of
long-term assets, our total impairment is very small.
Restructuring Benefits
We believe these restructuring efforts will enable us to sustain our leadership
position as the world's premier retailer of children's products. Although it is
difficult to estimate, between the reduction in our cost structure and the
benefits anticipated from repositioning our merchandise offerings, the
restructuring should provide at least a $50 million benefit to operating
earnings in 1996 and an even greater amount in 1997 and beyond. In addition, the
restructuring will have a positive impact on our cash flow.
1995 Divisional Highlights
When reviewing 1995 results, before the restructuring, it is important to
remember that the 1994 Power Rangers' phenomena was not replaced with a similar
hot toy. Comparable store sales at our U.S.A. toy stores fell 2 percent for the
year. As mentioned previously, we expected profitability in 1995 to be
adversely impacted by a number of pricing and marketing initiatives. We are
pleased to report that the implementation of these initiatives was successful.
We introduced more customer service programs in our stores and we introduced
larger catalogs which featured more pages, more coupons and received wider
distribution. In the fourth quarter, we experienced a significant upturn in the
sale of video game hardware platforms with the release of the new 32-bit
systems.
In 1995, we also completed a significant number of operational and promotional
initiatives. First, we completed the rollout of our Baby Registry to our entire
U.S.A. toy store chain. We are very pleased with the number of expectant parents
that have signed up for this service and the incremental business which has been
generated. We firmly believe that the Baby Registry system will be an integral
component of the success of our new Babies"R"Us and superstore concepts.
Our revolving feature shop area was expanded in 1995 to include such exciting
concepts as our Nickelodeon, Action Heroes, Pocahontas and Barbie shops. These
shops enable us to display exciting new merchandise offerings in a dramatically
enhanced visual environment. We are planning bigger and better things for our
feature shop concepts in 1996. In addition, we added 100 Learning Centers and
rolled out our new PC software department to our entire U.S.A. chain.
We have expanded the space dedicated to outdoor playsets in our stores to
further enhance our reputation as the selection leader of this merchandise.
The new Toys"R"Us Visa credit card now allows us to develop unique promotional
opportunities and special offers. This card enables us to reward our loyal
customers with a 3% rebate on every purchase made in an "R"Us store (and a 1%
rebate everywhere else) which enhances the value of the card from our customers
point of view.
Finally, we continue to improve our customers shopping experience through
enhanced customer service. 1996 will further demonstrate our commitment to
this essential area of our business and will continue to be a primary focus in
our toy stores worldwide.
Internationally, our U.K. toy stores had mid-single digit comparable store
sales increases, primarily due to the introduction of computer hardware.
Our Japanese comparable toy store sales were up in the mid-single digits,
largely due to the continuing success of 32-bit video hardware and software
which were released in Japan before the rest of the world. These gains were
offset by lower comparable store sales in Canada, France, Germany, Spain and
Australia. These results reflect continued difficult retail environments
throughout the world, causing our international division to report a 19%
decrease in operating earnings, before the impact of the restructuring.
We have added new franchisees to the Toys"R"Us family in Indonesia, Scandinavia,
South Africa, and Turkey. We will continue to aggressively pursue franchise
agreements in 1996 and beyond.
Our Kids"R"Us childrens clothing division was impacted by the extremely
difficult apparel sales environment throughout 1995. Comparable store sales
decreased in the mid-single digits and operating profits fell 36.3%, before
the restructuring, after three successive years of strong growth.
Under our $1 billion stock buy back program, we purchased 7.6 million shares
at a cost of $200.2 million. This brings the total number of shares
repurchased under this program to 21.3 million since its inception in January,
1994.
<TABLE>
<CAPTION>
TOTAL ASSETS (billions)
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
Fiscal Year 1986 1.5
1987 2.0
1988 2.6
1989 3.1
1990 3.6
1991 4.6
1992 5.3
1993 6.1
1994 6.6
1995 6.7
</TABLE>
3
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EXPANSION PLANS
In 1995 we opened 89 stores: 35 U.S.A. toy stores, 45 international toy stores,
and 9 Kids"R"Us stores. We are very excited about our 1996 expansion plans
which have been highlighted in this report. Our Concept 2000 toy store design
will be unveiled this year in approximately 16 locations, 4 of which will be
retrofits of existing stores.
Our new division, Babies"R"Us, will open about 10 locations in 1996, with a
brand new store design specially tailored to the juvenile market. Our new
superstore design combining all of the "R"Us concepts under one roof within
approximately 90,000 square feet, will be showcased in 2 locations, one of
which will be a retrofit of an existing Toys"R"Us and Kids"R"Us location.
Including the "Concept 2000" format, we will open approximately 35 new toy
stores and approximately 10 new Kids"R"Us stores in the United States this
year. Internationally, we will open approximately 55 toy stores, including 20
franchise stores.
CORPORATE CITIZENSHIP
Toys"R"Us maintains a company-wide giving program focused on improving the
health-care needs of children by supporting many national and regional
children's health care organizations. In 1995, we contributed funds to over
100 childrens health care organizations. We also continued our Hospital
Playroom Program, which equips quality children's play centers in hospitals,
bringing the total in operation to 35.
Toys"R"Us is a signatory to the Fair Share Agreement with the NAACP and has
taken steps to support women and minorities in the workplace. We are the
leading purchaser of products from several minority-owned toy companies.
Toys"R"Us continues to have a strong toy safety program which includes the
inspection of directly imported toys. Furthermore, we continue to take
numerous proactive steps, including a leadership position in eliminating the
sale of look-alike toy guns.
We are proud to be a recipient of the Consumer Product Safety Commission
Chairman's Commendation for Significant Contributions to Product Safety.
Through our Books"R"Us shops and our new learning center departments we are
promoting literacy among children by demonstrating that learning is fun.
Finally, with the help of Sharon Stone and Patti LaBelle who donated their time
and talents, our annual Children's Benefit Fund Dinner raised over $2.5 million
for children's charities.
HUMAN RESOURCES
In order to accomplish our aggressive goals for 1996 and beyond, we made the
following important additions and promotions within our executive ranks:
Additions:
Pierre Buuron,
President - Toys"R"Us Central Europe
Joseph J. Lombardi,
Vice President - Controller
Gwen Manto,
Senior Vice President - General Merchandise Manager - Kids"R"Us
<TABLE>
<CAPTION>
NUMBER OF COUNTRIES - INTERNATIONAL DIVISION
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
Fiscal Year 1986 4.0
1987 5.0
1988 6.0
1989 8.0
1990 8.0
1991 10.0
1992 11.0
1993 16.0
1994 20.0
1995 21.0
</TABLE>
4
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<PAGE>
Promotions:
Corporate and Administrative
Louis Lipschitz,
Executive Vice President and Chief Financial Officer
Toys"R"Us U.S.A.
