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(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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EXCHANGE ACT OF 1934
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/ / Preliminary Proxy Statement
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TOYS "R" US, INC.
______________________________________________________________________________
(Name of Registrant as Specified in its Charter)
TOYS "R" US, INC.
______________________________________________________________________________
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/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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pursuant to Exchange Act Rule 0-11:*
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* Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
[Toys "R" Us, Inc. Logo]
TOYS "R" US, INC.
461 From Road
Paramus, New Jersey 07652
_______________
Notice of Annual Meeting of
Stockholders to be Held
June 7, 1995
_______________
To the Stockholders of
TOYS "R" US, INC.
The Annual Meeting of Stockholders of Toys "R" Us, Inc. (the "Company")
will be held at the offices of the Company, 461 From Road, Paramus, New Jersey
07652 on Wednesday, June 7, 1995 at 10:00 A.M., for the following purposes:
1. to elect directors; and
2. to consider and transact such other business as may properly
be brought before the meeting or any adjournment or
adjournments thereof.
Only stockholders of record at the close of business on April 10, 1995 will
be entitled to vote at the meeting.
Andre Weiss
Secretary
April 21, 1995
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED, SELF-
ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
TOYS "R" US, INC.
461 From Road
Paramus, New Jersey 07652
_______________
Annual Meeting of Stockholders
June 7, 1995
_______________
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Toys "R"
Us, Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting
of Stockholders to be held at the offices of the Company, 461 From Road,
Paramus, New Jersey 07652, on Wednesday, June 7, 1995 at 10:00 A.M., or at any
adjournment or adjournments thereof.
A stockholder who executes a proxy may revoke it at any time before it is
voted. Attendance at the meeting shall not have the effect of revoking a proxy
unless the stockholder so attending shall, in writing, so notify the secretary
of the meeting at any time prior to the voting of the proxy. A proxy which is
properly signed and not revoked will be voted for the nominees for election as
directors listed herein unless contrary instructions are given or the persons
named in the proxy elect to exercise their discretionary authority to accumulate
votes in favor of less than all nominees. The Board of Directors knows of no
other business to come before the meeting, but if other matters properly come
before the meeting, the persons named in the proxy intend to vote thereon in
accordance with their best judgment.
The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by mail, directors, officers and employees of the Company may
solicit proxies by telephone or otherwise. The Company will reimburse brokers
or other persons holding stock in their names or in the names of their nominees
for their charges and expenses in forwarding proxies and proxy material to the
beneficial owners of such stock. It is anticipated that the mailing of this
Proxy Statement will commence on or about April 21, 1995.
VOTING SECURITIES
The Company had outstanding 277,234,993 shares of common stock ("Common
Stock") at the close of business on April 10, 1995, which are the only
securities of the Company entitled to be voted at the meeting. Each share of
Common Stock is entitled to one vote (except as stated below under "Election
of Directors") on each matter as may properly be brought before the meeting.
Only stockholders of record at the close of business on April 10, 1995 will be
entitled to vote.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee. Votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on any
proposal other than the election of directors and will be counted as present for
purposes of determining the existence of a quorum regarding such proposal.
Pursuant to applicable law, abstentions will have the same effect as a negative
vote. Under the rules of the New York Stock Exchange, brokers who hold shares
in street name have the authority to vote on certain "routine" matters when they
have not received
<PAGE>
instructions from beneficial owners. Brokers that do not receive instructions
are entitled to vote on the election of directors. Under applicable law, a
broker non-vote will have no effect on the outcome of the election of directors.
PRINCIPAL STOCKHOLDER
As of April 10, 1995, the following is the only entity known to the Company
to be the beneficial owner of more than five percent of the Common Stock:
Total Number
of Shares
Name and Address of Beneficially Percent
Beneficial Owner Owned of Class
------------------- ------------ --------
Petrie Stores Corporation (1) 15,902,702 5.7%
70 Enterprise Avenue
Secaucus, New Jersey 07094
____________________
(1) The information relating to Petrie Stores Corporation was obtained
from Amendments No. 20 and No. 21 to the Schedule 13D filed by such
corporation with the Securities and Exchange Commission. On January
24, 1995, the Company issued from its treasury 42,076,420 shares of
Common Stock in exchange for 39,853,403 shares of Common Stock and
$165 million in cash delivered by Petrie Stores Corporation. See
"Certain Transactions." Pursuant to its plan of complete liquidation
and dissolution, on March 24, 1995, Petrie Stores Corporation made an
initial distribution of an aggregate of 26,173,718 shares of Common
Stock to holders of record of the common stock of Petrie Stores
Corporation at the close of business on March 16, 1995.
