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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 January 28, 1995
[ ] 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
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.
[ ]
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As of April 10, 1995, the aggregate market value of voting stock held
by non-affiliates of the registrant was $7,138,801,000 1.
As of April 10, 1995, 277,234,993 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 January 28, 1995 (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 1995 Annual Meeting of
Stockholders (the "Proxy Statement") are incorporated by reference into
Part III hereof.
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1 Included in this amount is voting stock having an aggregate market
value of approximately $409,500,000 (representing 5.7% of the outstanding
voting stock) which is owned by one stockholder.
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PART I
Item 1. Business
Toys "R" Us, Inc. and its subsidiaries are principally engaged
in the operation of 1,123 children's specialty retail stores
consisting of 618 U.S. and 299 international toy stores under the
name "Toys 'R' Us" and 206 children's clothing stores under the name
"Kids 'R' Us", as of April 10, 1995.
Corporate Developments
On January 24, 1995, Petrie Stores Corporation, a New York
corporation ("Petrie"), exchanged 39.9 million shares of the
Company's common stock and $165 million in cash for 42.1 million
shares of the Company's common stock issued from its treasury. The
exchange was effectuated pursuant to an agreement entered into in
April 1994 with Petrie, the then holder of approximately 14% of the
Company's outstanding common stock. Following the exchange, Petrie
distributed 26.2 million of the 42.1 million shares of the Company's
common stock to Petrie shareholders. As of April 10, 1995, Petrie
held 5.7% of the Company's outstanding common stock.
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 47 states and Puerto Rico and
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2 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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sells children's and adult 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 plans to add educational and entertainment software for
children in all of its Toys "R" Us stores.
Most of the Toys "R" Us stores conform to a prototype design
consisting of approximately 46,000 square feet, with 30,000 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 40 new toy stores
each year. At April 10, 1995, Toys "R" Us utilized 17 warehouse/
distribution centers and a large fleet of tractors and trailers,
which it owns and maintains, to service its 618 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, and 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 January 28,
1995, the Company opened 37 new Toys "R" Us stores.
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Plans for the fiscal year ending February 3, 1996 call for
about 40 new Toys "R" Us stores.
Toys "R" Us - International
During the fiscal year ended January 28, 1995, Toys "R" Us -
International continued its expansion by opening 59 stores, with its
first stores in the following countries: Denmark (one store),
Luxembourg (one store), and Sweden (three stores) and additional new
toy stores in: Australia (ten stores), Austria (two stores), Belgium
(one store), Canada (six stores), France (four stores), Germany (nine
stores), Japan (eight stores), Malaysia (one store), the Netherlands
(three stores), Portugal (one store), Spain (three stores) and the
United Kingdom (four stores). All international countries are
serviced by executive and buying offices and warehouse/distribution
centers (see Item 2-Properties). There were a total of 11
international warehouse/distribution centers in operation at April
10, 1995.
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 stores in additional parts of the world.
Franchise agreements have been signed in Israel, Saudi Arabia and the
United Arab Emirates and in 1994, the first franchised store opened
in the United Arab Emirates. The Company expects to accelerate its
franchising program by entering into agreements in additional
countries in 1995, with plans to open stores in 1996.
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The Company also operates, through 50%-owned joint ventures,
four stores in Hong Kong and four stores in Taiwan. One new store was
opened in Taiwan in 1994.
In 1995, the Company plans to open approximately 50 new
international toy stores, including additional franchised stores.
Financial information relating to foreign and domestic
operations is hereby incorporated by reference to page 14 of the
Company's Annual Report.
Kids "R" Us
In 1994, 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. Six additional stores were opened during 1994.
As part of a plan to improve profitability, the Company closed
nineteen stores in 1994 (in addition to four stores closed in 1993),
including all stores in Puerto Rico and Arizona. In 1995, the
Company plans to open about 10 stores. All stores are serviced from
three existing distribution centers and 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.
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.
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Employees
The Company employed approximately 58,000 associates at the end
of the fiscal year. During the 1994 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 14 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 6 of the Company's Annual Report.
Incorporation
The registrant was incorporated in Delaware in 1928.
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Item 2. Properties
Toys "R" Us - United States
As of April 10, 1995, Toys "R" Us operated 17 distribution
centers, 15 of which are owned and 2 of which are leased. The
distribution centers average approximately 429,000 square feet each
in size.
As of April 10, 1995, Toys "R" Us operated 618 toy stores, 377
of which are owned and 241 of which are leased. Most of the stores
conform to a prototype design consisting of approximately 46,000
square feet. Further, in smaller markets, the Company is also
opening 30,000 square foot stores. The toy stores are typically
freestanding units or located in strip centers.
A significant portion of the properties constructed by Toys "R"
Us are owned. Toys "R" Us plans to continue this policy in 1995.
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 as of April 10, 1995:
Number of
Stores in
Distribution Center Region Serviced Region
Joliet, Illinois Illinois/Wisconsin/Minnesota 62
Rialto, California Southern California/Arizona/ 59
Nevada/Hawaii
Port Newark, New Jersey New York/Northern New Jersey 52
Elizabeth, New Jersey
Atlanta, Georgia Georgia/South Carolina/ 49
Tennessee/Alabama
Landover, Maryland Virginia/Maryland/ 45
North Carolina
Orlando, Florida Florida/Puerto Rico 42
Houston, Texas Southern Texas/Louisiana/ 41
Mississippi
Stockton, California Northern California/Utah 39
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Lees Summit, Missouri Kansas/Missouri/Iowa/ 36
Nebraska/Colorado
Northboro, Massachusetts New England 31
Youngstown, Ohio Northeastern Ohio/Western 29
Pennsylvania/Northwestern
New York
Fairfield, Ohio Central Ohio/Indiana/ Kentucky 29
Fairless Hills, Pennsylvania/Delaware/ 28
Pennsylvania Southern New Jersey
Carrollton, Texas Northern Texas/Oklahoma/ 28
Arkansas/New Mexico
Canton, Michigan Michigan/Northwestern Ohio 27
Kent, Washington Pacific Northwest/Alaska 21
---
618
===
The Company also leases corporate offices in Paramus and
Rochelle Park, New Jersey and owns a data center in Parsipanny, New
Jersey.
Kids "R" Us
As of April 10, 1995, Kids "R" Us operated 206 children's
clothing stores, of which 98 are owned and 108 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. As of April 10,
1995, 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 as of April 10, 1995:
Distribution Centers Number of Stores Serviced
Somerset, New Jersey 90
Southgate, Michigan 82
Irwindale, California 34
---
206
===
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Toys "R" Us-International
As of April 10, 1995, Toys "R" Us-International operated 11
distribution centers, 4 of which are owned and 7 of which are leased.
As of April 10, 1995, Toys "R" Us-International operated 289
stores, excluding joint ventures, 96 of which are owned and 193 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. 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, as of April 10, 1995:
Number
Executive and Distribution Country of Stores
Buying Offices Centers Serviced Serviced
Germany Koln(2), Germany, Austria, 76
Trossingen Belgium, Luxembourg,
Bocklemund The Netherlands,
Switzerland
Canada Concord, Ontario Canada 56
United Kingdom Conventry United Kingdom, 53
Denmark, Sweden
France Evry France 30
Japan Kobe Japan 28
Spain Alcala de Henares Spain, Portugal 23
Australia Regents Park, NSW Australia 17
- Jurong Singapore, Malaysia 6
---
289
===
The Company's distribution center in Kobe sustained only minor
damage due to an earthquake in January, 1995, and a temporary
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facility in Tokyo is being leased on a short-term basis to meet
operating needs.
See the Note, "Leases", in the Company's Notes to Consolidated
Financial Statements included in the Company's Annual Report, which
note is incorporated herein by reference, for additional information
with respect to the Company's leases.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote
of Security Holders
None.