Roger V. Goddu,
President - Store Merchandising
Michael J. Madden,
President - Store Operations
John F. Cummo,
Vice President - Creative Services
Debra M. Kachurak,
Vice President - Operations Development
Dennis J. Williams,
Vice President - General Manager
Toys"R"Us International
Gregory R. Staley,
President
Kenneth G. Bonning,
Vice President - Logistics and Franchise Operations
Joan W. Donovan,
Vice President - General Merchandise Manager
John Schryver,
Managing Director - Toys"R"Us Australia
Keith Van Beek,
Vice President - Development
President, Toys"R"Us Canada
Kids"R"Us
Jeff Handler,
Vice President - Advertising
John Morrow,
Vice President - Management Information Systems
Babies"R"Us
Richard L. Markee,
President
Jonathan M. Friedman,
Vice President - Chief Financial Officer
<TABLE>
<CAPTION>
CONSOLIDATED NUMBER OF STORES
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
Fiscal Year 1986 338.0
1987 424.0
1988 522.0
1989 615.0
1990 712.0
1991 812.0
1992 918.0
1993 1,032.0
1994 1,115.0
1995 1,203.0
</TABLE>
<TABLE>
<CAPTION>
NET SALES - INTERNATIONAL DIVISION (billions)
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
Fiscal Year 1986 0.1
1987 0.2
1988 0.4
1989 0.5
1990 0.8
1991 1.0
1992 1.4
1993 1.7
1994 2.1
1995 2.6
</TABLE>
<PAGE>
<Page
SUMMARY AND OUTLOOK
What was started in 1995 with our strategic restructuring program is only the
beginning of the watershed events we will unveil in 1996. It has been over 10
years since we introduced a new store concept and in 1996 there will be 3 of
them. To accomplish this unprecedented level of change, we must first
acknowledge the outstanding effort of our associates throughout the world who
are dedicated more than ever to our common goal of building shareholder value.
Secondly, we recognize the value of our suppliers who create an atmosphere of
excitement with their innovative toy products. Our evaluation of the February
New York Toy Fair indicates a year of exciting new products including a
resurgence of the video game market with the introduction of Nintendo 64 in the
United States and Japan, and hot new licensed toys. These new products will keep
our selection fresh and exciting for our customers.
Finally, we appreciate all our stockholders who have supported us through this
year of self-review and strategic formulation so that we could create a new
Toys"R"Us for the future. We are proud of the results of our planning efforts
and are currently implementing all of our exciting initiatives. And we're
planning some surprises too! For these reasons, we are bullish about Toys"R"Us
and look forward to reaping the rewards of our hard work, for you our
stockholders, in 1996 and beyond.
Sincerely,
/S/ Michael Goldstein
Vice Chairman and
Chief Executive Officer
/S/ Robert C. Nakasone
President and Chief Operating Officer
March 25, 1996
5
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<PAGE>
MANAGEMENT'S DISCUSSION -
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS*
The Company has experienced sales growth in each of its last three years;
sales were up 7.8% in 1995, 10.1% in 1994 and 10.8% in 1993. The growth is
attributable to the opening of 113 new U.S.A. toy stores, 171 international toy
stores and 25 children's clothing stores during the three year period, offset
by the decrease of comparable U.S.A.toy store sales of 2% in 1995. Comparable
U.S.A. toy store sales increased 2% and 3% in 1994 and 1993, respectively.
Cost of sales as a percentage of sales increased to 69.9% in 1995 from 68.7%
in 1994 due to an intensely competitive retail environment, the Company's
aggressive pricing strategy and an unfavorable shift in the merchandise mix.
Cost of sales as a percentage of sales decreased in 1994 from 69.2% in 1993
due to a more favorable merchandise mix.
Selling, advertising, general and administrative expenses as a percentage of
sales increased to 20.1% in 1995 from 19.0% in 1994 primarily as a result of
heavier than normal promotional activity, customer service and marketing
initiatives implemented in 1995 and a deleveraging factor resulting from a
decrease in comparable store sales. Selling, advertising, general and
administrative expenses increased in 1994 from 18.8% in 1993 primarily as a
result of increases in such expenses at a rate faster than comparable store
sales increases and customer service initiatives implemented in 1994.
On February 1, 1996, the Company announced a restructuring of its worldwide
operations and the early adoption of FAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed Of." Elements of the
restructuring plan are described in the Notes to the Consolidated Financial
Statements and consist of certain asset writeoffs and contractual obligations,
primarily in the United States and Europe. Although retailing remains a
competitive industry, the 1995 holiday selling season was particularly
difficult for selling toys and apparel. Our restructuring program is designed
to better position the Company over the long-term to compete more efficiently
and increase market share. The restructuring plan and the adoption of
FAS No. 121 resulted in charges of $396.6 million ($269.1 million, net of tax
benefits or $.98 cents per share). The Company anticipates that the majority of
this charge will be utilized throughout 1996 as elements of the restructuring
are completed, except for amounts related to long-term property and lease
commitments. The restructuring will benefit the Company in two important ways.
First, the restructuring will have a positive cash impact and improve the
Company's working capital. Secondly, the restructuring should enable the
Company to achieve operating efficiencies resulting in improved operating
earnings in 1996 and beyond. The Company estimates the restructuring should
provide at least a $50 million benefit to operating earnings in 1996 and a
greater amount in 1997 and thereafter.
Interest expense increased in 1995 as compared to 1994 and 1993 due to
increased average borrowings and a change in the mix of borrowings and interest
rates among countries. Interest income increased in 1995 as compared to 1994
and decreased in 1994 as compared to 1993, principally due to the availability
of cash for investments.
The effective tax rate increased to 44.2% in 1995 from 37.0% in 1994, primarily
due to the tax effects of the Companys restructuring of their worldwide
operations. The effective rate decreased in 1994 as compared to 37.5% in 1993,
due to a one-time retroactive adjustment in 1993 for an increase in the U.S.
Federal corporate income tax rate. The Company believes its deferred tax
assets, as reported, are fully realizable.
The Company believes that its risks attendant to foreign operations are
minimal as it owns assets and operates stores in nineteen different countries
which are politically stable. The Company also operates stores through
franchises in two countries. The Company's foreign exchange risk management
objectives are to stabilize cash flow from the effect of foreign currency
fluctuations. The Company will, whenever practical, offset local investments
in foreign currencies with borrowings denominated in the same currency.
The Company also enters into forward foreign exchange contracts or purchases
options to eliminate specific transaction currency risk. International sales
were favorably impacted by the translation of local currency results into U.S.
dollars at higher average exchange rates for both 1995 and 1994 as compared to
each prior year. International operating earnings were not impacted by the
translation of local currency results into U.S. dollars in 1995, and were
favorably impacted by higher exchange rates in 1994 than in 1993. Inflation
has had little effect on the Company's operations in the last three years.
*References to 1995, 1994, and 1993 are for the 53 weeks ended February 3, 1996
and the 52 weeks ended January 28, 1995 and January 29, 1994, respectively.
6
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a strong financial position as evidenced by
its working capital of $326 million at February 3, 1996 and $484 million at
January 28, 1995. The long-term debt to equity percentage is 24.7% at
February 3, 1996 as compared to 23.0% at January 28, 1995.