ELECTION OF DIRECTORS
In accordance with the recommendation of its Nominating Committee, the
Board of Directors proposes for election at the Annual Meeting of Stockholders
the 10 persons listed below to serve (subject to the Company's By-Laws) as
directors of the Company until the next annual meeting and until the election
and qualification of their successors. If any such person should be unwilling
or unable to serve as a director of the Company (which is not anticipated) the
persons named in the proxy will vote the proxy for substitute nominees selected
by them unless the number of directors has been reduced to the number of
nominees willing and able to serve.
In electing directors, holders of Common Stock have cumulative voting
rights; that is, each holder of record of Common Stock shall be entitled to as
many votes as shall equal the number of shares owned of record multiplied by the
number of directors to be elected, and may cast all of such votes for a single
director or may distribute them among all or some of the directors to be voted
for, as such holder sees fit. Unless contrary instructions are given, the
persons named on the proxy will have discretionary authority to accumulate votes
in the same manner.
Certain information for each nominee for director is set forth below:
Common Stock
Beneficially
Owned as of Percent
Principal Occupation, Employment, etc. March 7, 1995 of Class
-------------------------------------- ------------- --------
Robert A. Bernhard. . . . . . . . . . . . . . . . . . 40,041(a)(b) *
Private real estate developer since prior to 1990;
director of the Company since 1980; age 68 years.
2
<PAGE>
Common Stock
Beneficially
Owned as of Percent
Principal Occupation, Employment, etc. March 7, 1995 of Class
-------------------------------------- ------------- --------
Michael Goldstein (c). . . . . . . . . . . . . . . . 695,517(d) *
Vice Chairman of the Board and Chief Executive
Officer of the Company since February 1994 (also
Chief Administrative Officer of the Company since
prior to 1990 to February 1994 and Chief Financial
Officer since prior to 1990 to January 1993);
director of the Company since 1989; age 53 years.
Milton S. Gould (c). . . . . . . . . . . . . . . . . 31,754(b) *
Of Counsel to the New York City law firm of
LeBoeuf, Lamb, Greene & MacRae since March 1994.
Senior Partner of the New York City law firm of
Shea & Gould since prior to 1990 to March 1994;
director of the Company since 1978; age 85 years.
Shirley Strum Kenny. . . . . . . . . . . . . . . . . 7,737(b)(e) *
President of The State University of New York at
Stony Brook since September 1994; President of
Queens College of The City University of New York
since prior to 1990 to August 1994; director of
the Company since 1990; director of Computer
Associates International, Inc.; age 60 years.
Charles Lazarus (c). . . . . . . . . . . . . . . . . 1,411,491(f) *
Chairman of the Board since prior to 1990; Chief
Executive Officer of the Company since prior to
1990 to February 1994; director of the Company
since 1969; director of Automatic Data Processing,
Inc. and Loral Corporation; age 71 years.
Reuben Mark. . . . . . . . . . . . . . . . . . . . . 8,200(b) *
Chairman and Chief Executive Officer of
Colgate-Palmolive Company, a producer of consumer
goods, since prior to 1990; director of the Company
since 1990; director of Time Warner, Inc., The New
York Stock Exchange, Inc. and Pearson, p.l.c.; age
56 years.
Howard W. Moore. . . . . . . . . . . . . . . . . . . 152,950(g) *
President of Howard Moore Associates, business
consultants, since 1990; formerly Executive Vice
President - General Merchandise Manager of the
Company until 1990; director of the Company since
1984; age 64 years.
Robert C. Nakasone (c). . . . . . . . . . . . . . . . 798,385(h) *
President and Chief Operating Officer since
February 1994; Vice Chairman of the Board and
President of World Wide Toy Stores of the Company
since prior to 1990 to February 1994; director of
the Company since 1989; director of Staples, Inc.;
age 47 years.
Norman M. Schneider. . . . . . . . . . . . . . . . . 10,322(b) *
Management consultant since prior to 1990; director
of the Company since 1978; director of Park
Electrochemical Corp. and Datascope Corp.; age 84
years.
Harold M. Wit (c). . . . . . . . . . . . . . . . . . 12,927(b) *
Managing Director, Director and a member of the
Executive Committee of Allen & Company
Incorporated, investment bankers, since prior to
1990; director of the Company since 1978; director
of Allegheny & Western Energy Corporation; age 66
years.
___________________
(a) Includes shares owned by a profit sharing plan of which Mr. Bernhard is
the sole beneficiary. Also includes shares beneficially owned by his wife
as to which shares Mr. Bernhard disclaims beneficial ownership.
3
<PAGE>
(b) Includes 5,200 shares with respect to which such person has the right to
acquire beneficial ownership upon exercise of currently exercisable
options, and the percentage (less than 1% of outstanding Common Stock) is
calculated on the basis that such shares are deemed outstanding.
(c) Member of the Executive Committee of the Board of Directors.
(d) Includes 662,500 shares with respect to which Mr. Goldstein has the right
to acquire beneficial ownership upon exercise of currently exercisable
options, and the percentage is calculated on the basis that such shares
are deemed outstanding.