Item 4A. Executive Officers of the Company
as of April 10, 1995
(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 53 Vice Chairman of the Board and Chief
Executive Officer
Robert C. Nakasone 47 President and Chief Operating
Officer
Larry D. Bouts 46 Vice President of the Company and
President of the International
Division of the Company
Roger V. Goddu 44 Executive Vice President and
General Merchandise Manager-USA Toy
Stores
Richard L. Markee 42 Vice President of the Company and
President of the Kids "R" Us
Division of the Company
Louis Lipschitz 50 Senior Vice President-Finance and
Chief Financial Officer
Jonathan Friedman 39 Vice President - Controller of the
Company and Chief Financial Officer
of the Kids "R" Us Division of the
Company
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(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 January 31, 1994, he became Vice Chairman
of the Board and Chief Executive Officer. From February 1, 1993 to
January 30, 1994, he was Vice Chairman of the Board and Chief
Administrative Officer. From prior to 1990 to January 31, 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 January 31, 1994, he became President
and Chief Operating Officer. From prior to 1990 to January 30,
1994, he was Vice Chairman of the Board and President of Worldwide
Toy Stores.
Mr. Bouts has been employed by the Company since September
1990. Effective February 3, 1991, he became Vice President of the
Company and President of the International Division. From prior to
1990 to August 1990, he was Vice President - Finance, Chief Financial
Officer of PepsiCo Foods International, a division of PepsiCo, Inc.
Mr. Goddu has been employed by the Company for more than five
years. From prior to 1990 to date, he has been Executive Vice
President - General Merchandise Manager - USA Toy Stores.
Mr. Markee has been employed by the Company since October
1990. From March 1, 1993 to date, he has been President of the Kids
"R" Us Division and a Vice President of the Company. From October 1,
1990 to February 28, 1993, he was Vice President - General
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Merchandise Manager for the Kids "R" Us Division, and from prior to
1990 to September 1990, he was employed by Target Stores, a
specialty store division of Dayton Hudson Corporation, as Vice
President - Divisional Merchandise Manager.
Mr. Lipschitz has been employed by the Company for more than
five years. From February 1, 1993 to date, he has been Senior
Vice President-Finance and Chief Financial Officer. From April 1990
to January 31, 1993, he was Vice President - Finance and Treasurer,
and from prior to 1990 to March 1990, he was Vice President - Treasurer.
Mr. Friedman has been employed by the Company for more than
five years. From October 1994 to date, he has been Vice
President - Controller of the Company and Chief Financial Officer of
the Kids "R" Us Division. From April 1990 to October 1994, he was
Vice President - Controller of the Company. From prior to 1990 to
April 1990, he was Assistant Controller of the Company.
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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 15 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 page 6 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 7 to 15 of the
Company's Annual Report.
(i) Consolidated Balance Sheets at January 28, 1995 and
January 29, 1994;
(ii) Consolidated Statements of Earnings for each of the
three years in the period ended January 28, 1995;
(iii) Consolidated Statements of Cash Flows for each of
the three years in the period ended January 28, 1995;
(iv) Consolidated Statements of Stockholders' Equity for
each of the three years in the period ended January 28, 1995;
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(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 an operating
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 Stockholder" 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) No reports on Form 8-K have been filed by the Company
during the last quarter of the period covered by this
Report.
(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
Senior Vice President-Finance
and Chief Financial Officer
Date: April 21, 1995
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 21st day of April, 1995.
Signature Title
Charles Lazarus Chairman of the Board
Michael Goldstein Director, Vice Chairman of the
Board and Chief Executive Officer
(Principal Executive Officer)
Robert A. Bernhard Director
Milton S. Gould Director
Shirley Strum Kenny Director
Reuben Mark Director
Howard W. Moore Director
Robert C. Nakasone Director
Norman M. Schneider Director
Harold M. Wit Director
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Louis Lipschitz Senior Vice President - Finance and
Chief Financial Officer (Principal
Financial and Accounting Officer)
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 Paper (P)
No. Document or Electronic (E)
3A Restated Certificate of Incorporation of E
registrant and Amendment thereto.
3B By-Laws of registrant as amended and restated
effective January 31, 1994. Incorporated
herein by reference to Exhibit 3B to
registrant's Annual Report on Form 10-K for the
year ended January 29, 1994.
4 i) Form of Indenture dated as of January 1, 1987
between the registrant and United Jersey Bank,
as Trustee, pursuant to which Securities in one
or more series in an unlimited amount may be
issued by the 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 is incorporated herein by
reference to Exhibit 4(b) to Registration
Statement No. 33-11461.
iii) Form of Indenture between the 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 the registrant. Incorporated herein
by reference to Exhibit 4 to registrant's
Registration Statement No. 33-42237.
iv) Form of the registrant's 8 3/4% Debentures due
2021 is incorporated herein by reference to
Exhibit 4 to registrant's Report on Form 8-K
dated August 29, 1991.
v) Substantially all other long-term debt of the
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,
(a) industrial revenue bonds issued by industrial
development authorities and guaranteed by the
registrant, (b) mortgages held by third parties on
real estate owned by the registrant, (c) stepped
coupon guaranteed bonds held by a third party and
guaranteed by the registrant and (d) an agreement
under which the registrant guaranteed certain
yen-denominated loans made by a third party to a
subsidiary of the registrant. The registrant
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Exhibit Paper (P)
No. or Electronic (E)
will file with the Securities and Exchange
Commission (the "Commission") copies of the
constituent documents relating to such debt 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* An employment agreement dated March 14, 1978 and
an amendment thereto dated November 20, 1979
between registrant and Charles Lazarus are
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 is
incorporated herein by reference to Exhibit 10B
to registrant's Annual Report on Form 10-K for
the year ended January 31, 1982. An amendment
dated as of December 7, 1982 to such employment
agreement is incorporated herein by reference to
Exhibit 10B to registrant's Annual Report on Form
10-K for the year ended January 30, 1983. An
amendment dated April 10, 1984 to such employment
agreement is incorporated herein by reference to
Exhibit 10B to the registrant's Annual Report on
Form 10-K for the year ended January 29, 1984.
An amendment dated as of March 14, 1989 to such
employment agreement is incorporated herein by
reference to Exhibit 10B to registrant's Annual
Report on Form 10-K for the year ended January
29, 1989.
10C* Form of Indemnification Agreement between
registrant and each director is incorporated
herein by reference to Exhibit 10F to
registrant's Annual Report on Form 10-K for the
year ended February 1, 1987.
* 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.
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Exhibit Paper (P)
No. or Electronic (E)
10D* A stock option agreement dated as of February 1,
1988 between registrant and Robert Nakasone is
incorporated herein by reference to Exhibit 10G
to registrant's Annual Report on Form 10-K for
the year ended January 31, 1988. The first
amendment dated as of April 1, 1989 to such
agreement is incorporated herein by reference to
Exhibit 10G to registrant's Annual Report on Form
10-K for the year ended January 29, 1989. The
second amendment dated as of September 19, 1989
to such agreement is incorporated herein by
reference to Exhibit 10G to registrant's Annual
Report on Form 10-K for the year ended January
28, 1990.
10E* A stock option agreement dated as of February 1,
1988 between registrant and Michael Goldstein is
incorporated herein by reference to Exhibit 10H
to registrant's Annual Report on Form 10-K for
the year ended January 31, 1988. The first
amendment dated as of April 1, 1989 to such
agreement is incorporated herein by reference to
Exhibit 10H to registrant's Annual Report on Form
10-K for the year ended January 29, 1989. The
second amendment dated as of September 19, 1989
to such agreement is incorporated herein by
reference to Exhibit 10H to registrant's Annual
Report on Form 10-K for the year ended January
28, 1990.
10F* Stock Option Plan and Agreement dated as of
March 14, 1989 between the registrant and
Charles Lazarus, and a First Amendment thereto
dated as of September 19, 1989 is incorporated
by reference to Exhibit 10I to registrant's
Annual Report on Form 10-K for the year ended
January 28, 1990.
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.
* 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.