In 1996, the Company plans to open approximately 90 toy stores in the United
States and internationally. The new revolutionary "Concept 2000" store
design will be unveiled in approximately 16 United States locations, 4 of
which are retrofits of existing stores. The signing of new franchise
agreements will allow the Company to open approximately 20 franchise stores
and enter the markets of Indonesia, Saudi Arabia, South Africa and Turkey in
1996. Our newest division, Babies"R"Us, will open approximately 10 stores in
the United States. Additionally, there are plans to open about 10 Kids"R"Us
children's clothing stores. Finally, the Company will open 2 superstores that
combine all of the "R"Us concepts under one roof. One of these locations will
be a retrofit of an existing Toys"R"Us and Kids"R"Us store. The Company opened
80 toy stores in 1995, 96 in 1994 and 108 in 1993, and 9 Kids"R"Us children's
clothing stores in 1995, 6 in 1994 and 10 in 1993. The Company closed 19
Kids"R"Us clothing stores in 1994 and 4 in 1993 which did not meet our
expectations. The Company closed 1 toy store in the United Kingdom in 1995.
These closures did not have a significant impact on the Companys financial
position.
For 1996, capital requirements for real estate, store and warehouse fixtures
and equipment, leasehold improvements and other additions to property and
equipment are estimated at $550 million (including real estate and related
costs of $350 million). The Company's policy is to purchase its real estate
where appropriate and it plans to continue this policy.
The Company has an existing $1 billion share repurchase program, under which
it has repurchased 21.3 million shares of its common stock for $693.9 million,
since the program was announced in January of 1994.
The seasonal nature of the business (approximately 49% of sales take place in
the fourth quarter) typically causes cash to decline from the beginning of the
year through October as inventory increases for the holiday selling season and
funds are used for land purchases and construction of new stores, which
usually open in the first ten months of the year. The Company has a $1 billion
multi-currency unsecured revolving credit facility expiring in February 2000,
from a syndicate of financial institutions. Cash requirements for operations,
capital expenditures, lease commitments and the share repurchase program will
be met primarily through operating activities, borrowings under the revolving
credit facility, issuance of short-term commercial paper and other bank
borrowings for foreign subsidiaries.
QUARTERLY FINANCIAL DATA AND MARKET INFORMATION
QUARTERLY FINANCIAL DATA
(Amounts in millions, except per share amounts)
The following table sets forth certain unaudited quarterly
financial information.
<TABLE>
<CAPTION>
First Second Third Fourth
Year Ended Quarter Quarter Quarter Quarter*
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
February 3, 1996
- ---------------------------------------------------------------------
Net Sales $ 1,493.0 $ 1,614.2 $ 1,714.5 $ 4,605.2
Cost of Sales 1,017.3 1,104.5 1,168.5 3,302.0
Restructuring and
other charges - - - 396.6
Net Earnings 18.4 15.8 20.9 93.0
Earnings per Share $ .07 $ .06 $ .08 $ .34
January 28,1995
- ---------------------------------------------------------------------
Net Sales $ 1,461.9 $ 1,452.1 $ 1,631.3 $ 4,200.3
Cost of Sales 1,001.2 982.9 1,097.2 2,926.7
Net Earnings 37.6 38.0 47.4 408.8
Earnings per Share $ .13 $ .13 $ .17 $ 1.46
</TABLE>
(*For the 14 weeks ended February 3, 1996 and the 13 weeks ended
January 28, 1995)
MARKET INFORMATION
The Company's common stock is listed on the New York Stock Exchange. The
following table reflects the high and low prices (rounded to the nearest
one-eighth) based on New York Stock Exchange trading since January 29, 1994.
The Company has not paid any cash dividends, however, the Board of Directors
of the Company reviews this policy annually.
The number of stockholders of record of common stock on March 12, 1996 was
approximately 32,900.
<TABLE>
<CAPTION>
High Low
<S> <C> <C> <C>
- ----------------------------------------------
1994 1st Quarter 37 3/8 32 3/8
2nd Quarter 36 3/4 32 1/4
3rd Quarter 38 3/4 33
4th Quarter 39 28 1/4
- ----------------------------------------------
1995 1st Quarter 30 7/8 23 3/4
2nd Quarter 29 1/2 24 1/4
3rd Quarter 28 3/4 21 5/8
4th Quarter 24 3/8 20 1/2
</TABLE>
7
<PAGE>
<PAGE>
Consolidated Statements of Earnings
TOYS"R"US, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended
- ---------------------------------------------------------------------------------------------
February 3, January 28, January 29,
(In millions except per share information) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 9,426.9 $ 8,745.6 $ 7,946.1
- ---------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 6,592.3 6,008.0 5,494.7
Selling, advertising, general and administrative 1,894.8 1,664.2 1,497.0
Restructuring and other charges 396.6 - -
Depreciation and amortization 191.7 161.4 133.4
Interest expense 103.3 83.9 72.3
Interest and other income (17.4) (16.0) (24.1)
- ---------------------------------------------------------------------------------------------
9,161.3 7,901.5 7,173.3
- ---------------------------------------------------------------------------------------------
Earnings before taxes on income 265.6 844.1 772.8
Taxes on income 117.5 312.3 289.8
- ---------------------------------------------------------------------------------------------
Net earnings $ 148.1 $ 531.8 $ 483.0
=============================================================================================
Earnings per share $ .53 $ 1.85 $ 1.63
=============================================================================================
</TABLE>
See notes to consolidated financial statements.
"We are truly the one-stop kids shop!