(e) Includes shares beneficially owned by a trust of which Ms. Kenny is co-
trustee, as to which shares Ms. Kenny disclaims beneficial ownership.
(f) Includes 1,125,000 shares with respect to which Mr. Lazarus has the right
to acquire beneficial ownership upon exercise of currently exercisable
options, and the percentage is calculated on the basis that such shares
are deemed outstanding.
(g) Includes 109,950 shares with respect to which Mr. Moore has the right to
acquire beneficial ownership upon exercise of currently exercisable
options, and the percentage is calculated on the basis that such shares
are deemed outstanding.
(h) Includes 730,102 shares with respect to which Mr. Nakasone has the right
to acquire beneficial ownership upon exercise of currently exercisable
options, and the percentage is calculated on the basis that such shares
are deemed outstanding. Also includes shares beneficially owned by his
minor children as to which shares Mr. Nakasone disclaims beneficial
ownership.
* Less than 1% of the outstanding Common Stock.
The address of each person named in the table above is c/o Toys "R" Us,
Inc., 461 From Road, Paramus, New Jersey 07652.
As of March 7, 1995, all executive officers and directors of the Company
as a group (15 persons) owned beneficially 3,324,459 shares of Common Stock
(including 2,844,622 shares with respect to which such persons had the right to
acquire beneficial ownership as of such date and shares beneficially owned by
the family members of certain executive officers and directors as to which
shares such executive officers and directors disclaim beneficial ownership),
which constituted approximately 1.2% of the shares deemed outstanding on that
date. Except for shares beneficially owned by such family members, such
executive officers and directors have sole voting power and sole investment
power with respect to such shares. In addition, as of March 7, 1995, Named
Officers (as hereinafter defined) not identified in the table above, Larry D.
Bouts, President of Toys "R" Us International Division, owned beneficially no
shares of Common Stock, Roger V. Goddu, Executive Vice President- General
Merchandise Manager of USA Toy Stores, owned beneficially 81,023 shares of
Common Stock, and Richard L. Markee, President of Kids "R" Us Division, owned
beneficially 14 shares of Common Stock (each less than 1% of the shares deemed
outstanding on such date).
The Board of Directors held six meetings and took action once by unanimous
written consent during the Company's last fiscal year. The Board of Directors
has an Executive Committee, a Nominating Committee, an Audit Committee, a
Management Compensation and Stock Option Committee (the "Compensation
Committee"), and an Operating Committee.
The Executive Committee of the Board of Directors has and may exercise all
the powers and authority of the full Board of Directors, subject to certain
exceptions. The Executive Committee took action twice by unanimous written
consent during the Company's last fiscal year.
The Nominating Committee currently has as its members three directors who
are not officers or employees of the Company: Robert A. Bernhard, Shirley Strum
Kenny and Harold M. Wit (Chairman). The Nominating Committee recommends to the
Board of Directors the individuals to be nominated for election
4
<PAGE>
as directors at the annual meeting of stockholders and has the authority to
recommend the individuals to be elected as directors to fill any vacancies or
additional directorships which may arise from time to time on the Board of
Directors. The Nominating Committee considers nominations made in accordance
with the procedure in the following paragraph.
The Company's By-Laws provide that nominations for the election of
directors may be made by any stockholder in writing, delivered or mailed by
first class mail to the Secretary of the Company, Toys "R" Us, Inc., 461 From
Road, Paramus, New Jersey 07652, not less than 14 days nor more than 50 days
prior to the meeting, except that if less than 21 days' notice of the meeting
is given, such written notice shall be delivered or mailed not later than the
close of the tenth day following the day on which notice of the meeting was
mailed. Each notice shall set forth (i) the name, age, business address and,
if known, residence address of each nominee proposed in such notice, (ii) the
principal occupation or employment of each such nominee, and (iii) the number
of shares of stock of the Company which is beneficially owned by each such
nominee. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedure, such nomination shall be
disregarded.
The Audit Committee currently has as its members three directors who are
not officers or employees of the Company: Shirley Strum Kenny, Norman M.
Schneider and Harold M. Wit (Chairman). The Audit Committee held two meetings
during the Company's last fiscal year. The Audit Committee (i) reviews the
procedures employed in connection with the internal auditing program and
accounting procedures, (ii) consults with the independent auditors, (iii)
reviews the reports submitted by such independent auditors and (iv) makes such
reports and recommendations to the Board of Directors as it may deem
appropriate.
The Compensation Committee currently has as its members three directors who
are not officers or employees of the Company: Robert A. Bernhard, Milton S.
Gould and Norman M. Schneider. The Compensation Committee held two meetings and
took action twelve times by unanimous written consent during the Company's last
fiscal year. The Compensation Committee reviews management compensation
standards and practices and functions as the independent committee under the
Company's Stock Option Plan, Management Incentive Compensation Plan and 1994
Stock Option and Performance Incentive Plan. (See "Report of the Compensation
Committee on Executive Compensation.")