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Exhibit Paper (P)
No. or Electronic (E)
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. Incorporated herein by reference to
Exhibit 10K to registrant's Annual Report on
Form 10-K for the year ended January 29, 1994.
10K* Management Incentive Compensation Plan of the
registrant 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.
13 Registrant's Annual Report to Stockholders for E
the year ended January 28, 1995. Except for
the portions thereof which 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. E
23 Consent of Independent Auditors, Ernst & Young LLP. E
27 Financial Data Schedule E
* 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.
24
<PAGE>
EXHIBIT 3A
RESTATED
CERTIFICATE OF INCORPORATION
OF
TOYS "R" US, INC.
Toys "R" Us, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is TOYS "R" US, INC. The name under which
the Corporation was originally incorporated was Interstate Department Stores,
Inc., and the date of filing of its original Certificate of Incorporation with
the Secretary of state was February 14, 1928.
2. This Restated Certificate of Incorporated only restates and integrates
and does not further amend the provisions of the Certificate of Incorporation of
the Corporation as heretofore amended or supplemented, and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
3. The text of the Certificate of Incorporation of the Corporation as
heretofore amended or supplemented is hereby restated and integrated to read as
follows:
"FIRST. The name of the Corporation is TOYS "R" US, INC.
SECOND. The address of the Corporation's registered office in the State of
Delaware is 32 Loockerman Square, Suite L-100, Dover, Kent County, Delaware
19901. The name of its registered agent at such address is the Prentice-Hall
Corporation System, Inc.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH. The aggregate number of shares which the Corporation shall have the
authority to issue is Five Hundred Fifty Million (550,000,000) shares of Common
Stock, par value $.10 a share.
FIFTH. In all elections of directors of the Corporation, each holder of
record of Common Stock shall be entitled to as many votes as shall equal the
number of votes which (except for this provision as to cumulative voting) he
would be entitled to cast for the election of directors with respect to his
shares of stock multiplied by the number of directors
<PAGE>
to be elected by him, and he may cast all of such votes for a single director or
may distribute them among the number to be voted for, or for any two or more of
them, as he may see fit. Election of directors need not be by written ballot.
SIXTH. The Board of Directors is authorized to adopt, amend, or repeal By-
Laws of the Corporation.
SEVENTH. Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (whether or not by or
in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall be entitled to be indemnified by the Corporation to the extent permitted
by law against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement incurred by him in connection with such action, suit
or proceeding. Such right of indemnification shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
EIGHTH. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class stockholders of this Corporation,
as the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
2
<PAGE>
NINTH. No director of the Corporation shall be liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit."
4. Pursuant to the provisions of Section 245 of the General Corporation Law
of the State of Delaware, the Board of Directors of the Corporation duly adopted
this Restated Certificate of Incorporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Louis Lipschitz, its Vice-President-Finance and Treasurer, and
attested by Andre Weiss, its Secretary, on the 10th day of March, 1992.
TOYS "R" US, INC.
By: /s/ Louis Lipschitz
--------------------------
Louis Lipschitz
Vice President-Finance and
Treasurer
ATTEST:
/s/ Andre Weiss
- - ---------------
Andre Weiss
Secretary
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
TOYS "R" US, INC.
We, the undersigned, being the Senior Vice President Finance and Chief
Financial Officer and the Secretary, respectively, of Toys "R" Us, Inc., a
Delaware corporation (the "Corporation"), DO HEREBY CERTIFY THAT:
1. Article Fourth of the Restated Certificate of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
FOURTH. The aggregate number of shares which the Corporation shall
have the authority to issue is Six Hundred Fifty Million (650,000,000)
shares of Common Stock, par value $.10 per share.
2. Such amendment has been duly adopted by the Board of Directors and the
stockholders of the Corporation in accordance with the provisions of Section 242
of the General Corporation Law.
IN WITNESS WHEREOF, we have signed and attested this Certificate this 8th
day of June, 1994.
By: /s/ Louis Lipschitz
---------------------------
Louis Lipschitz
Senior Vice President-
Finance and Chief Financial
Officer
ATTEST:
/s/ Andre Weiss
- - ---------------
Andre Weiss
Secretary
<PAGE>
TABLE OF CONTENTS
1 Financial Highlights
2 Letter to Our Stockholders
6 Management's Discussion
Results of Operations
and Financial Condition
7 Financial Statements
15 Report of Management
15 Market Information
15 Report of Independent
Auditors
16 Directors and Officers
17 Corporate Data
Toys "R" Us is the world's largest children's specialty retail chain in terms
of both sales and earnings. At January 28, 1995, the Company operated 618 toy
stores in the United States, 293 international toy stores and 204 Kids "R" Us
children's clothing stores.
STORE LOCATIONS
TOYS "R" US UNITED STATES - 618 LOCATIONS
Alabama - 7
Alaska - 1
Arizona - 10
Arkansas - 2
California - 77
Colorado - 10
Connecticut - 9
Delaware - 2
Florida - 39
Georgia - 14
Hawaii - 1
Idaho - 2
Illinois - 34
Indiana - 12
Iowa - 7
Kansas - 4
Kentucky - 7
Louisiana - 8
Maine - 2
Maryland - 17
Massachusetts - 16
Michigan - 23
Minnesota - 11
Mississippi - 5
Missouri - 12
Montana - 1
Nebraska - 3
Nevada - 3
New Hampshire - 5
New Jersey - 21
New Mexico - 3
New York - 41
North Carolina - 16
Ohio - 28
Oklahoma - 4
Oregon - 7
Pennsylvania - 29
Rhode Island - 1
South Carolina - 8
South Dakota - 2
Tennessee - 12
Texas - 50
Utah - 5
Virginia - 18
Washington - 11
West Virginia - 3
Wisconsin - 11
Puerto Rico - 4
TOYS "R" US INTERNATIONAL - 293 LOCATIONS
Australia - 17
Austria - 7
Belgium - 3
Canada - 56
Denmark - 1
France - 29
Germany - 53
Hong Kong - 4
Japan - 24
Luxembourg - 1
Malaysia - 3
Netherlands - 8
Portugal - 3
Singapore - 3
Spain - 20
Sweden - 3
Switzerland - 4
Taiwan - 4
United Arab Emirates - 1
United Kingdom - 49
KIDS "R" US UNITED STATES - 204 LOCATIONS
Alabama - 1
California - 25
Connecticut - 6
Delaware - 1
Florida - 8
Georgia - 4
Illinois - 20
Indiana - 7
Iowa - 1
Kansas - 1
Maine - 1
Maryland - 8
Massachusetts - 5
Michigan - 13
Minnesota - 5
Missouri - 4
Nebraska - 1
New Hampshire - 2
New Jersey - 17
New York - 20
Ohio - 19
Pennsylvania - 14
Rhode Island - 1
Tennessee - 1
Texas - 7
Utah - 2
Virginia - 7
Wisconsin - 3
<PAGE>
TOYS "R" US, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Dollars in millions except per share information) Fiscal Year Ended
Jan. 28, Jan. 29, Jan. 30, Feb. 1, Feb. 2, Jan. 28, Jan. 29, Jan. 31, Feb. 1, Feb. 2,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Sales $ 8,746 $ 7,946 $ 7,169 $ 6,124 $ 5,510 $ 4,788 $ 4,000 $ 3,137 $ 2,445 $ 1,976
Net Earnings 532 483 438 340 326 321 268 204 152 120
Earnings Per Share 1.85 1.63 1.47 1.15 1.11 1.09 .91 .69 .52 .41
FINANCIAL POSITION
AT YEAR END:
Working Capital 394 633 797 328 177 238 255 225 155 181
Real Estate-Net 2,271 2,036 1,877 1,751 1,433 1,142 952 762 601 423
Total Assets 6,571 6,150 5,323 4,583 3,582 3,075 2,555 2,027 1,523 1,226
Long-Term Obligations 785 724 671 391 195 173 174 177 85 88
Stockholders' Equity 3,429 3,148 2,889 2,426 2,046 1,705 1,424 1,135 901 717
NUMBER OF STORES
AT YEAR END:
Toys"R"Us - United States 618 581 540 497 451 404 358 313 271 233
Toys"R"Us - International 293 234 167 126 97 74 52 37 24 13
Kids"R"Us - United States 204 217 211 189 164 137 112 74 43 23
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED NET SALES (BILLIONS)
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
FISCAL YEAR 1985 $2.0
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
</TABLE>
1
<PAGE>
[Photo of Michael Goldstein, Vice Chairman and Chief Executive Officer and
Robert C. Nakasone, President and Chief Operating Officer.]
