UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 29, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-1117
TOYS "R" US, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-5159250
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
461 From Road, Paramus, New Jersey 07652
(Address of principal executive offices) (Zip Code)
(201) 262-7800
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 21, 1994, 277,554,230 shares of common stock were outstanding.
<PAGE>
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion - Results of Operations
and Financial Condition 7
PART II - OTHER INFORMATION 8
SIGNATURES 9
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<TABLE>
Page 3
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<CAPTION>
October 29, October 30, January 29,
1994 1993 1994
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 103,544 $ 122,348 $ 791,893
Accounts and other receivables 131,693 90,666 98,534
Merchandise inventories 3,207,510 2,898,598 1,777,569
Prepaid expenses and other 73,305 83,718 40,400
Total current assets 3,516,052 3,195,330 2,708,396
Property, equipment and other assets 3,987,279 3,299,283 3,441,213
$ 7,503,331 $ 6,494,613 $ 6,149,609
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 1,217,214 $ 552,627 $ 239,862
Accounts payable 1,938,200 1,838,189 1,156,411
Accrued expenses and other 423,783 365,195 471,782
Income taxes payable 9,348 11,977 206,996
Total current liabilities 3,588,545 2,767,988 2,075,051
Deferred income taxes 260,000 219,224 202,663
Long-term debt 780,824 702,094 723,613
Stockholders' equity:
Common stock 29,794 29,794 29,794
Additional paid-in capital 443,722 491,805 454,061
Retained earnings 3,135,767 2,638,251 3,012,806
Foreign currency translation adjustments (6,970) (58,292) (56,021)
Treasury shares, at cost (728,351) (296,251) (292,358)
2,873,962 2,805,307 3,148,282
$ 7,503,331 $ 6,494,613 $ 6,149,609
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
Page 4
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands except per share information)
<CAPTION>
13 Weeks Ended 39 Weeks Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $1,631,345 $1,449,118 $4,545,395 $4,052,609
Costs and expenses:
Cost of sales 1,097,236 982,151 3,081,331 2,767,441
Selling, advertising, general & administrative 394,876 347,532 1,100,976 973,574
Depreciation and amortization 43,202 35,579 116,631 96,908
Interest expense - net 20,845 16,291 51,281 36,276
1,556,159 1,381,553 4,350,219 3,874,199
Earnings before taxes on income 75,186 67,565 195,176 178,410
Taxes on income 27,819 30,108 72,215 70,012
Net earnings $ 47,367 $ 37,457 $ 122,961 $ 108,398
Earnings per share $.17 $.13 $.42 $.37
Common and common equivalent shares 285,402 295,559 289,588 296,896
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Page 5
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
39 Weeks Ended
October 29, October 30,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 122,961 $ 108,398
Adjustments to reconcile net earnings to net cash used by
operating activities:
Depreciation and amortization 116,631 96,908
Deferred income taxes 14,884 18,180
Changes in operating assets and liabilities:
Accounts and other receivables (33,159) (21,281)
Merchandise inventories (1,429,941) (1,399,927)
Prepaid expenses and other operating assets (56,174) (48,336)
Accounts payable, accrued expenses and taxes 536,142 748,484
Total adjustments (851,617) (605,972)
Net cash used by operating activities (728,656) (497,574)
Cash flows from investing activities:
Capital expenditures-net (457,860) (411,012)
Other assets (33,440) (33,927)
Net cash used by investing activities (491,300) (444,939)
Cash flows from financing activities:
Short-term borrowings, net 977,352 431,855
Long-term borrowings 21,518 19,300
Long-term debt repayments (839) (934)
Exercise of stock options 23,382 27,631
Share repurchase program (469,714) (147,134)
Net cash provided by financing activities 551,699 330,718
Effect of exchange rate changes on cash and cash
equivalents (20,092) (29,578)
Cash and cash equivalents:
Decrease during period (688,349) (641,373)
Beginning of period 791,893 763,721
End of period $ 103,544 $ 122,348
<FN>
Supplemental disclosures of cash flow information:
The Company considers all highly liquid investments purchased as part of its daily cash
management activities to be cash equivalents.
During the thirty-nine weeks ended October 29, 1994 and October 30, 1993, the Company made
income tax payments of $253,080 and $198,337 and interest payments (net of amounts
capitalized) of $84,560 and $68,416, respectively.
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Page 6
TOYS "R" US, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim Reporting
The interim financial statements are unaudited and are subject to year-end
adjustments. However, in the opinion of management, all known adjustments
(which consist only of normal recurring accruals) have been made to present
fairly the consolidated operating results for the unaudited periods.
Because of the seasonal nature of the Company's business, results for interim
periods are not indicative of results to be expected for the fiscal year.
2. Earnings Per Share
Earnings per share for the thirteen and thirty-nine weeks ended October 29,
1994 and October 30, 1993 are computed by dividing net earnings by the
weighted average number of common shares outstanding, after reduction for
treasury shares and assuming exercise of dilutive stock options computed by
the treasury stock method using the average market price during the period.