The Operating Committee consists of three directors and has as its members
Charles Lazarus, Michael Goldstein and Robert C. Nakasone. The Operating
Committee is authorized to incur indebtedness on behalf of the Company within
limits established by the full Board. The Operating Committee took action
twenty-seven times by unanimous written consent during the Company's last fiscal
year.
Compensation of Directors
Directors who are not officers or employees of the Company or any of its
subsidiaries ("Non-Employee Directors") each receive $20,000 per annum for
service on the Board and an additional $1,000 for attending any meetings of the
Board and any committee meetings held on a date other than the date of Board
meetings. Directors who are also officers or employees of the Company receive
no additional compensation for services as a director, committee participation
or special assignments.
In addition, effective November 1, 1994, each Non-Employee Director was
granted options to purchase 1,000 shares of Common Stock under the Company's
Non-Employee Directors' Stock Option Plan. Subject to certain conditions,
one-fifth of such options become exercisable on a cumulative basis on each
anniversary of the date of grant at an exercise price of $38.56 per share, the
market value of Common Stock on the date of grant. Options expire ten years
after the date of grant.
In addition, effective January 31, 1994, Charles Lazarus terminated his
employment as Chief Executive Officer of the Company and, pursuant to his
employment agreement, exercised his right to become a
5
<PAGE>
consultant to the Company for a five-year period. As a consultant, Mr. Lazarus
is obligated to render such consulting services as may be requested by the Board
of Directors at such times as may be mutually convenient for the Company and Mr.
Lazarus. Mr. Lazarus is entitled to receive as compensation during the five-
year consulting period the following amounts: for the first year an amount
equal to his total compensation (base salary and incentive compensation)
received for the full fiscal year prior to his becoming a consultant (i.e.,
for the fiscal year ended January 29, 1994) and for the second through fifth
years, 90%, 80%, 70% and 60% of such amount, respectively. Therefore, for the
fiscal year ended January 28, 1995, Mr. Lazarus received $7,862,530 in
consulting fees. The employment agreement also provides that Mr. Lazarus is
entitled to receive a payment of $200,000 a year for five years commencing at
the termination of his consulting period. During the term of Mr. Lazarus'
consulting period and for three years thereafter, he has agreed to refrain
from competing either directly or indirectly with any business carried on by
the Company.
Executive Compensation
The following table sets forth, for the Company's last three fiscal years,
the annual and long-term compensation of those persons who were, at January 28,
1995, (i) the chief executive officer and (ii) the other four most highly
compensated executive officers of the Company (the "Named Officers"):
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compensation
Awards
------------
Shares of
Fiscal Annual Compensation Common Stock
Year ------------------- Underlying All Other
Name and Principal Position Ended Salary Bonus Options(#) Compensation(2)
- --------------------------- ----- ------ ----- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Michael Goldstein 1/28/95 $800,000 $402,700 -0- $16,500
Vice Chairman of the Board 1/29/94 175,000 772,753 425,000 25,942
and Chief Executive Officer 1/30/93 175,000 689,024 -0- 25,175
Robert C. Nakasone 1/28/95 800,000 402,700 -0- 16,500
President and Chief Operating 1/29/94 210,000 772,753 425,000 25,942
Officer 1/30/93 210,000 689,024 -0- 25,175
Larry D. Bouts 1/28/95 425,000 144,667 40,000 16,500
President of Toys "R" Us 1/29/94 210,000 202,483 195,000 25,942
International Division 1/30/93 200,000 210,000 20,000 25,175
Roger V. Goddu 1/28/95 375,000 141,574 30,000 16,500
Executive Vice President - 1/29/94 200,000 257,584 190,000 25,942
General Merchandise Manager 1/30/93 200,000 229,675 15,000 25,175
of USA Toy Stores
Richard L. Markee (1) 1/28/95 350,000 166,420 30,000 16,500
President of Kids "R" Us 1/29/94 275,000 157,885 72,500 25,942
Division
_________________
<FN>
(1) Prior to March 1, 1993, Mr. Markee was not an executive officer of the
Company.
(2) "All Other Compensation" represents the Company's contributions to the TRU
Partnership Employees' Savings and Profit Sharing Plan for the accounts of
the Named Officers.