8
<PAGE>
<PAGE>
Consolidated Balance Sheets
TOYS"R"US, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
February 3, January 28,
(In millions) 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 202.7 $ 369.8
Accounts and other receivables 128.9 115.9
Merchandise inventories 1,999.5 1,999.2
Prepaid expenses and other current assets 87.8 45.8
- ----------------------------------------------------------------------------
Total Current Assets 2,418.9 2,530.7
- ----------------------------------------------------------------------------
Property and Equipment:
Real estate, net 2,336.0 2,270.8
Other, net 1,522.2 1,398.0
- ----------------------------------------------------------------------------
Total Property and Equipment 3,858.2 3,668.8
- ----------------------------------------------------------------------------
Other Assets 460.4 371.7
- ----------------------------------------------------------------------------
$ 6,737.5 $ 6,571.2
============================================================================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Short-term borrowings $ 332.8 $ 122.7
Accounts payable 1,182.0 1,339.1
Accrued expenses and other current liabilities 438.1 382.6
Income taxes payable 139.9 202.5
- ----------------------------------------------------------------------------
Total Current Liabilities 2,092.8 2,046.9
- ----------------------------------------------------------------------------
Long-Term Debt 826.8 785.4
Deferred Income Taxes 228.7 219.9
Other Liabilities 156.9 90.1
Stockholders' Equity:
Common stock 30.0 29.8
Additional paid-in capital 542.8 521.3
Retained earnings 3,692.7 3,544.6
Foreign currency translation adjustments 12.9 (25.1)
Treasury shares, at cost (846.1) (641.7)
- ----------------------------------------------------------------------------
Total Stockholders' Equity 3,432.3 3,428.9
- ----------------------------------------------------------------------------
$ 6,737.5 $ 6,571.2
============================================================================
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
<PAGE>
Consolidated Statements of Cash Flows
TOYS"R"US, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended
- ------------------------------------------------------------------------------------------------------------
February 3, January 28, January 29,
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 148.1 $ 531.8 $ 483.0
- ------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Restructuring and other charges 396.6 - -
Depreciation and amortization 191.7 161.4 133.4
Deferred income taxes (66.7) (14.5) 36.5
Changes in operating assets and liabilities:
Accounts and other receivables (10.8) (17.4) (29.1)
Merchandise inventories (193.1) (221.6) (278.9)
Prepaid expenses and other operating assets (15.7) (31.7) (39.5)
Accounts payable, accrued expenses and other liabilities (150.5) 183.5 325.1
Income taxes payable (49.3) (2.0) 26.6
- ------------------------------------------------------------------------------------------------------------
Total adjustments 102.2 57.7 174.1
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 250.3 589.5 657.1
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net (467.5) (585.7) (555.3)
Other assets (67.4) (44.6) (58.3)
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (534.9) (630.3) (613.6)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net 210.1 (117.2) 119.1
Long-term borrowings 82.2 34.6 40.5
Long-term debt repayments (9.3) (1.1) (1.3)
Exercise of stock options 16.2 26.0 29.9
Share repurchase program (200.2) (469.7) (183.2)
Sale of stock to Petrie Stores Corporation - 161.6 -
- ------------------------------------------------------------------------------------------------------------
Net cash provided by/(used in) financing activities 99.0 (365.8) 5.0
- ------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 18.5 (15.5) (20.3)
CASH AND CASH EQUIVALENTS
(Decrease)/increase during year (167.1) (422.1) 28.2
Beginning of year 369.8 791.9 763.7
- ------------------------------------------------------------------------------------------------------------
End of year $ 202.7 $ 369.8 $ 791.9
============================================================================================================
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company considers its highly liquid investments purchased as part of its
daily cash management activities to be cash equivalents. During 1995, 1994 and
1993, the Company made income tax payments of $234.5, $318.9 and $220.2 and
interest payments (net of amounts capitalized) of $118.4, $123.6 and $104.3,
respectively.
See notes to consolidated financial statements.
10
<PAGE>
<PAGE>
Consolidated Statements of Stockholders' Equity
TOYS"R"US, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock
-------------------------------------
Foreign
Issued In Treasury Additional currency
---------------- ----------------- paid-in Retained translation
(In millions) Shares Amount Shares Amount capital earnings adjustments
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 30, 1993 297.9 $ 29.8 (4.9) $ (150.4) $ 465.5 $2,529.8 $ 14.3
Net earnings for the year - - - - - 483.0 -
Share repurchase program - - (4.9) (183.2) - - -
Exercise of stock options - - 1.4 41.2 (21.5) - -
Tax benefit from exercise of stock options - - - - 10.0 -
Foreign currency translation adjustments - - - - - - (70.3)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, January 29, 1994 297.9 29.8 (8.4) (292.4) 454.0 3,012.8 (56.0)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings for the year - - - - - 531.8 -
Share repurchase program - - (13.1) (469.7) - -
Exercise of stock options 0.1 - 1.1 41.9 (21.9) - -
Tax benefit from exercise of stock options - - - - 6.1 - -
Exchange with and sale of stock to
Petrie Stores Corporation - - 2.2 78.5 83.1 - -
Foreign currency translation adjustments - - - - - - 30.9
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, January 28, 1995 298.0 29.8 (18.2) (641.7) 521.3 3,544.6 (25.1)
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings for the year - - - - - 148.1 -
Share repurchase program - - (7.6) (200.2) - - -
Exercise of stock options - - .9 34.2 (19.8) - -
Tax benefit from exercise of stock options - - - - 3.1 - -
Corporate inversion 2.4 0.2 (2.4) (38.4) 38.2 - -
Foreign currency translation adjustments - - - - - - 38.0
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, February 3, 1996 300.4 $ 30.0 (27.3) $ (846.1) $ 542.8 $3,692.7 $ 12.9
==================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
11
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TOYS"R"US, INC. AND SUBSIDIARIES
(Amounts in millions, except per share amounts)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year ends on the Saturday nearest to January 31.
Reference to 1995, 1994 and 1993 are for the 53 weeks ended February 3, 1996
and the 52 weeks ended January 28, 1995 and January 29, 1994, respectively.
Reclassification
Certain amounts in the 1994 Consolidated Balance Sheet have been reclassified
to conform with the 1995 presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material inter-company balances and transactions
have been eliminated. Assets and liabilities of foreign operations are
translated at current rates of exchange at the balance sheet date while
results of operations are translated at average rates in effect for the
period. Translation gains or losses are shown as a separate component
of stockholders' equity.
Merchandise Inventories
Merchandise inventories for the U.S.A. toy store operations, which represent
over 61% of total inventories, are stated at the lower of LIFO (last-in,
first-out) cost or market as determined by the retail inventory method.
If inventories had been valued at the lower of FIFO (first-in, first-out)cost
or market, inventories would show no change at February 3, 1996, or January 28,
1995. All other merchandise inventories are stated at the lower of FIFO cost
or market as determined by the retail inventory method.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
assets or, where applicable, the terms of the respective leases, whichever is
shorter.
Preopening Costs
Preopening costs, which consist primarily of advertising, occupancy and payroll
expenses, are amortized over expected sales to the end of the fiscal year in
which the store opens.
Capitalized Interest
Interest on borrowed funds is capitalized during construction of property and
is amortized by charges to earnings over the depreciable lives of the related
assets. Interest of $6.1, $6.9 and $7.3 was capitalized during 1995, 1994 and
1993, respectively.
Financial instruments
The carrying amounts reported in the balance sheets for cash and cash
equivalents and short-term borrowings approximate their fair market values.
Forward Foreign Exchange Contracts
The Company enters into forward foreign exchange contracts to eliminate the
risk associated with currency movement relating to its short-term intercompany
loan program with foreign subsidiaries and inventory purchases denominated in
foreign currency. Gains and losses which offset the movement in the underlying
transactions are recognized as part of such transactions. Gross deferred
unrealized gains and losses on the forward contracts were not material at
either February 3, 1996 or January 28, 1995. The related receivable, payable
and deferred gain or loss are included on a net basis in the balance sheet.
As of February 3, 1996 and January 28, 1995, the Company had approximately
$205.0 and $547.0 of outstanding forward contracts maturing in 1996 and 1995,
respectively, which are entered into with counterparties that have high credit
ratings and with which the Company has the contractual right to net forward
currency settlements.