TO OUR STOCKHOLDERS
FINANCIAL HIGHLIGHTS
We are proud to report another good year for Toys "R" Us. In 1994, we achieved
gains in market share and once more reported record results, marking the 16th
consecutive year of increased sales and earnings since Toys "R" Us became a
public company. Over that period, earnings have grown at an annual compounded
rate of 24%.
For the year, sales grew to $8.7 billion, a 10% increase over the $7.9 billion
reported in the previous year. Operating earnings increased 11% while net
earnings rose to $532 million, a 10% increase over the $483 million reported
in 1993. Earnings per share climbed 14% to $1.85 compared to $1.63 a year ago.
Comparable store sales at our U.S.A. toy stores rose 2% for the year, with
operating earnings up 7%. Our performance reflected several new marketing
and merchandising initiatives: we introduced a new Spring catalog and three
Holiday catalogs, which featured more pages, more coupons and received wider
distribution; we introduced several initiatives to improve customer service;
and expanded our Books "R" Us shops. We also introduced Lego and Stuffed
Animal shops and the sale of PC software for children, which was successfully
tested as a new Learning Center shop in a number of U.S.A. and European toy
stores. However, we experienced a downturn in our video game business in the
fall of 1994 as customers awaited new generation 32 and 64 bit video game
systems by Sega, Sony and Nintendo, expected in the latter half of 1995. In
addition, competition from national and regional discount stores, as well as
mall based toy stores, intensified as they increase advertising and more than
ever emphasized lower prices. Lastly, new competitors have emerged targeting
specific segments of our business. These competitors include juvenile
specialty stores, educational toy stores and computer electronic shops with
broad offerings of video games.
We now face a number of issues, in our U.S.A. toy store operations, which
require us to take significant actions. These steps, while improving our
long-term profitability and market share, will adversely impact our ability
to achieve our historic earnings growth rate in 1995. Further, until the new
video game systems are introduced, the outlook for that category in the first
three quarters of 1995 is poor, and it will hurt sales and profits. However,
we expect a strong fourth quarter as the new systems and our initiatives
create excitement and improved customer traffic.
Our strategies for 1995 include improving our image through a variety of
pricing and marketing initiatives, the introduction of new in-store shops
that highlight our dominant selection of merchandise and an increased emphasis
on customer service. The Toys "R" Us franchise is one of the best in the world
and we intend to take aggressive measures to strengthen this franchise over
the years to come.
Internationally, our French and Iberian toy stores had comparable store sales
increases for the full year. In Japan, our performance improved in the fourth
quarter with the introduction of 32 bit video game systems by both Sony and
Sega. These gains were offset by lower comparable store sales for our
Canadian, Central European and United Kingdom toy stores, reflecting new
competition in Canada and a poor retail environment in Central Europe. In
spite of this, our International division achieved a 37% increase in operating
earnings, by again improving upon inventory management and increasing
productivity in both labor and distribution.
Our International franchising division added a third franchisee to the
Toys "R" Us family in 1994, which will now enable us to open toy stores in
Israel, Saudi Arabia and the United
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED NET EARNINGS (MILLIONS)
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
FISCAL YEAR 1985 120
1986 152
1987 204
1988 268
1989 321
1990 326
1991 340
1992 438
1993 483
1994 532
</TABLE>
Arab Emirates. Our first franchise store opened in Dubai in January 1995
to tremendous excitement and heavy consumer traffic. We expect to accelerate
our franchising program by entering into agreements in additional countries
in 1995, with plans to open stores in 1996.
Our Kids "R" Us children's clothing division enjoyed relatively strong
comparable store sales despite the continuation of the difficult apparel
sales environment. Operating profits rose 16%, our third successive year of
strong growth, reflecting improved expense control as well as new marketing
and merchandising initiatives. Our greatly expanded private label merchandise
program has met with excellent customer response. In addition, Kids "R" Us
closed 19 stores in 1994 which were not meeting expectations. Based on the
last three years' results, we will expand Kids "R" Us at faster rate as we
enter 1996.
Under our $1 billion stock buyback program, we repurchased 13.1 million shares
at a cost of $470 million during 1994. We intend to continue to aggressively
buy back stock during 1995. In addition, we completed our transaction with
Petrie Stores Corporation at the end of January 1995, which gave us
approximately $162 million in cash, net of expenses, and increased our
outstanding stock by approximately 2.2 million shares.
OPERATIONAL HIGHLIGHTS
We are proud of our ability to provide the best selection of merchandise,
stocked in depth with everyday low prices while expanding customer service
and maintaining one of the lowest expense structures in the industry. The
following are some of the highlights of 1994 along with our plans for 1995.
In 1994, we significantly expanded our catalog program with a Spring catalog
and two new and one expanded Holiday Toy catalogs that provided our customers
with over $1,800 in coupon savings. This program allows us to continue to
demonstrate the broad selection of merchandise that can be found at
Toys "R" Us. Increasingly, customers in our stores use these as shopping aids.
Our International division has also begun to use the catalog program with
tremendous success.
We have continued to test various "specialty shops" within our U.S.A. and
International toy stores. In 1994, we added 130 Books "R" Us shops bringing
our total to over 300 stores. We also added approximately twenty Lego shops,
twenty Stuffed Animal shops and five Learning Center shops in our stores.
Based on our successful test results, we will implement the Learning Center
concept in 100 stores in 1995. These shops will carry a full selection of
learning aid products as well as PC software for kids. In addition, by the
middle of 1995 we plan to offer an exciting and full selection of PC software
for children in all of our U.S.A. toy stores and in several international
markets. Our focus will be on children's educational and entertainment
software, and we plan to have the most dominant selection anywhere. We also
plan to greatly expand our space allocation to large outdoor/indoor playsets
to show our dominant selection in this merchandise category.
Enhancing customer service was our single most important operational
development in 1994. In conjunction with this initiative, we installed
customer friendly in-aisle price scanners and other service oriented
<TABLE>
<CAPTION>
CONSOLIDATED STOCKHOLDERS' EQUITY (BILLIONS)
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
FISCAL YEAR 1985 0.7
1986 0.9
1987 1.1
1988 1.4
1989 1.7
1990 2.0
1991 2.4
1992 2.9
1993 3.1
1994 3.4
</TABLE>
3
<PAGE>
technology in our U.S.A. toy stores. We also tested and intend to install
a new automated Baby Registry throughout the entire chain in 1995. Our
Geoffrey Helper Program was expanded and we modified some of our store
policies and procedures to be more customer friendly and increase employee
empowerment and decision-making. In 1995, we will continue to enhance all
aspects of customer service, from improving basic store maintenance and
housekeeping standards to dedicating additional associate hours to critical
customer service needs.
From the beginning of our remodeling program in 1990 through the end of
January 1995, we have remodeled over 100 toy stores including 30 stores this
past year. These remodeled stores enhance the customer's shopping experience
while increasing in-store productivity. We expect to remodel another 15 to 20
toy stores in 1995.
During the year, the U.S.A. toy division continued to increase productivity
and improve its ability to replenish stores by building two state-of-the-art
automated distribution centers that replaced four older facilities. Further,
our International division retrofitted two existing centers with our new
automated systems. We are proud of our associates in Japan who were able to
continue to operate successfully following the January earthquake. Our
distribution center located in Kobe sustained only minor damage. In 1995, we
will be opening our largest distribution center in New Jersey and will also
open a state-of-the-art distribution center in Germany.