<PAGE>
Page 7
MANAGEMENT'S DISCUSSION - RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations
Sales increased by $182,227,000 or 12.6% in the third quarter and $492,786,000
or 12.2% for the thirty-nine weeks over the prior year's comparable periods due
primarily to sales from new toy and children's clothing stores, offset by the
closing of 21 children's clothing stores since the beginning of fiscal 1993.
Comparable USA toy store sales increased by 5.3% for the quarter and 4.6% for
the thirty-nine weeks. International toy store comparable sales decreased due
to adverse local economic conditions. Kids "R" Us had comparable store sales
increases.
Cost of sales as a percentage of sales decreased .5% for the third quarter and
the thirty-nine weeks versus the prior year's comparable periods due to a more
favorable product mix and reduced markdowns associated with strong inventory
controls.
Selling, advertising, general and administrative expenses as a percentage of
sales increased .2% for the third quarter and the thirty-nine weeks versus the
prior year's comparable periods as a result of continued international expansion
and lower comparable international toy store sales.
Net interest expense increased in the third quarter and the thirty-nine weeks
compared to the prior year's comparable periods, principally as a result of
higher average short term borrowings due primarily to our share repurchase
program and a decrease in interest income (for the quarter there was no
significant impact and for the first nine months, it decreased from $13,876,000
in 1993 to $10,197,000 in 1994).
The effective tax rate decreased from 44.6% and 39.2% in the third quarter and
thirty-nine weeks ended October 30, 1993, respectively, to 37% in the current
year due to the impact of a retroactive change in the U.S. tax rate resulting in
a one-time charge of $5 million or 1.7 cents per share during the third quarter
of 1993.
Since January 29, 1994, foreign currency exchange rates have experienced
fluctuations, however, the impact on net earnings was not significant.
Financial Condition
By the end of 1994, 37 U.S.A. and 59 international toy stores including our
first stores in Denmark, Sweden and Luxembourg and 6 Kids "R" Us children's
clothing stores will have opened. The Company has closed 17 of the 20
Kids "R" Us stores that were anticipated to be closed this year, with no
significant impact on the Company's financial condition. Annual capital
expenditures for new and existing facilities are estimated to be between
$600 to $650 million. Seasonal cash requirements will continue to be met
through operations, the issuance of short-term commercial paper, bank
borrowings for certain foreign subsidiaries and the issuance of long-term
debt, if advantageous.
<PAGE>
Page 8
PART II - OTHER INFORMATION
Item 5. Other Information
On November 15, 1994, the Company and Petrie Stores Corporation
("Petrie") received a favorable ruling from the Internal
Revenue Service ("IRS") holding that the proposed exchange by
Petrie of approximately 39.9 million shares of Company common
stock, par value $.10 per share ("Company Common Stock") and
cash for shares of Company Common Stock and the distribution
by Petrie of such shares to Petrie shareholders upon the
liquidation of Petrie will qualify as a tax-free reorganization
under the Internal Revenue Code.
The IRS ruling confirms that the exchange will not have an effect
on the results of operations of the Company. The exchange of
shares of Company Common Stock for shares of Company Common Stock
held by Petrie will be treated by the Company as a treasury stock
transaction and the issuance of shares of Company Common Stock for
cash will be treated as an issuance of treasury stock.
Petrie shareholders are expected to vote on the exchange of shares
of Company Common Stock with the Company and the liquidation of
Petrie on or about January 20, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) The Company was not required to file any reports on Form 8-K
during the 13 weeks ended October 29, 1994.
<PAGE>
Page 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 6, 1994 Toys "R" Us, Inc.
(Registrant)
s/Louis Lipschitz
(Signature)
Louis Lipschitz
Senior Vice President - Finance and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this document:
<TABLE>
<CAPTION>
Exhibit Page
No. No. Document
<S> <C> <C>
27 Financial Data Schedule
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Earnings as reported
in the Form 10-Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000051734
<NAME> TOYS "R" US, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> OCT-29-1994
<CASH> 103,544
<SECURITIES> 0
<RECEIVABLES> 131,693
<ALLOWANCES> 0
<INVENTORY> 3,207,510
<CURRENT-ASSETS> 3,516,052
<PP&E> 4,369,466
<DEPRECIATION> 755,884
<TOTAL-ASSETS> 7,503,331
<CURRENT-LIABILITIES> 3,588,545
<BONDS> 780,824
<COMMON> 29,794
0
0
<OTHER-SE> 2,844,168
<TOTAL-LIABILITY-AND-EQUITY> 7,503,331
<SALES> 4,545,395
<TOTAL-REVENUES> 4,545,395
<CGS> 3,081,331
<TOTAL-COSTS> 1,100,976
<OTHER-EXPENSES> 116,631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,281
<INCOME-PRETAX> 195,176
<INCOME-TAX> 72,215
<INCOME-CONTINUING> 122,961
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 122,961
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