</TABLE>
6
<PAGE>
<TABLE>
The following table sets forth, for the Company's fiscal year ended January
28, 1995, information concerning grants of stock options to the Named Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants Grant Date Value
------------------------------------------------- ----------------
Shares of % of Total
Common Options
Stock Granted
Underlying to Employees Exercise
Options in Fiscal Price (Per Expiration Grant Date
Name Granted(#) Year(2) (Share) Date Present Value(3)
- ---- ---------- ------- ------- ---- ----------------
<S> <C> <C> <C> <C> <C>
Michael Goldstein -- -- -- -- --
Robert C. Nakasone -- -- -- -- --
Larry D. Bouts 40,000(1) 0.95% $38.56 11/01/04 $882,000
Roger V. Goddu 30,000(1) 0.72 38.56 11/01/04 661,500
Richard L. Markee 30,000(1) 0.72 38.56 11/01/04 661,500
_________________
<FN>
(1) Non-qualified Stock Options granted effective November 1, 1994 under the
Toys "R" Us, Inc. 1994 Stock Option and Performance Incentive Plan. Such
options become exercisable four years and nine months after the date of
grant provided that the grantee remains in the employ of the Company. See
"Report of the Compensation Committee on Executive Compensation."
(2) Based on a total of 4,188,900 options granted to 30,131 employees of the
Company.
(3) In accordance with Securities and Exchange Commission rules, the Black-
Scholes option pricing model was used to estimate the grant date present
value of the options set forth in this table. The Company's use of this
model should not be construed as an endorsement of its accuracy at valuing
options. All option valuation models, including Black-Scholes, require a
prediction about the future movement of the stock price. The actual
value, if any, an executive may realize will depend on the excess of the
stock price over the exercise price on the date the option is exercised.
The estimated values under the model are based on the following
assumptions and variables: (i) the exercise of all options occurs at
their expiration dates, (ii) the one-year historic stock price volatility
of the Common Stock is 26% and (iii) for purposes of present value
calculations, the ten-year zero-coupon Treasury bond interest rate at
the date of grant was used.
</TABLE>
7
<PAGE>
<TABLE>
The following table sets forth, for the Company's fiscal year ended January
28, 1995, information concerning the exercise of options by the Named Officers
and the value of unexercised options of the Named Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Shares of
Common Value of
Value Stock Unexercised
Shares of Realized Underlying In-the-Money
Common (Market Price Options at Options at
Stock at Exercise FY-End(#) FY-End
Acquired on Less Exercise /Exercisable /Exercisable
Name Exercise(#) Price) Unexercisable Unexercisable
- ---- ----------- ------ ------------- -------------
<S> <C> <C> <C> <C>
Michael Goldstein -- -- 662,500 $8,746,875
325,000 --
Robert C. Nakasone -- -- 730,102 9,798,086
325,000 --
Larry D. Bouts -- -- -- --
420,000 813,850
Roger V. Goddu -- -- 78,750 863,663
275,000 243,850
Richard L. Markee -- -- -- --
140,000 191,325
</TABLE>
Report of the Compensation Committee
on Executive Compensation
Overview and Philosophy
The Compensation Committee of the Board of Directors is composed
entirely of non-management or outside directors. It has been delegated the
authority to review and consider the Company's management compensation standards
and practices and to recommend to the Board of Directors on an annual basis the
compensation to be paid to the Chief Executive Officer and other executive
officers of the Company. In addition, the Compensation Committee administers
the Company's stock option plans and agreements, including the Toys "R" Us,
Inc. 1994 Stock Option and Performance Incentive Plan (the "1994 Plan"), and
approves all grants to be made in connection therewith and administers, sets
performance goals and approves awards under the Toys "R" Us, Inc. Management
Incentive Compensation Plan (the "Incentive Plan").
The compensation and stock option programs are designed so that the
Company may attract and retain qualified management employees and motivate such
management employees to enhance profitability and stockholder returns. Over the
past several years, the Committee has implemented such objectives by having a
substantial portion of executive officers' cash compensation tied to annual
corporate earnings and by providing incentives to management through the use of
stock options. However, in order to bring the Company's compensation practices
in line with those of specialty retailers and other comparable companies and to
bring about a true pay for performance approach to the Company's compensation
program, the Company adopted the Incentive Plan and related new base salary
structure, which were implemented during the Company's last fiscal year. Under
the new compensation structure, base salaries were raised to levels competitive
with those of specialty retailers and other comparable companies. Bonuses
awarded under the Incentive Plan were generally lower than those previously
awarded to executive officers under the Company's
8
<PAGE>
prior compensation structure. In addition, in accordance with the Incentive
Plan, bonus compensation was conditioned in varying degrees upon the attainment
and certification of specific year-end targets or performance goals that were
established by the Compensation Committee at a meeting held on March 28, 1994,
in accordance with transitional rules issued by the Internal Revenue Service.
Executive Officers' Compensation
Each year, the Chief Executive Officer presents a proposal to the
Compensation Committee for executive officers' compensation. The Compensation
Committee reviews and considers such proposal and presents its recommendation
for adoption by the Board of Directors. Under the Company's current practice,
each executive officer of the Company receives a base salary, an incentive
cash bonus (if certain performance goals are achieved) and long-term incentive
compensation in the form of stock options.