Stock Options
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, "Accounting for Stock Issued to Employees," and
intends to continue to do so.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
RESTRUCTURING AND OTHER CHARGES
On February 1, 1996, the Company recorded charges of $396.6 ($269.1 after tax
or $.98 per share) to restructure its worldwide operations (the "restructuring")
and to early adopt Financial Accounting Standards Board ("FAS No. 121"),
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed Of." The restructuring charge includes $184.0 related to strategic
inventory repositioning, $84.4 related to the closing of 25 stores, $71.6 for
the consolidation of three distribution centers and seven administrative
facilities and $32.4 of other costs. The charge to early adopt FAS No. 121
was $24.2, primarily relating to a write down of certain store assets to fair
value, based on discounted cash flows.
12
<PAGE>
<PAGE>
Total restructuring and other charges are comprised of $208.8 relating to
operations in the United States and $187.8 for international operations.
The portion of the unused charge of $353.4 at February 3, 1996 is expected
to be utilized throughout 1996, except for amounts related to long-term
property and lease commitments, which will be utilized throughout 1996 and
thereafter.
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Useful Life February 3, January 28,
(in years) 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 802.4 $ 764.8
Buildings 45-50 1,745.3 1,627.1
Furniture and equipment 5-20 1,351.9 1,177.9
Leaseholds and
leasehold improvements 12 1/2-50 959.0 809.4
Construction in progress 45.6 55.7
Leased property
under capital leases 25.1 24.9
- ------------------------------------------------------------------------------
4,929.3 4,459.8
Less accumulated depreciation
and amortization 1,071.1 791.0
- ------------------------------------------------------------------------------
$ 3,858.2 $ 3,668.8
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
SEASONAL FINANCING AND LONG-TERM DEBT
February 3, January 28,
1996 1995
<S> <C> <C>
British pound sterling 11% Stepped
Coupon Guaranteed Bonds, due 2017 $ 198.4 $ 206.6
83/4% debentures, due 2021,
net of expenses 198.1 198.1
Japanese yen loans payable at annual
interest rates from 3.45% to 6.47%,
due in varying amounts through 2012 178.3 192.9
81/4% sinking fund debentures,
due 2017, net of discounts 88.3 88.2
British pound sterling loan payable at 7%,
due quarterly through 2001(a) 77.3 -
Industrial revenue bonds,
net of expenses (b) 74.2 74.2
Mortgage notes payable at annual
interest rates from 6% to 11% (c) 19.2 13.0
Obligations under capital leases 12.8 14.0
- -----------------------------------------------------------------------------
846.6 787.0
Less current portion 19.8 1.6
- -----------------------------------------------------------------------------
$ 826.8 $ 785.4
=============================================================================
</TABLE>
(a) British pound sterling loan payable is collateralized by property with a
carrying value of $154.1 at February 3, 1996.
(b) Bank letters of credit of $57.1, expiring in 1997, support certain
industrial revenue bonds. The Company expects the bank letters of credit
expiring in 1997 will be renewed. The bonds have fixed or variable interest
rates with an average rate of 4.4% at February 3, 1996.
(c) Mortgage notes payable are collateralized by property and equipment with an
aggregate carrying value of $27.8 at February 3, 1996.
The fair market value of the Company's long-term debt at February 3, 1996 was
approximately $948.2. The fair market value was estimated using quoted market
rates for publicly traded debt and estimated interest rates for non-public debt.
On January 27, 1995, the Company entered into a $1 billion unsecured committed
revolving credit facility expiring in February 2000. This multi-currency
facility permits the Company to borrow at the lower of LIBOR plus a fixed
spread or a rate set by competitive auction. The facility is available to
support domestic commercial paper borrowings and to meet worldwide cash
requirements.
Additionally, the Company also has lines of credit with various banks to meet
the short-term financing needs of its foreign subsidiaries. The weighted
average interest rate on short-term borrowings outstanding at February 3, 1996
and at January 28, 1995 was 4.0% and 6.3%, respectively.
The annual maturities of long-term debt at February 3, 1996 are as follows:
<TABLE>
<CAPTION>
Year ending in
- ----------------------------------
<S> <C>
1997 $ 19.8
1998 23.3
1999 25.9
2000 26.6
2001 22.8
2002 and subsequent 728.2
- ----------------------------------
$ 846.6
==================================
</TABLE>
13
<PAGE>
<PAGE>
LEASES
The Company leases a portion of the real estate used in its operations.
Most leases require the Company to pay real estate taxes and other expenses;
some require additional amounts based on percentages of sales.
Minimum rental commitments under noncancelable operating leases having a
term of more than one year as of February 3, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Net
minimum Sublease minimum
Year ending in rentals income rentals
- -------------------------------------------------------------------------
<S> <C> <C> <C>
1997 $ 298.5 $ 16.1 $ 282.4
1998 292.4 15.7 276.7
1999 289.4 15.1 274.3
2000 291.5 15.3 276.2
2001 287.1 15.2 271.9
2002 and subsequent 3,340.8 52.8 3,288.0
- -------------------------------------------------------------------------
$ 4,799.7 $ 130.2 $ 4,669.5
=========================================================================
</TABLE>
Total rental expense was as follows:
<TABLE>
<CAPTION>
Year ended
- -------------------------------------------------------------------------------
February 3, January 28, January 29,
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $ 284.3 $ 226.4 $ 180.1
Additional amounts computed
as percentages of sales 5.6 6.3 5.6
- -------------------------------------------------------------------------------
289.9 232.7 185.7
Less sublease income 17.0 10.3 7.9
- -------------------------------------------------------------------------------
$ 272.9 $ 222.4 $ 177.8
===============================================================================
</TABLE>
STOCKHOLDERS EQUITY
The common shares of the Company, par value $.10 per share, were as follows:
<TABLE>
<CAPTION>
February 3, January 28,
1996 1995
- ---------------------------------------------------------
<S> <C> <C>
Authorized shares 650.0 650.0
- ---------------------------------------------------------
Issued shares 300.4 298.0
- ---------------------------------------------------------
Treasury shares 27.3 18.2
=========================================================
</TABLE>
Earnings per share is 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 year.
Weighted average number of shares used in computing earnings per share were
as follows:
<TABLE>
<CAPTION>
Year ended
- -------------------------------------------------------------------------
February 3, January 28, January 29,
1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Common and common
equivalent shares 276.9 287.4 296.5
=========================================================================
</TABLE>
<PAGE>
Effective January 1, 1996, the Company formed a new parent company (the
"Surviving Company"), thus making the former parent company (the "Predecessor
Company") a wholly-owned subsidiary of the Surviving Company. As a result of
this corporate inversion, each share of common stock of the Predecessor
Company was converted into one share of common stock of the Surviving Company.
In April 1994, the Company entered into an agreement with Petrie Stores
Corporation ("Petrie"), the then holder of 14% of the Company's outstanding
Common Stock. Pursuant to such agreement, the Company consummated a
transaction with Petrie on January 24, 1995, wherein 42.1 shares of the
Company's common stock were issued from its treasury in exchange for 39.9
shares of the Company's common stock and $165.0 in cash.