<TABLE>
<CAPTION>
CONSOLIDATED NUMBER OF STORES
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
FISCAL YEAR 1985 269
1986 338
1987 424
1988 522
1989 615
1990 712
1991 812
1992 918
1993 1,032
1994 1,115
</TABLE>
STORE GROWTH
In 1994, we opened 37 toy stores in the United States. Internationally, 59
stores opened in 17 countries, including our first stores in Denmark,
Luxembourg and Sweden and our first franchise store in the United Arab
Emirates. For the second year in a row, our International division opened
more toy stores than our U.S.A. toy division. We also opened 6 Kids "R" Us
stores.
In 1995, we plan to open 40 toy stores in the United States and about 50 toy
stores internationally, including franchise stores in the Middle East. We
also plan to open about 10 new Kids "R" Us stores. The 1995 stores will
capitalize on the existing infrastructure, thereby enhancing the
profitability of new and existing stores alike.
Aided by our financial strength, we intend to capitalize on our strong
competitive position throughout the world, by continued expansion to
achieve greater sales, earnings and market share gains.
<TABLE>
<CAPTION>
NET SALES - INTERNATIONAL DIVISION (BILLIONS)
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
FISCAL YEAR 1985 $0.0
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
</TABLE>
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 1994, we contributed funds to over
100 children's health care organizations. We also expanded our Hospital
Playroom Program, which equips quality children's play centers in hospitals,
by opening eight additional playrooms, bringing the total to twenty-six. We
expect to expand our program to thirteen additional hospitals in 1995.
Toys "R" Us is a signatory to a Fair Share Agreement with the NAACP and has
taken steps to support
4
<PAGE>
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 initiatives, including a leadership position in eliminating
the sale of look-alike toy guns. We are proud to be the recent recipient of
the Consumer Product Safety Commission Chairman's Commendation For Significant
Contributions to Product Safety.
Through our new Books "R" Us shops we are promoting literacy among children by
demonstrating that reading is fun.
Lastly, we developed a Toy Guide for differently-abled children, which was
carefully designed with their specific abilities and needs in mind.
HUMAN RESOURCES
The talent and high caliber of our management team and of our associates
allows Toys "R" Us to expand aggressively and profitably.
We have made the following important promotions within our executive ranks:
Toys "R" Us, United States:
Michael J. Madden,
Group Vice President - Store
Operations
Michael A. Gerety,
Vice President - Store Planning
Kids "R" Us:
James G. Parros, Senior Vice
President - Stores and Distribution
Center Operations
Jonathan M. Friedman,
Vice President - Chief Financial
Officer
<TABLE>
<CAPTION>
NUMBER OF COUNTRIES - INTERNATIONAL DIVISION
(GRAPHIC MATERIAL OMITTED)
<S> <C> <C>
FISCAL YEAR 1985 3
1986 4
1987 5
1988 6
1989 8
1990 8
1991 10
1992 11
1993 16
1994 20
</TABLE>
SUMMARY
We intend to aggressively pursue all of our strategic initiatives and are
committed to building market share and profitability in the years to come.
We will work hard to continue being the most trusted store in town.
We value our excellent relationships with our innovative suppliers and
commend them for their products, which create an atmosphere of excitement in
our stores. Our assessment of the February New York Toy Fair indicates a year
of robust sales in basic categories such as fashion dolls and preschool toys,
where there is quality product that is reasonably priced.
We recognize the dedication and quality work of our associates around the
world who have made this another record year. Our appreciation is also
extended to you, our stockholders, for your commitment and loyalty to
Toys "R" Us.
Sincerely,
/s/ Michael Goldstein
Vice Chairman and
Chief Executive Officer
/s/ Robert C. Nakasone
President and
Chief Operating Officer
March 29, 1995
5
<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 10.1% in 1994, 10.8% in 1993 and 17.1% in 1992. Part of the
growth is attributable to the opening of 121 new U.S.A. toy stores, 167
international toy stores and 39 children's clothing stores during the three
year period, and a portion of the increase is due to comparable U.S.A. toy
store sales increases of 2.1%, 3.3% and 6.9% in 1994, 1993 and 1992,
respectively.
Cost of sales as a percentage of sales decreased to 68.7% in 1994 from 69.2%
in 1993 and from 69.3% in 1992 due to a more favorable merchandise mix.
Selling, advertising, general and administrative expenses as a percentage of
sales increased to 19.0% in 1994 from 18.8% in 1993 and 18.7% in 1992
primarily as a result of increases in such expenses at a rate faster than
comparable store sales increases and also due to customer service initiatives
implemented in 1994, and start-up costs for the opening of our new market in
Australia in 1993.
Interest expense increased in 1994 as compared to 1993 and 1992 due to
increased average borrowings and a change in the mix of borrowings and
interest rates among countries. Short-term interest income decreased in
1994 as compared to 1993 and increased in 1993 as compared to 1992,
principally due to the availability of cash for investments.
The effective tax rate decreased to 37.0% in 1994 from 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 effective rate increased to 37.5% in 1993 from
36.5% in 1992, due to the rate change and retroactive adjustment discussed
above. 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 operates in twenty different countries which are politically
stable. 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 purchase options to
eliminate specific transaction currency risk. International sales and
operating earnings were favorably impacted by the translation of local
currency results into U.S. dollars at higher average exchange rates in 1994
than 1993 and unfavorably impacted by lower average exchange rates in 1993
than in 1992. Inflation has had little effect on the Company's operations in
the last three years.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a strong financial position as evidenced
by its working capital of $394 million at January 28, 1995 and $633 million at
January 29, 1994. The long-term debt to equity percentage is 22.9% at January
28, 1995 as compared to 23.0% at January 29, 1994.
In 1995, the Company plans to open approximately 90 toy stores in the United
States and internationally, including franchise stores. Additionally, there
are plans to open about 10 Kids "R" Us children's clothing stores. The Company
opened 96 toy stores in 1994, 108 in 1993 and 84 in 1992 and 6 Kids "R" Us
children's clothing stores in 1994, 10 in 1993 and 23 in 1992. The Company
closed 19 Kids "R" Us children's clothing stores in 1994 and 4 in 1993, which
were not meeting our expectations. These closures did not have a significant
impact on the Company's financial position.
For 1995, capital requirements for real estate, store and warehouse fixtures
and equipment, leasehold improvements and other additions to property and
equipment are estimated at $575 million (including real estate and related
costs of $375 million). The Company's policy is to purchase its real estate
where appropriate and plans to continue this policy.
The Company has an existing $1 billion share repurchase program, under which
it has repurchased 13.7 million shares of its common stock for $493.7 million,
since it had announced the program in January of 1994.
The seasonal nature of the business (approximately 48% 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 bank borrowings for foreign subsidiaries.
*References to 1994, 1993 and 1992 are for the 52 weeks ended January 28,
1995, January 29, 1994 and January 30, 1993, respectively.
