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 July 30, 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
requirement 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 August 22, 1994, 284,725,462 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
<PAGE>
<TABLE>
Page 3
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<CAPTION>
July 30, July 31, January 29,
1994 1993 1994
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 109,578 $ 146,818 $ 791,893
Accounts and other receivables 96,187 62,798 98,534
Merchandise inventories 2,411,919 2,142,103 1,777,569
Prepaid expenses and other 65,457 56,485 40,400
Total current assets 2,683,141 2,408,204 2,708,396
Property, equipment and other assets 3,746,293 3,087,022 3,441,213
$ 6,429,434 $ 5,495,226 $ 6,149,609
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 641,816 $ 287,712 $ 239,862
Accounts payable 1,323,177 1,208,186 1,156,411
Accrued expenses and other 363,732 303,845 471,782
Income taxes payable 14,009 2,471 206,996
Total current liabilities 2,342,734 1,802,214 2,075,051
Deferred income taxes 238,231 200,479 202,663
Long-term debt 755,136 687,893 723,613
Stockholders' equity:
Common stock 29,794 29,794 29,794
Additional paid-in capital 448,089 473,408 454,061
Retained earnings 3,088,400 2,600,794 3,012,806
Foreign currency translation adjustments (20,290) (65,218) (56,021)
Treasury shares, at cost (452,660) (234,138) (292,358)
3,093,333 2,804,640 3,148,282
$ 6,429,434 $ 5,495,226 $ 6,149,609
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Page 4
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands except per share information)
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net Sales $1,452,117 $1,317,012 $2,914,050 $2,603,491
Costs and expenses:
Cost of sales 982,892 902,414 1,984,095 1,785,290
Selling, advertising, general & administrative 355,868 317,629 706,100 626,042
Depreciation and amortization 36,984 30,757 73,429 61,329
Interest expense - net 16,034 10,736 30,436 19,985
1,391,778 1,261,536 2,794,060 2,492,646
Earnings before taxes on income 60,339 55,476 119,990 110,845
Taxes on income 22,325 19,971 44,396 39,904
Net earnings $ 38,014 $ 35,505 $ 75,594 $ 70,941
Earnings per share $.13 $.12 $.26 $.24
Common and common equivalent shares 290,614 296,685 291,673 297,593
<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>
26 Weeks Ended
July 30, July 31,
1994 1993
<S> <C> <C>
Cash Flows from operating activities:
Net earnings $ 75,594 $ 70,941
Adjustments to reconcile net earnings to net cash used by
operating activities:
Depreciation and amortization 73,429 61,329
Deferred income taxes 9,851 9,953
Changes in operating assets and liabilities:
Accounts and other receivables 2,347 6,587
Merchandise inventories (634,350) (643,432)
Prepaid expenses and other operating assets (42,664) (19,031)
Accounts payable, accrued expenses and taxes (134,271) 47,625
Total adjustments (725,658) (536,969)
Net cash used by operating activities (650,064) (466,028)
Cash flows from investing activities:
Capital expenditures-net (259,004) (194,732)
Other assets (18,675) (19,456)
Net cash used by investing activities (277,679) (214,188)
Cash flows from financing activities:
Short-term borrowings, net 401,954 166,940
Long-term borrowings 11,218 900
Long-term debt repayments (553) (600)
Exercise of stock options 5,688 8,238
Share repurchase program (171,962) (84,025)
Net cash provided by financing activities 246,345 91,453
Effect of exchange rate changes on cash and cash
equivalents (917) (28,140)
Cash and cash equivalents:
Decrease during period (682,315) (616,903)
Beginning of period 791,893 763,721
End of period $ 109,578 $ 146,818
<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 twenty-six weeks ended July 30, 1994 and July 31, 1993, the Company made income
tax payments of $227,254 and $186,604 and interest payments (net of amounts capitalized)
of $56,177 and $47,144, 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 twenty-six weeks ended July, 30,
1994 and July 31, 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 $135,105,000 or 10.3% in the second quarter and $310,559,000
or 11.9% for the twenty-six weeks over the prior year's comparable periods due
primarily to sales from 112 new toy stores and 11 children's clothing stores,
offset by the closing of 20 children's clothing stores since the beginning of
fiscal 1993. Comparable USA toy store sales increased by 2.2% for the second
quarter and 4.3% for the twenty-six 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 .8% in the second quarter and
decreased .5% for the twenty-six 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 .4% in the second quarter and .2% in the twenty-six 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 second quarter and in the twenty-six weeks
compared to the prior years comparable periods, principally as a result of
higher average short term borrowings and a decrease in interest income
($2,257,000 in 1994 as compared to $3,292,000 in 1993 for the quarter, and
$6,908,000 in 1994 as compared to $10,115,000 in 1993 for the first half).
Our effective tax rate increased from 36% in the first half of 1993 to 37% in
the first half of 1994 due to a 1% increase in the U.S. federal corporate income
tax rate.
Since January 29, 1994, foreign currency exchange rates have experienced
fluctuations, however, the impact on net earnings was not significant.
Financial Condition
Plans are underway for approximately 40 U.S.A. and 60 international toy stores
including our first stores in Denmark, Sweden and Luxembourg and 6 Kids "R" Us
children's clothing stores. The Company has closed 16 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. 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 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of the Company's Stockholders on June 8,
1994, all of management's nominees for director were elected.
Also approved by the following votes was:
(i) A proposal to amend the Company's Restated Certificate of
Incorporation to authorize additional shares of Common Stock
(230,685,480 shares in favor, 13 against, 832,021 shares
abstaining and 4,304,000 broker non-votes);
(ii) a proposal to approve the Toys "R" Us, Inc. 1994 Stock
Option and Performance Incentive Plan (179,045,484 shares in
favor, 29,038,100 shares against shares abstaining and
40,290,562 broker non-votes); and
(iii) a proposal to approve the Toys "R" Us, Inc. Management
Incentive Compensation Plan (240,552,430 shares in favor,
7,736,258 shares against such proposal, 1,215,443 shares
abstaining and 0 broker non-votes).
Management's nominees for director received the following votes:
<TABLE>
<CAPTION>
Number of Shares Withheld Votes
<S> <C> <C>
Robert A. Bernhard 248,599,446 905,385
Michael Goldstein 248,612,583 892,248
Milton S. Gould 248,524,632 980,199
Shirley Strum Kenny 248,604,856 899,975
Charles Lazarus 248,535,216 969,615
Reuben Mark 248,610,728 894,103
Howard W. Moore 248,612,624 892,207
Robert C. Nakasone 248,610,511 894,320
Norman M. Schneider 248,523,682 981,149
Harold M. Wit 248,609,605 895,226
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) The Company was not required to file any reports on Form 8-K
during the 13 weeks ended July 30, 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: September 6, 1994 Toys "R" Us, Inc.
(Registrant)
s/Louis Lipschitz
(Signature)
Louis Lipschitz
Senior Vice President - Finance and
Chief Financial Officer
<PAGE>