TAXES ON INCOME
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
Year ended
- ------------------------------------------------------------------------------
February 3, January 28, January 29,
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 137.1 $ 251.6 $ 200.3
Foreign 26.7 29.2 17.3
State 20.4 46.0 35.7
- ------------------------------------------------------------------------------
184.2 326.8 253.3
- ------------------------------------------------------------------------------
Deferred:
Federal (21.8) 8.9 50.0
Foreign (41.6) (24.7) (16.2)
State (3.3) 1.3 2.7
- ------------------------------------------------------------------------------
(66.7) (14.5) 36.5
- ------------------------------------------------------------------------------
Total $ 117.5 $ 312.3 $ 289.8
==============================================================================
</TABLE>
14
<PAGE>
<PAGE>
Deferred tax liabilities and deferred tax assets reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
The Company had gross deferred tax liabilities of $313.7 at February 3, 1996
and $270.9 at January 28, 1995, which consist primarily of temporary differences
related to fixed assets of $245.0 and $217.0, respectively. The Company had
gross deferred tax assets of $252.4 at February 3, 1996 and $129.9 at January
28, 1995, which consist primarily of tax benefits from the restructuring of
$122.1 in 1995, foreign start-up net operating losses of $108.9 and $94.0 and
operating costs not currently deductible for tax purposes of $3.4 and $25.4,
respectively. Valuation allowances were not significant.
A reconciliation of the federal statutory tax rate with the effective tax
rate follows:
<TABLE>
<CAPTION>
Year ended
- -------------------------------------------------------------------------------
February 3, January 28, January 29,
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of
federal income tax benefit 3.4 3.7 3.2
Foreign (1.3) (0.4) (0.5)
Restructuring and other charges 7.2 - -
Other, net (0.1) (1.3) (0.2)
- -------------------------------------------------------------------------------
44.2% 37.0% 37.5%
===============================================================================
</TABLE>
Deferred income taxes are not provided on unremitted earnings of foreign
subsidiaries that are intended to be indefinitely invested. Unremitted
earnings were approximately $167.0 at February 3, 1996, exclusive of amounts
that if remitted would result in little or no tax under current U.S. tax laws.
Net income taxes of approximately $57.0 would be due if these earnings were
to be remitted.
PROFIT SHARING PLAN
The Company has a profit sharing plan with a 401(k) salary deferral feature
for eligible domestic employees. The terms of the plan call for annual
contributions by the Company as determined by the Board of Directors, subject
to certain limitations. The profit sharing plan may be terminated at the
Company's discretion. Provisions of $32.3, $31.4 and $30.0 have been charged
to operations in 1995, 1994 and 1993, respectively.
STOCK OPTIONS
The Company has Stock Option Plans (the "Plans") which provide for the granting
of options to purchase the Company's common stock to substantially all employees
and non-employee directors of the Company. The Plans provide for the issuance
of non-qualified options, incentive stock options, performance share options,
performance units, stock appreciation rights, restricted shares and unrestricted
shares. The majority of the options become exercisable and vest approximately
five years from the date of grant. Certain non-qualified options become
exercisable nine years from the date of grant, however the exercise date of all
or a portion of such options may be accelerated if the price of the Company's
common stock reaches certain target amounts. The options granted to
non-employee directors are exercisable 20% each year on a cumulative basis
commencing one year from the date of grant.
In addition to the aforementioned plans, 2.9 stock options were granted to
certain senior executives during the period from 1988 to 1993 pursuant to
individual plans. These options are exercisable 20% each year on a cumulative
basis commencing one year from the date of grant.
The exercise price per share of all options granted has been the average of
the high and low market price of the Company's common stock on the date of
grant. Most options must be exercised within ten years from the date of grant.
At February 3, 1996, an aggregate of 37.5 shares of authorized common stock
was reserved for all of the Plans noted above, of which 17.1 were available
for future grants. All outstanding options expire at dates varying from
May 1996 to December 2005.
Stock option transactions are summarized as follows:
<TABLE>
<CAPTION>
Shares Under Option
- ------------------------------------------------------------------------------
Non-
Incentive Qualified Price Range
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding January 28, 1995 .4 19.0 $ 7.68 - 40.94
Granted - 13.4 22.06 - 28.94
Exercised (.2) (.9) 9.52 - 27.81
Canceled - (11.3) 7.68 - 40.94
- ------------------------------------------------------------------------------
Outstanding February 3, 1996 .2 20.2 $12.11 - 40.94
- ------------------------------------------------------------------------------
Options exercisable
at February 3, 1996 .2 8.2
- ------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<PAGE>
In May 1995, the Company granted non-qualified stock options at the then average
market price of $25.44 per share to all employees, except for certain managemant
employees and executive officers, in replacement of options with exercise prices
ranging from $30.44 to $40.94, subject to the employees surrendering their
outstanding options. Of the new options, 25% become exercisable May 17, 1997,
25% become exercisable May 17, 1998, with the remaining balance exercisable on
or after May 17, 1999. All such options expire on May 17, 2000. The management
employees referred to above were also granted similar options, but received
fractional shares for each surrendered share. Such options became exercisable
six months from the date of grant and expire after eight years, nine months.
In order to promote increased employee share ownership, a restoration feature
was added to encourage the early exercise of options and retention of shares.
This feature provides for the grant of new options when previously owned
shares of Company stock are used to exercise existing options. Restoration
option grants are non-dilutive as they do not increase the combined number of
shares of Company stock and options held by an employee prior to exercise.
The new options are granted at a price equal to the fair market value on the
date of the new grant, become exercisable six months from the date of grant
and generally expire on the same date as the original grant that was exercised.
The exercise of nonqualified stock options results in state and federal
income tax benefits to the Company related to the difference between the
market price at the date of exercise and the option price.
FOREIGN OPERATIONS
Certain information relating to the Company's foreign operations is set forth
below. Corporate assets include all cash and cash equivalents and other
related assets.
<TABLE>
<CAPTION>
Year ended
- ------------------------------------------------------------------------------
February 3, January 28, January 29,
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales
Domestic $ 6,791.5 $ 6,644.8 $ 6,278.6
Foreign 2,635.4 2,100.8 1,667.5
- ------------------------------------------------------------------------------
Total $ 9,426.9 $ 8,745.6 $ 7,946.1
==============================================================================
Operating Profit
Domestic $ 432.8 (a) $ 778.7 $ 724.9
Foreign (74.2)(b) 140.8 102.9
General corporate
expenses (7.1) (7.5) (6.8)
Interest expense, net (85.9) (67.9) (48.2)
- ------------------------------------------------------------------------------
Earnings before taxes
on income $ 265.6 $ 844.1 $ 772.8
- ------------------------------------------------------------------------------
Identifiable Assets
Domestic $ 4,013.2 $ 3,950.5 $ 3,630.9
Foreign 2,483.0 2,216.1 1,694.6
Corporate 241.3 404.6 824.1
- ------------------------------------------------------------------------------
Total $ 6,737.5 $ 6,571.2 $ 6,149.6
==============================================================================
</TABLE>
(a) After restructuring and other charges of $208.8.