6
<PAGE>
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
(In thousands except per share information) Year Ended
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Net sales $ 8,745,586 $ 7,946,067 $ 7,169,290
Costs and expenses:
Cost of sales 6,007,958 5,494,766 4,968,555
Selling, advertising, general and administrative 1,664,180 1,497,011 1,342,262
Depreciation and amortization 161,406 133,370 119,034
Interest expense 83,945 72,283 69,134
Interest and other income (15,970) (24,116) (18,719)
______________ _____________ ____________
7,901,519 7,173,314 6,480,266
______________ _____________ ____________
Earnings before taxes on income 844,067 772,753 689,024
Taxes on income 312,300 289,800 251,500
______________ _____________ ____________
Net earnings $ 531,767 $ 482,953 $ 437,524
______________ _____________ ____________
______________ _____________ ____________
Earnings per share $ 1.85 $ 1.63 $ 1.47
______________ _____________ ____________
______________ _____________ ____________
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands)
January 28, January 29,
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 369,833 $ 791,893
Accounts and other receivables 115,914 98,534
Merchandise inventories 1,999,148 1,777,569
Prepaid expenses and other 45,818 40,400
______________ ______________
Total Current Assets 2,530,713 2,708,396
Property and Equipment:
Real estate, net 2,270,825 2,035,673
Other, net 1,397,980 1,148,794
______________ ______________
Total Property and Equipment 3,668,805 3,184,467
Other Assets 371,675 256,746
______________ ______________
$ 6,571,193 $ 6,149,609
______________ ______________
______________ ______________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ 122,661 $ 239,862
Accounts payable 1,339,081 1,156,411
Accrued expenses and other current liabilities 472,653 471,782
Income taxes payable 202,548 206,996
______________ ______________
Total Current Liabilities 2,136,943 2,075,051
Deferred Income Taxes 219,927 202,663
Long-Term Debt 785,448 723,613
Stockholders' Equity:
Common stock 29,795 29,794
Additional paid-in capital 521,295 454,061
Retained earnings 3,544,573 3,012,806
Foreign currency translation adjustments (25,121) (56,021)
Treasury shares, at cost (641,667) (292,358)
______________ ______________
3,428,875 3,148,282
______________ ______________
$ 6,571,193 $ 6,149,609
______________ ______________
______________ ______________
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) Year Ended
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 531,767 $ 482,953 $ 437,524
____________ ____________ ____________
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 161,406 133,370 119,034
Deferred income taxes (14,545) 36,534 13,998
Changes in operating assets and liabilities:
Accounts and other receivables (17,380) (29,149) (5,307)
Merchandise inventories (221,579) (278,898) (108,066)
Prepaid expenses and other operating assets (31,668) (39,448) (36,249)
Accounts payable, accrued expenses and other liabilities 183,506 325,165 112,232
Income taxes payable (2,014) 26,588 40,091
____________ ____________ ____________
Total adjustments 57,726 174,162 135,733
____________ ____________ ____________
Net cash provided by operating activities 589,493 657,115 573,257
____________ ____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net (585,702) (555,258) (421,564)
Other assets (44,593) (58,383) (22,175)
____________ ____________ ____________
Net cash used in investing activities (630,295) (613,641) (443,739)
____________ ____________ ____________
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net (117,201) 119,090 (170,887)
Long-term borrowings 34,648 40,576 318,035
Long-term debt repayments (1,111) (1,335) (7,926)
Exercise of stock options 25,998 29,879 86,323
Share repurchase program (469,714) (183,233) (27,244)
Sale of stock to Petrie Stores Corporation 161,642 - -
____________ ____________ ____________
Net cash (used)/provided by financing activities (365,738) 4,977 198,301
____________ ____________ ____________
Effect of exchange rate changes on cash
and cash equivalents (15,520) (20,279) (8,691)
CASH AND CASH EQUIVALENTS
(Decrease)/increase during year (422,060) 28,172 319,128
Beginning of year 791,893 763,721 444,593
____________ ____________ ____________
End of year $ 369,833 $ 791,893 $ 763,721
____________ ____________ ____________
____________ ____________ ____________
</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 the years
ended January 28, 1995, January 29, 1994, and January 30, 1993 the Company
made income tax payments of $318,948, $220,229, and $151,722 and interest
payments (net of amounts capitalized) of $123,603, $104,281, and $83,584
respectively.
See notes to consolidated financial statements.
9
<PAGE>
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
_______________________________________
Issued In Treasury Additional
________________________ _____________ paid-in Retained
(In thousands) Shares Amount Amount capital earnings
____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balance, February 1, 1992 297,938 $ 29,794 $ (127,717) $ 384,803 $ 2,092,329
Net earnings for the year - - - - 437,524
Share repurchase program (708 Treasury shares) - - (27,244) - -
Exercise of stock options (4,479 Treasury shares) - - 4,524 35,301 -
Tax benefit from exercise of stock options - - - 45,390 -
_________ __________ ____________ ___________ _____________
Balance, January 30, 1993 297,938 29,794 (150,437) 465,494 2,529,853
Net earnings for the year - - - - 482,953
Share repurchase program (4,940 Treasury shares) - - (183,233) - -
Exercise of stock options (1,394 Treasury shares) - - 41,312 (21,464) -
Tax benefit from exercise of stock options - - - 10,031 -
_________ __________ ____________ ___________ _____________
Balance, January 29, 1994 297,938 29,794 (292,358) 454,061 3,012,806
Net earnings for the year - - - - 531,767
Share repurchase program (13,074 Treasury shares) - - (469,714) - -
Exercise of stock options (1,103 Treasury shares) 16 1 41,888 (21,947) -
Tax benefit from exercise of stock options - - - 6,056 -
Exchange with and sale of stock to Petrie Stores
Corporation (2,223 Net treasury shares) - - 78,517 83,125 -
_________ __________ ____________ ___________ _____________
Balance, January 28, 1995 297,954 $ 29,795 $ (641,667) $ 521,295 $ 3,544,573
_________ __________ ____________ ___________ _____________
_________ __________ ____________ ___________ _____________
</TABLE>
See notes to consolidated financial statements.
10
<PAGE>
TOYS "R" US, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company's fiscal year ends on the Saturday nearest to January 31.
References to 1994, 1993, and 1992 are for the 52 weeks ended January 28,
1995, January 29, 1994 and January 30, 1993, respectively.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany 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. The increase (decrease) in the foreign currency
translation adjustment was $30,900, ($70,338) and ($33,650) for 1994, 1993
and 1992, respectively.
MERCHANDISE INVENTORIES
Merchandise inventories for the U.S.A. toy store operations, which
represent over 62% 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 January 28, 1995 or
January 29, 1994. 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 $6,926, $7,300 and $8,403 was capitalized during
1994, 1993 and 1992, 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 January 28, 1995 or January 29, 1994. The related
receivable, payable and deferred gain or loss are included on a net basis in
the balance sheet. As of January 28, 1995 and January 29, 1994, the Company
had approximately $547,000 and $290,000, of outstanding forward contracts
maturing in 1995 and 1994, 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.
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Useful Life January 28, January 29,
(in years) 1995 1994
<S> <C> <C> <C>
Land $ 764,808 $ 693,737
Buildings 45-50 1,627,145 1,446,277
Furniture and equipment 5-20 1,177,909 953,360
Leaseholds and
leasehold improvements 12 1/2-50 809,365 658,191
Construction in progress 55,730 41,855
Leased property
under capital leases 24,881 24,360
______________ ______________
4,459,838 3,817,780
Less accumulated
depreciation and
amortization 791,033 633,313
______________ ______________
$ 3,668,805 $ 3,184,467
______________ ______________
______________ ______________
</TABLE>
11
<PAGE>
SEASONAL FINANCING AND LONG-TERM DEBT
<TABLE>
<CAPTION>
January 28, January 29,
1995 1994
<S> <C> <C>
Industrial revenue bonds,
net of expenses (a) $ 74,239 $ 74,208
Mortgage notes payable at annual
interest rates from 7 1/8% to 11% (b) 12,980 13,318
Japanese yen loans payable at annual
interest rates from 3.45% to 6.47%,
due in varying amounts through 2012 192,910 142,688
British pound sterling 11% Stepped
Coupon Guaranteed Bonds, due 2017 206,570 194,415
8 1/4% sinking fund debentures,
due 2017, net of discounts 88,220 88,117
8 3/4% debentures, due 2021,
net of expenses 198,051 197,978
Obligations under capital leases 14,056 14,432
___________ ___________
787,026 725,156
Less current portion 1,578 1,543
___________ ___________
$ 785,448 $ 723,613
___________ ___________
___________ ___________
</TABLE>
(a) Bank letters of credit of $57,135, expiring in 1996, support certain
industrial revenue bonds. The Company expects the bank letters of credit
expiring in 1996 will be renewed. The bonds have fixed or variable interest
rates with an average rate of 3.2% at January 28, 1995.