Base Salary and Incentive Compensation
In determining base salaries and performance goals (in accordance with the
Incentive Plan), the Compensation Committee reviews compensation data regarding
other specialty retailers, including, among others, certain of the companies
included in the index used for the Performance Graph contained herein, selected
on the basis of similarities in size and work environment. However, the
Committee is aware that the responsibilities and contributions of certain of the
Company's executive officers transcend those ordinarily associated with their
office titles. The Committee may also take into account an individual's
experience and performance as well as cost-of-living levels in the locality in
which the individual is based. Performance goals are based on an analysis of
historical performance and growth expectations for the Company; provided that,
with respect to certain employees whose responsibilities are primarily related
to individual Divisions, as opposed to the Company as a whole, performance goals
may be based on historical performance and growth expectations for the Company
and/or that Division.
The Compensation Committee set salary levels and adopted performance goals
(in accordance with the Incentive Plan) for the past fiscal year which were
ratified by the Company's Board of Directors. In making its determination, the
Compensation Committee took special notice of management's contributions to the
continued success of the Company as a preeminent worldwide specialty retailer,
marked by the Company's growth in earnings during the prior fiscal year. The
Committee also recognized that management initiated expansion projects in
several new markets. While the expenses of such expansion create a charge
against current reported earnings, they provide the structure for sustained
long-term earnings growth. In addition, the Company continued its franchise
program with the first franchises located in the Middle East.
The total cash compensation paid to the Company's executive officers for
the past fiscal year is believed to be comparable to specialty retailers and
other comparable companies. For the past fiscal year, in determining base
salaries and incentive bonuses, the Committee set its targets between the 50th
and the 75th Quartile range of such compensation paid by such specialty
retailers and other comparable companies. Base salaries for executive officers
were set at a higher level than in past years and a smaller portion of
compensation was paid through a year-end incentive bonus. Each executive
officer who was employed through the end of the past fiscal year received a
cash bonus (as described below) based on a target relating to the Company's
consolidated pre-tax earnings for the fiscal year or, in the case of two
divisional officers, based on the Company's pre-tax earnings and/or their
Division's earnings.
Under the Incentive Plan, eligible management employees of the Company and
its subsidiaries ("Participants") are eligible to receive a cash bonus payable
at the close of each fiscal year of the Company based upon the attainment and
certification of performance goals established by the Committee. As performance
goals, the Committee adopts, during the first quarter of each fiscal year, a
target ("Target") for
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such fiscal year equal to a desired level of any or a combination of the
following financial results of the Company on a consolidated basis: (i) pre-tax
earnings, (ii) operating earnings, (iii) after-tax earnings, (iv) return on
investment or (v) earned value added (collectively, the "Financial Goals");
provided that, with respect to certain Participants, the Financial Goals may be
based upon divisional rather than consolidated results, or a combination of the
two. In addition, the Committee assigns to each Participant a percentage of his
or her base salary ("Base Salary Percentage") which is awarded as a bonus in the
event that 100% of the Target is achieved. With respect to each Target, the
Committee also specifies a separate amount based upon one or more of the
Financial Goals (a "Base Amount"), which, if not achieved, shall result in no
bonus being awarded. At the same time, the Committee adopts a mathematical
formula or matrix for the fiscal year which indicates the extent to which
bonuses shall be paid if the applicable Base Amounts are exceeded, including
if the Target is attained or exceeded. The matrix used for determining bonuses
for the past fiscal year permitted receipt of an amount greater than the Base
Salary Percentage if the applicable Target were exceeded, provided that no
Participant would receive more than 150% of such Participant's Base Salary
Percentage. For the past fiscal year, the consolidated and divisional Base
Amounts established by the Committee were achieved, but only in the case of
one Division, Kids "R" Us, was the Target achieved.
Long-Term Incentive Compensation
The Compensation Committee is authorized to award grants of stock options
to all employees, including executive officers. Generally, such options have an
exercise price equal to the market value of the Company's Common Stock on the
date of grant, become exercisable four years and nine months after the date of
grant and are contingent upon the optionee's continued employment. The number
of options granted to an individual varies according to his or her job title.
In the past fiscal year, the Committee awarded, under the 1994 Plan, non-
qualified stock options to officers of the Company (and to over 30,000 non-
officer employees) expected to make significant future contributions to the
Company. The stock options have an exercise price of $38.56, the market price
of the Company's Common Stock on the date of grant. Such options become
exercisable four years and nine months after the date of grant provided that the
grantee remains in the employ of the Company. The Committee may, but currently
has no plans to, make use of the alternative types of awards, such as stock
appreciation rights, restricted stock awards, performance shares, and
performance units, available under the 1994 Plan.
With respect to stock option awards in the past fiscal year, the
Compensation Committee considered generally that the Company has shown positive
results in recent years and that employees should be rewarded for that
performance. In addition, the Committee considered the Company's improved
competitive position as a toy retailer and the fact that the Company is engaged
in several long-term expansion projects around the world. The success of such
projects is considered to depend in large part on the sustained vision and
commitment of management in future years. Generally, the Committee has granted
stock options to those employees of the Company and its subsidiaries who have
satisfied certain continuous service requirements. The Committee believes that
option awards provide the necessary long-term incentive to focus managers on
building profitability and stockholder value. As a general rule, however, the
Committee monitors aggregate grants of options on a year-by-year basis,
determining awards based on position classifications and performance, without
taking into account prior option grants or exercises by individual officers or
employees.