(b) After restructuring and other charges of $187.8.
16
<PAGE>
<PAGE>
REPORT OF MANAGEMENT
Responsibility for the integrity and objectivity of the financial information
presented in this Annual Report rests with Toys"R"Us management.
The accompanying financial statements have been prepared from accounting
records which management believes fairly and accurately reflect the operations
and financial position of the Company. Management has established a system
of internal controls to provide reasonable assurance that assets are maintained
and accounted for in accordance with its policies and that transactions are
recorded accurately on the Company's books and records.
The Company's comprehensive internal audit program provides for constant
evaluation of the adequacy of the adherence to managements established policies
and procedures. The Company has distributed to key employees its policies for
conducting business affairs in a lawful and ethical manner. The Audit Committee
of the Board of Directors, which is comprised solely of outside directors,
provides oversight to the financial reporting process through periodic meetings
with our independent auditors, internal auditors and management.
The financial statements of the Company have been audited by Ernst & Young LLP,
independent auditors, in accordance with generally accepted auditing standards,
including a review of financial reporting matters and internal controls to the
extent necessary to express an opinion on the consolidated financial statements.
/S/ Michael Goldstein /S/Louis Lipschitz
Vice Chairman and Executive Vice President
Chief Executive Officer and Chief Financial Officer
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Toys"R"Us, Inc.
We have audited the accompanying consolidated balance sheets of Toys"R"Us, Inc.
and subsidiaries as of February 3, 1996 and January 28, 1995, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the three years in the period ended February 3, 1996. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Toys"R"Us, Inc.
and subsidiaries at February 3, 1996 and January 28, 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended February 3, 1996, in conformity with generally accepted
accounting principles.
/S/ Ernst & Young LLP
New York, New York
March 13, 1996
17
<PAGE>
<PAGE>
DIRECTORS AND OFFICERS
Directors
Charles Lazarus
Chairman of the Board of the Company
Robert A. Bernhard
Real Estate Developer
Michael Goldstein
Vice Chairman and Chief Executive Officer of the Company
Milton S. Gould
Attorney-at-law; Of Counsel to LeBoeuf, Lamb, Greene & MacRae
Shirley Strum Kenny
President, State University of New York at Stony Brook
Reuben Mark
Chairman and CEO Colgate-Palmolive Company
Norman S. Matthews
Former President, Federated Department Stores, Inc; Consultant
Howard W. Moore
Former Executive
Vice President - General Merchandise Manager of the Company; Consultant
Robert C. Nakasone
President and Chief Operating Officer of the Company
Norman M. Schneider
Former Chairman, Leisure Products Division of Beatrice Foods Company; Consultant
Harold M. Wit
Managing Director, Allen & Company Incorporated; Investment Bankers
Officers - Corporate and Administrative
Michael Goldstein
Vice Chairman and Chief Executive Officer
Robert C. Nakasone
President and Chief Operating Officer
Louis Lipschitz
Executive Vice President and Chief Financial Officer
Dennis Healey
Senior Vice President - Management Information Systems
Michael P. Miller
Senior Vice President - Real Estate
Jeffrey S. Wells
Senior Vice President - Human Resources
Gayle C. Aertker
Vice President - Real Estate
Michael J. Corrigan
Vice President - Compensation and Benefits
Richard N. Cudrin
Vice President - Employee and Labor Relations
Eileen C. Gabriel
Vice President - Information Systems
Jon W. Kimmins
Vice President - Treasurer
Joseph J. Lombardi
Vice President - Controller
Matthew J. Lombardi
Vice President - Information Technology
<PAGE>
Eric A. Swartwood
Vice President - Architecture and Construction
Michael L. Tumolo
Vice President - Counsel
Peter W. Weiss
Vice President -Taxes
Andre Weiss
Secretary -Partner-Schulte Roth & Zabel
Toys"R"Us United States - Officers and General Managers
Roger V. Goddu
President -Store Merchandising
Michael J. Madden
President -Store Operations
Van H. Butler
Senior Vice President - Divisional Merchandise Manager
Bruce C. Hall
Senior Vice President - Regional Operations
Thomas J. Reinebach
Senior Vice President -Distribution and Support Services
Ernest V. Speranza
Senior Vice President - Advertising/Marketing
Robert J. Weinberg
Senior Vice President - Divisional Merchandise Manager
Kristopher M. Brown
Vice President - Distribution Operations
John F. Cummo
Vice President - Creative Services
Harvey J. Finkel
Vice President - Regional Operations
Martin Fogelman
Vice President - Divisional Merchandise Manager
Michael A. Gerety
Vice President - Store Planning
Debra M. Kachurak
Vice President - Operations Development
Lee Richardson
Vice President - Advertising
John P. Sullivan
Vice President - Divisional Merchandise Manager
Karl S. Taylor
Vice President - Merchandise Planning and Allocation
General Managers
Robert F. Price
Vice President Southern California/
Arizona/Nevada/Hawaii
Dennis J. Williams
Vice President
New York/Northern New Jersey
Thomas A. Drugan
Alabama/Georgia/South Carolina/Tennessee
Cathy Filion
Michigan/N.W. Ohio
<PAGE>
Larry D. Gardner
New England
Mark H. Haag
Pacific Northwest/Alaska
Michael K. Heffner
N. Texas/Oklahoma/Arkansas/New Mexico
Daniel D. Hlavaty
Central Ohio/Indiana/Kentucky
Richard A. Moyer
S. Texas/Louisiana/Mississippi
Gerald S. Parker
Maryland/Virginia/North Carolina
John J. Prawlocki
Florida/Puerto Rico
J. Michael Roberts
Pennsylvania/Delaware/Southern New Jersey
David E. Schoenbeck
Northern California/Utah
Edward F. Siegler
Colorado/Kansas/Missouri/Iowa/Nebraska
Carl P. Spaulding
N.E. Ohio/W. Pennsylvania/N. New York
William A. Stephenson
Illinois/Wisconsin/Minnesota
18
<PAGE>
<PAGE>
Toys"R"US International - Officers and Country Management
Gregory R. Staley
President
Lawrence H. Meyer
Vice President - Chief Financial Officer
Kenneth G. Bonning
Vice President - Logistics and Franchise Operations
Joan W. Donovan
Vice President - General Merchandise Manager
Joseph Giamelli
Vice President - Information Systems
Adam F. Szopinski
Vice President - Operations
Keith C. Spurgeon
Vice President - Toys"R"Us Asia/Australia
Keith Van Beek
Vice President - Development
President - Toys"R"Us Canada
Pierre Buuron
President - Toys"R"Us Central Europe
Jacques LeFoll
President - Toys"R"Us France/Belgium
Guillermo Porrati
Managing Director - Toys"R"Us Iberia
David Rurka
Managing Director - Toys"R"Us United Kingdom/Scandinavia
John Schryver
Managing Director - Toys"R"Us Australia
Manabu Tazaki
President - Toys"R"Us Japan
Scott Chen
General Manager - Toys"R"Us Taiwan
Joe Tang
General Manager - Toys"R"Us Hong Kong
Michael Yeo
General Manager - Toys"R"Us Singapore
Kids"R"Us - Officers
Richard L. Markee
President - Kids"R"Us and Babies"R"Us
James G. Parros
Senior Vice President - Stores and Distribution Center Operations
Gwen Manto
Senior Vice President - General Merchandise Manager
Jonathan M. Friedman
Vice President - Chief Financial Officer - Kids"R"Us and Babies"R"Us
James L. Easton
Vice President - Divisional Merchandise Manager
Jeff Handler
Vice President - Advertising
Jerel G. Hollens
Vice President - Merchandise Planning and Management Information Systems
Debra G. Hyman
Vice President - Divisional Merchandise Manager
Elizabeth S. Jordan
Vice President - Human Resources
John Morrow
Vice President - Management Information Systems
Lorna E. Nagler
Vice President - Divisional Merchandise Manager
<PAGE>
CORPORATE DATA
Annual Meeting
The Annual Meeting of the Stockholders of Toys"R"Us will be held at The Long
Island Marriott Hotel, 101 James Doolittle Boulevard, Uniondale, New York on
Wednesday, June 5, 1996 at 10:00 a.m.