(b) Mortgage notes payable are collateralized by property and equipment with
an aggregate carrying value of $18,330 at January 28, 1995.
The fair market value of the Company's long-term debt at January 28, 1995 is
approximately $815,000. 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 five years. 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 the cash requirements of selected
foreign subsidiaries.
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 January 28,
1995 and January 29, 1994, was 6.3% and 5.4%, respectively.
The annual maturities of long-term debt at January 28, 1995 are as follows:
<TABLE>
<CAPTION>
Year ending in
<S> <C>
1996 $ 1,578
1997 5,559
1998 8,085
1999 9,740
2000 8,662
2001 and subsequent 753,402
___________
$ 787,026
___________
___________
</TABLE>
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 January 28, 1995 were as follows:
<TABLE>
<CAPTION>
Gross Net
minimum Sublease minimum
Year ending in rentals income rentals
<S> <C> <C> <C>
1996 $ 258,447 $ 8,461 $ 249,986
1997 256,477 7,265 249,212
1998 255,650 7,091 248,559
1999 256,373 6,215 250,158
2000 254,144 6,036 248,108
2001 and subsequent 3,226,873 37,387 3,189,486
___________ ____________ ___________
$ 4,507,964 $ 72,455 $ 4,435,509
____________ ____________ ___________
____________ ____________ ___________
</TABLE>
Total rental expense was as follows:
<TABLE>
<CAPTION>
Year ended
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Minimum rentals $ 226,382 $ 180,118 $ 149,027
Additional amounts
computed as
percentages of sales 6,361 5,604 5,447
___________ ___________ ___________
232,743 185,722 154,474
Less sublease income 10,348 7,935 5,788
___________ ___________ ___________
$ 222,395 $ 177,787 $ 148,686
___________ ___________ ___________
___________ ___________ ___________
</TABLE>
12
<PAGE>
STOCKHOLDERS' EQUITY
The common shares of the Company, par value $.10 per share, were as follows:
<TABLE>
<CAPTION>
January 28, January 29,
1995 1994
<S> <C> <C>
Authorized shares 550,000 550,000
_________ _________
_________ _________
Issued shares 297,954 297,938
_________ _________
_________ _________
Treasury shares 18,164 8,416
_________ _________
_________ _________
</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 numbers of shares used in computing earnings per share were
as follows:
<TABLE>
<CAPTION>
Year ended
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Common and common
equivalent shares 287,415 296,463 297,718
_________ _________ _________
_________ _________ _________
</TABLE>
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 42,076 shares of the
Company's common stock were issued from its treasury in exchange for 39,853
shares of the Company's common stock and $165,000 in cash.
TAXES ON INCOME
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
Year ended
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal $ 251,621 $ 200,303 $ 186,013
Foreign 29,221 17,259 15,605
State 46,003 35,704 35,884
___________ ___________ ___________
326,845 253,266 237,502
___________ ___________ ___________
Deferred:
Federal 8,873 49,961 17,187
Foreign (24,752) (16,186) (6,705)
State 1,334 2,759 3,516
___________ ___________ ___________
(14,545) 36,534 13,998
___________ ___________ ___________
Total $ 312,300 $ 289,800 $ 251,500
___________ ___________ ___________
___________ ___________ ___________
</TABLE>
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 has gross deferred tax liabilities of $270,900 at
January 28, 1995 and $251,700 at January 29, 1994, which consist primarily of
temporary differences related to fixed assets of $217,000 and $194,000,
respectively. The Company had gross deferred tax assets of $129,900 at
January 28, 1995 and $92,800 at January 29, 1994, which consist primarily of
net operating losses of foreign start-up operations of $94,000 and $60,400,
and operating costs not currently deductible for tax purposes of $25,400 and
$23,200, respectively. Valuation allowances are not significant.
A reconciliation of the federal statutory tax rate with the effective tax
rate follows:
<TABLE>
<CAPTION>
Year ended
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 34.0%
State income taxes, net of
federal income tax benefit 3.7 3.2 4.0
Foreign (0.4) (0.5) (1.2)
Other, net (1.3) (0.2) (0.3)
______ ______ ______
37.0% 37.5% 36.5%
______ ______ ______
______ ______ ______
</TABLE>
Deferred income taxes were not provided on unremitted earnings of foreign
subsidiaries that are intended to be indefinitely invested. Unremitted
earnings were approximately $131,000 at January 28, 1995, exclusive of
amounts that if remitted would result in little or no tax under current U.S.
tax laws. Net income taxes of approximately $46,000 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 $31,391, $29,961 and $29,824 have
been charged to operations in 1994, 1993 and 1992, respectively.
13
<PAGE>
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 four years and nine months 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, 2,862 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. Options must be exercised within ten years from the date of grant.
At January 28, 1995, an aggregate of 28,502 shares of authorized common stock
was reserved for all of the Plans noted above; 9,139 of which were available
for future grants and 5,390 which were reserved for exercisable options. All
outstanding options expire at dates varying from May 1995 to November 2004.
Stock option transactions are summarized as follows:
<TABLE>
<CAPTION>
Shares Under Option
Non-
Incentive Qualified Price Range
<S> <C> <C> <C>
Outstanding January 29, 1994 527 16,720 $ 7.68 - 40.94
Granted - 4,189 34.31 - 38.56
Exercised (167) (952) 7.68 - 36.94
Canceled - (954) 7.68 - 39.88
____ _______ _______________
Outstanding January 28, 1995 360 19,003 $ 7.68 - 40.94
____ _______ _______________
____ _______ _______________
</TABLE>
The exercise of non-qualified 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. During 1994, 1993
and 1992, $6,056, $10,031 and $45,390, respectively, was credited to
additional paid-in capital.
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
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Sales
Domestic $ 6,644,799 $ 6,278,591 $ 5,795,119
Foreign 2,100,787 1,667,476 1,374,171
_____________ _____________ _____________
Total $ 8,745,586 $ 7,946,067 $ 7,169,290
_____________ _____________ _____________
_____________ _____________ _____________
Operating Profit
Domestic $ 778,659 $ 724,818 $ 647,640
Foreign 140,829 102,923 101,132
General corporate
expenses (7,446) (6,821) (9,333)
Interest expense, net (67,975) (48,167) (50,415)
_____________ _____________ _____________
Earnings before taxes
on income $ 844,067 $ 772,753 $ 689,024
_____________ _____________ _____________
_____________ _____________ _____________
Identifiable Assets
Domestic $ 3,950,511 $ 3,630,921 $ 3,277,527
Foreign 2,216,086 1,694,565 1,248,827
Corporate 404,596 824,123 796,498
_____________ _____________ _____________
Total $ 6,571,193 $ 6,149,609 $ 5,322,852
_____________ _____________ _____________
_____________ _____________ _____________
</TABLE>
QUARTERLY FINANCIAL DATA
The following table sets forth certain unaudited quarterly financial
information.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Year Ended January 28,1995
Net Sales $ 1,461,933 $ 1,452,117 $ 1,631,345 $ 4,200,191
Cost of Sales 1,001,203 982,892 1,097,236 2,926,627
Net Earnings 37,580 38,014 47,367 408,806
Earnings per Share $ .13 $ .13 $ .17 $ 1.46
Year Ended January 29,1994
Net Sales $ 1,286,479 $ 1,317,012 $ 1,449,118 $ 3,893,458
Cost of Sales 882,876 902,414 982,151 2,727,325
Net Earnings 35,436 35,505 37,457 374,555
Earnings per Share $ .12 $ .12 $ .13 $ 1.27
</TABLE>
14
<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 management's 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 Senior Vice President - Finance
Chief Executive Officer and Chief Financial Officer
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 30, 1993.
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 7, 1995 was
approximately 27,200.