In addition, the Company provides health care benefits and profit sharing
and stock purchase plan contributions for executive officers on terms generally
available to all Company employees. The Compensation Committee believes that
such benefits are not more favorable to employees than those offered by
specialty retailers and other comparable companies. The amount of perquisites,
as determined in
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accordance with the rules of the Securities and Exchange Commission relating to
executive compensation, did not exceed $50,000 or 10% of the total salary and
bonus of any executive officer in the last fiscal year.
The Compensation Committee intends that all compensation paid to executive
officers, to the extent possible, will qualify for deductibility under Section
162(m) of the Internal Revenue Code of 1986, as amended, which limits in certain
circumstances the deductibility of compensation in excess of $1 million paid to
certain executive officers.
Chief Executive Officer's Compensation
The Compensation Committee determined the compensation for Michael
Goldstein, the Company's Chief Executive Officer since January 31, 1994. Mr.
Goldstein is eligible to participate in the same executive compensation plans
available to other executive officers. In determining Mr. Goldstein's base
salary and performance goals (under the Incentive Plan), the Compensation
Committee conducts the same type of competitive review and analysis for Mr.
Goldstein's position as it does for the other executive officers. For the past
fiscal year, the Committee set Mr. Goldstein's base salary and his combined base
salary and incentive bonus (if 100% of the pre-established Target were achieved)
at a level it believed to be between the 50th and the 75th Quartile range of
such compensation paid to chief executive officers by specialty retailers and
other comparable companies. Incentive compensation earned by Mr. Goldstein for
the past fiscal year, however, was below targeted levels, as the Company's
pre-tax earnings were lower than targeted.
Mr. Goldstein's base salary for the past fiscal year was increased from
$175,000 to $800,000. This increase was largely due to the adoption by the
Company of the new compensation structure described above pursuant to which base
salaries were raised and a much smaller portion of compensation was paid through
a year-end incentive bonus and to Mr. Goldstein's promotion from Chief
Administrative Officer to Chief Executive Officer of the Company. The Company
made no stock option grants to Mr. Goldstein during the past fiscal year.
Robert A. Bernhard
Milton S. Gould
Norman M. Schneider
Members of the Management
Compensation and Stock
Option Committee
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Five-Year Stockholder Return Comparison
Set forth below is a line-graph presentation comparing the cumulative
stockholder return on the Company's Common Stock, on an indexed basis, against
the cumulative total returns of the S&P Composite-500 Stock Index and the S&P
Specialty Retail Index for the period of the Company's last five fiscal years
(January 31, 1990 = 100):
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN ON TOYS "R" US, INC.
COMMON STOCK, S&P COMPOSITE-500 AND S&P SPECIALTY RETAIL INDICES
Measurement Period Ended January 31,
------------------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Toys "R" Us, Inc. 100 111.36 133.73 156.61 148.48 118.98
S&P 500 Index 100 108.39 132.99 147.06 166.00 166.88
S&P Specialty
Retail Index 100 114.90 155.20 204.05 199.47 198.26
The S&P Specialty Retail Index includes Circuit City, Home Depot, Lowe's
Companies, Melville Corp., Pep Boys MM&J, Price/Costco, Tandy Corp., Toys "R" Us
and Woolworth.
Certain Transactions
On April 20, 1994, the Company entered into an Acquisition Agreement, as
amended on May 10, 1994, with Petrie Stores Corporation, a New York corporation
("Petrie"), at that time the holder of approximately 14% of the Company's
outstanding Common Stock. Pursuant to such Agreement, on January 24, 1995, the
Company consummated a transaction with Petrie pursuant to which the Company
issued from its treasury 42,076,420 shares of Common Stock in exchange for
39,853,403 shares of Common Stock and $165 million in cash delivered by Petrie.
The transaction was conditioned on, among other things, the receipt of a ruling
from the Internal Revenue Service that the transaction would be tax-free to
Petrie, its shareholders and the Company, the disposition by Petrie of its
retail operations, and the reduction by Petrie of its contingent liabilities,
all of which conditions were satisfied. In connection with such transaction
and the disposition of Petrie's retail operations to a third party, on December
9, 1994, the Company entered into the Buyer Indemnification Agreement and the
Seller Indemnification Agreement, each with Petrie, Petrie Retail, Inc., and PS
Stores Acquisition Corp. and its direct and indirect subsidiaries. Under the
Buyer Indemnification Agreement, the Company agreed to indemnify the other
parties thereto from and against any and all losses relating to any breach or
inaccuracy of any representation, warranty or agreement contained in the ruling
request delivered to the Internal Revenue Service and relating to the Company.