The office of the Company is located at
461 From Road Paramus, New Jersey 07652
Telephone: 201-262-7800
General Counsel
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
Stockholder Information
The Company will supply to any owner of Common Stock, upon written request to
Mr. Louis Lipschitz of the Company at the address set forth herein, and without
charge, a copy of the Annual Report on Form 10-K for the year ended February 3,
1996, which has been filed with the Securities and Exchange Commission.
Stockholder information, including quarterly earnings and other corporate news
releases, can be obtained toll free by calling 800-785-TOYS. Significant news
releases will be available on the following dates:
Call After... For the following...
May 20, 1996 1st Quarter Results
Aug. 19, 1996 2nd Quarter Results
Nov. 18, 1996 3rd Quarter Results
Jan. 3, 1997 Christmas Sales Results
Mar. 12, 1997 1996 Results
Common Stock Listed
New York Stock Exchange,
Symbol: TOY
Registrar and Transfer Agent
American Stock Transfer and Trust Company
40 Wall Street
New York, New York 10005
Telephone: 718-921-8200
(RECYCLED SYMBOL)
Printed on recycled paper
19
<PAGE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
AS OF FEBRUARY 3, 1996
Name Jurisdiction of Incorporation
- ----- -----------------------------
TRU, Inc. Delaware
Geoffrey, Inc. Delaware
Toys "R" Us-NY Holdings, Inc. Delaware
Toys "R" Us-Ohio, Inc. Delaware
Toys "R" Us-Delaware, Inc. Delaware
KRU, Inc. Delaware
Toys "R" Us-Mass., Inc. Massachusetts
ABG Corp. Nevada
Toys "R" Us-NYTEX, Inc. New York
Toys "R" Us-N.Y. Limited Partnership New York
Toys "R" Us-Penn., Inc. Pennsylvania
TRU of Puerto Rico, Inc. Puerto Rico
Toys "R" Us-Texas, Inc. Texas
TRU Mass. Properties, Inc. Delaware
TRU Ohio Properties, Inc. Delaware
TRU Penn. Properties, Inc. Delaware
TRU Properties, Inc. Delaware
TRU (Vermont), Inc. Vermont
Toys "R" Us Handelsgesellschaft m.b.H. Austria
Toys "R" Us (Australia) Pty, Ltd. Australia
TRU (Barbados), Ltd. Barbados
Toys "R" Us-Belgium, SCA. Belgium
Toys "R" Us (Canada) Ltd. Ontario, Canada
TRU (NRO) Investments Ltd. Alberta, Canada
TRU (NRO) II Investments Ltd. Alberta, Canada
TRU (NRO) III Investments Ltd. Alberta, Canada
Toys "R" Us A/S Denmark
Toys "R" Us S.A.R.L. France
Toys "R" Us GmbH Germany
Toys "R" Us Operations GmbH Germany
Toys "R" Us Logistik GmbH Germany
Toys "R" Us Service GmbH Germany
Toys "R" Us Asia Limited Hong Kong
TRU (HK) Limited Hong Kong
Toys "R" Us S.r.l. Italy
Toys "R" Us-Japan Ltd.* Japan
Toys "R" Us (Luxembourg) S.A. Luxembourg
Toys "R" Us (Malaysia) SDN. BHN.** Malaysia
Toys "R" Us (Mexico), S.A. de C.V. Mexico
TRU (Netherlands) B.V. Netherland
Toys "R" Us (Netherlands) B.V. Netherland
Toys R Us Portugal, Limitada Portugal
Toys "R" Us-Singapore (Pte) Limited Singapore
Toys R Us, Iberia, S.A. Spain
<PAGE>
<PAGE>
Toys "R" Us, Aktiebolag Sweden
Toys R Us AG Switzerland
TRU AG Switzerland
Toys "R" Us Holdings PLC United Kingdom
Toys "R" Us Limited United Kingdom
Toys "R" Us Properties Limited United Kingdom
Other subsidiaries are omitted because considered in the aggregate such
subsidiaries would not constitute a significant subsidiary.
* 80% owned
** 60% owned
<PAGE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Toys "R" Us, Inc.
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Toys "R" Us, Inc. of our report dated
March 13, 1996, included in the 1995 Annual Report to Stockholders of
Toys "R" Us, Inc.
We also consent to the incorporation by reference in Registration
Statements (Form S-4 Number 33-56303; Form S-3 Numbers 2-87794,
33-23264, 33-34273, 33-42237, 33-51359 and 33-64315; Form S-8
Numbers 2-64887, 2-91834, 33-16821 and 33-42627) of Toys "R" Us, Inc.
of our report dated March 13, 1996, with respect to
the consolidated financial statements incorporated herein by reference.
/s/ Ernst & Young LLP
New York, New York
April 25, 1996
<PAGE>
<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 exhibit 13 of the Form 10-K and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-3-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> FEB-3-1996
<CASH> 202,700
<SECURITIES> 0
<RECEIVABLES> 128,900
<ALLOWANCES> 0
<INVENTORY> 1,999,500
<CURRENT-ASSETS> 2,418,900
<PP&E> 4,929,300
<DEPRECIATION> 1,071,100
<TOTAL-ASSETS> 6,737,500
<CURRENT-LIABILITIES> 2,092,800
<BONDS> 826,800
<COMMON> 30,000
0
0
<OTHER-SE> 3,402,300
<TOTAL-LIABILITY-AND-EQUITY> 6,737,500
<SALES> 9,426,900
<TOTAL-REVENUES> 9,426,900
<CGS> 6,592,300
<TOTAL-COSTS> 1,894,800
<OTHER-EXPENSES> 588,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,900
<INCOME-PRETAX> 265,600
<INCOME-TAX> 117,500
<INCOME-CONTINUING> 148,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148,100
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