<TABLE>
<CAPTION>
High Low
- - -----------------------------------------------------
<S> <C> <C> <C>
1993 1st Quarter............. 42 3/8 36 5/8
2nd Quarter............. 39 3/4 32 3/8
3rd Quarter............. 40 3/8 33 3/4
4th Quarter............. 42 7/8 36
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
</TABLE>
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 January 28, 1995 and January 29, 1994, and the
related consolidated statements of earnings, stockholders' equity and cash
flows for each of the three years in the period ended January 28, 1995. 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 January 28, 1995 and January 29,1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 28, 1995, in conformity with
generally accepted accounting principles.
/S/ Ernst & Young LLP
New York, New York
March 8, 1995
15
<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
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
DENNIS HEALEY
Senior Vice President -
Management Information Systems
LOUIS LIPSCHITZ
Senior Vice President -
Finance and Chief Financial Officer
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
JONATHAN M. FRIEDMAN
Vice President - Controller and
Chief Financial Officer - Kids "R" Us
EILEEN C. GABRIEL
Vice President -
Information Systems
JON W. KIMMINS
Vice President - Treasurer
MATTHEW J. LOMBARDI
Vice President -
Information Technology
ERIC A. SWARTWOOD
Vice President -
Architecture and Construction
MICHAEL L. TUMOLO
Vice President -
Real Estate Counsel
PETER W. WEISS
Vice President - Taxes
ANDRE WEISS
Secretary - Attorney-at-law;
Partner-Schulte Roth & Zabel
TOYS "R" US UNITED STATES - OFFICERS AND GENERAL MANAGERS
ROGER V. GODDU
Executive Vice President -
General Merchandise Manager
MICHAEL J. MADDEN
Group Vice 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
HARVEY J. FINKEL
Vice President - Regional Operations
MARTIN FOGELMAN
Vice President -
Divisional Merchandise Manager
MICHAEL A. GERETY
Vice President - Store Planning
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
New York/Northern New Jersey
THOMAS A. DRUGAN
Alabama/Georgia/South Carolina/Tennessee
LARRY D. GARDNER
Pacific Northwest/Alaska
MARK H. HAAG
Southern California/Arizona/Nevada/Hawaii
DANIEL D. HLAVATY
Central Ohio/Indiana/Kentucky
DEBRA M. KACHURAK
New England
RICHARD A. MOYER
S. Texas/Louisiana/Mississippi
GERALD S. PARKER
Northern California/Utah
JOHN J. PRAWLOCKI
Florida/Puerto Rico
J. MICHAEL ROBERTS
Pennsylvania/Delaware/Southern New Jersey
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
JOHN P. SUOZZO
Maryland/Virginia/North Carolina
BRIAN L. VOORHEES
N. Texas/Oklahoma/Arkansas/New Mexico
DENNIS J. WILLIAMS
Michigan/N.W. Ohio
16
<PAGE>
KIDS "R" US - OFFICERS
RICHARD L. MARKEE
President
VIRGINIA HARRIS
Senior Vice President -
General Merchandise Manager
JAMES G. PARROS
Senior Vice President - Stores and
Distribution Center Operations
JAMES L. EASTON
Vice President -
Divisional Merchandise Manager
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
LORNA E. NAGLER
Vice President -
Divisional Merchandise Manager
TOYS "R" US INTERNATIONAL - OFFICERS AND COUNTRY MANAGEMENT
LARRY D. BOUTS
President
GREGORY R. STALEY
Senior Vice President -
General Merchandise Manager
LAWRENCE H. MEYER
Vice President -
Chief Financial Officer
KEN BONNING
Vice President - Logistics
JOSEPH GIAMELLI
Vice President -
Information Systems
ADAM SZOPINSKI
Vice President - Operations
KEITH VAN BEEK
Vice President - Development
COUNTRY MANAGEMENT
JACQUES LE FOLL
President - Toys "R" Us France
CARL OLSEN
Managing Director -
Toys "R" Us Australia
GUILLERMO PORRATI
Managing Director -
Toys "R" Us Central Europe/Iberia
DAVID RURKA
Managing Director - Toys "R" Us
United Kingdom/Scandinavia
MANABU TAZAKI
President - Toys "R" Us Japan
ELLIOTT WAHLE
President - Toys "R" Us Canada
KEITH C. SPURGEON
Vice President -
Toys "R" Us Asia/Australia
SCOTT CHEN
General Manager -
Toys "R" Us Taiwan
DAVID SILBER
General Manager -
Toys "R" Us Hong Kong
MICHAEL YEO
General Manager -
Toys "R" Us Singapore
CORPORATE DATA
ANNUAL MEETING
The Annual Meeting of the Stockholders of Toys "R" Us will be held at the
offices of the Company on Wednesday, June 7, 1995 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
January 28, 1995, 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 15, 1995 1st Quarter Results
Aug. 14, 1995 2nd Quarter Results
Nov. 13, 1995 3rd Quarter Results
Jan. 2, 1996 Christmas Sales Results
Mar. 13, 1996 1995 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
17
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
AS OF JANUARY 28, 1995
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
<S> <C>
TRU, Inc. Delaware
Geoffrey, Inc. Delaware
Toys "R" Us-NY Holdings, Inc. Delaware
Toys "R" Us-Ohio, Inc. Delaware
Toys "R" Us-Headquarters, 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 (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, N.V. Belgium
Toys "R" Us (Canada) Ltd. Ontario, Canada
Geoffrey Toys (Canada) Ltd. 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
TRU (HK) Limited Hong Kong
Toys "R" Us Limited Hong Kong
Toys "R" Us S.r.l. Italy
Toys "R" Us-Japan Ltd.* Japan
Toys "R" Us (Malaysia) SDN. BHN.** Malaysia
Toys "R" Us (Mexico), S.A. de C.V. Mexico
TRU (Netherlands) B.V. Netherlands
B.V. Toys "R" Us (International) Netherlands
Toys R Us Portugal, Limitada Portugal
Toys "R" Us-Singapore (Pte) Limited Singapore
Toys R Us, Iberia, S.A. Spain
Toys "R" Us, Aktiebolag Sweden
TRU Toys R Us AG Switzerland
TRU AG Switzerland
Toys "R" Us Limited United Kingdom
Toys "R" Us Holdings PLC United Kingdom
Toys "R" Us Properties Limited United Kingdom
</TABLE>
Other subsidiaries are omitted because considered in the aggregate
such subsidiaries would not constitute a significant subsidiary.
* 80% owned
** 60% owned
<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. and subsidiaries of our report dated
March 8, 1995, included in the 1994 Annual Report to Stockholders of
Toys "R" Us, Inc. and subsidiaries.
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 and 33-51359; Form S-8 Numbers 2-64887,
2-91834, 33-16821 and 33-42627) of Toys "R" Us, Inc. and subsidiaries
of our report dated March 8, 1995, with respect to the consolidated financial
statements incorporated herein by reference.
/s/ Ernst & Young LLP
New York, New York
April 21, 1995
<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> JAN-28-1995
<PERIOD-START> JAN-30-1994
<PERIOD-END> JAN-28-1995
<CASH> 369,833
<SECURITIES> 0
<RECEIVABLES> 115,914
<ALLOWANCES> 0
<INVENTORY> 1,999,148
<CURRENT-ASSETS> 2,530,713
<PP&E> 4,459,838
<DEPRECIATION> 791,033
<TOTAL-ASSETS> 6,571,193
<CURRENT-LIABILITIES> 2,136,943
<BONDS> 785,448
<COMMON> 29,795
0
0
<OTHER-SE> 3,399,080
<TOTAL-LIABILITY-AND-EQUITY> 6,571,193
<SALES> 8,745,586
<TOTAL-REVENUES> 8,745,586
<CGS> 6,007,958
<TOTAL-COSTS> 1,664,180
<OTHER-EXPENSES> 161,406
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,975
<INCOME-PRETAX> 844,067
<INCOME-TAX> 312,300
<INCOME-CONTINUING> 531,767
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 531,767
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.85
</TABLE>