Under the Seller Indemnification Agreement, Petrie and the other parties
thereto agreed to indemnify the Company from and against any and all losses
relating to any liabilities or obligations or alleged liabilities or
obligations of any of such other parties. In addition, such parties
indemnified the Company against all losses relating to any breach or inaccuracy
of any representation, warranty or agreement contained in the ruling request
referred to above and relating to Petrie, any of its subsidiaries or related
party and the purchaser of Petrie's retail operations. In connection with the
consummation of the foregoing transaction, the Company entered into a letter
agreement with Petrie providing for the retention by Petrie of sufficient
assets to pay its liabilities.
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In connection with the annual solicitation of proxies (as required by
law) and to receive updated lists of stockholders, the Company reimburses all
brokers or other persons holding stock in their names or in the names of their
nominees for expenses incurred in forwarding proxies and proxy material to the
beneficial owners of such stock. In 1994, approximately $257,000 was so
reimbursed to Automatic Data Processing, Inc., of which Charles Lazarus,
Chairman of the Board of Directors of the Company, is a director. Such
reimbursements are not material to the Company. In the ordinary course of
business, the Company purchases merchandise from Colgate-Palmolive Company and
its competitors. Reuben Mark, a director of the Company, is Chairman and Chief
Executive Officer of Colgate-Palmolive Company. Such purchases are all on
bases comparable to transactions with other vendors and are not material to the
Company.
An Australian subsidiary of the Company is leasing a distribution center
and office space in Australia from an Australian subsidiary of Colgate-Palmolive
Company. The lease term is eight years (of which six years are remaining), with
the size of the leased premises to increase over the term. The lease payments
were the Australian dollar equivalent of approximately US$752,000 in the
Company's fiscal year ended January 28, 1995 and are expected to increase over
the term to a maximum of approximately US$1,370,000 per fiscal year, subject to
market adjustments. The terms of the lease are at fair market value and are not
material to the Company.
Compliance with Section 16(a)
During 1994, Howard W. Moore, a director of the Company, filed one
required report on Form 4 two days late. The Form 4 related to one transaction
involving the Common Stock beneficially owned by Mr. Moore. In making this
disclosure, the Company has relied on written representations of its directors
and executive officers and its ten percent holders and copies of the reports
that they have filed with the Securities and Exchange Commission.
APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed and designated Ernst
& Young LLP, independent auditors, New York, New York, to audit the consolidated
financial statements of the Company for the fiscal year ending February 3, 1996.
Representatives of Ernst & Young LLP are expected to be present at the
meeting and will be afforded the opportunity to make a statement if they desire
to do so, and such representatives are expected to be available to respond to
appropriate questions.
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders to be presented at the annual meeting to be
held in 1996 must be received for inclusion in the Company's proxy statement and
form of proxy by December 22, 1995.
By order of the Board of Directors
Andre Weiss
Secretary
April 21, 1995
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[FRONT SIDE OF PROXY CARD]
TOYS "R" US, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 7, 1995
The undersigned hereby appoints MICHAEL GOLDSTEIN and ROBERT C. NAKASONE,
jointly and severally, proxies, with power of substitution, to vote at the
Annual Meeting of Stockholders of TOYS "R" US, INC. to be held June 7, 1995
(including adjournments), with all powers the undersigned would possess if
personally present, as specified on the reverse side with respect to the
election of directors (including discretionary authority to accumulate votes),
and in accordance with their discretion on any other business that may come
before the meeting, and revokes all proxies previously given by the undersigned
with respect to the shares covered hereby.
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. In either event, please sign and
return this card.
(Continued and to be signed on reverse side)
SEE REVERSE
SIDE
<PAGE>
[REVERSE SIDE OF PROXY CARD]
[X] Please mark your
votes as in this
example.
The Board of Directors Recommends a Vote "FOR" Proposal 1.
1. Election of Directors FOR WITHHELD
[ ] [ ]
For, except vote withheld from the following nominee(s):
________________________________________________________
Election of Directors. Nominees:
Robert A. Bernhard
Michael Goldstein
Milton S. Gould
Shirley Strum Kenny
Charles Lazarus
Reuben Mark
Howard W. Moore
Robert C. Nakasone
Norman M. Schneider
Harold M. Wit
2. In their discretion upon such other business as may properly be brought
before the meeting.
If this proxy is properly executed and returned, the shares represented
hereby will be voted. If not otherwise specified (or unless discretionary
authority to accumulate votes is exercised), this proxy will be voted for
the named persons nominated as directors.
Signatures _______________________________
Date _______________________________
Signatures _______________________________
Date _______________________________
Note: Please date and sign above exactly as name appears on this proxy.
Executors, administrators, trustees, etc. should give full title. If
shares are held jointly, each holder should sign.
