UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-1117
TOYS "R" US, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-5159250
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
461 From Road, Paramus, New Jersey 07652
(Address of principal executive offices) (Zip Code)
(201)262-7800
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 20, 1995, 273,085,642 shares of common stock were outstanding.
<PAGE>
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets.................................. 3
Consolidated Statements of Earnings.......................... 4
Consolidated Statements of Cash Flows........................ 5
Notes to Consolidated Financial Statements................... 6
Item 2. Management's Discussion - Results of Operations and Financial
Condition.................................................... 7
PART II - OTHER INFORMATION............................................ 8
SIGNATURES............................................................. 9
<PAGE>
<TABLE>
Page 3
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<CAPTION>
October 28, October 29, January 28,
1995 1994 1995
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 220,308 $ 103,544 $ 369,833
Accounts and other receivables ................ 138,057 131,693 115,914
Merchandise inventories ....................... 3,646,362 3,207,510 1,999,148
Prepaid expenses and other .................... 78,301 73,305 45,818
Total current assets ..................... 4,083,028 3,516,052 2,530,713
Property, equipment and other assets ............. 4,353,478 3,987,279 4,040,480
$ 8,436,506 $ 7,503,331 $ 6,571,193
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings ......................... $ 1,493,486 $ 1,217,214 $ 122,661
Accounts payable .............................. 2,201,752 1,938,200 1,339,081
Accrued expenses and other .................... 338,925 423,783 472,653
Income taxes payable .......................... 23,863 9,348 202,548
Total current liabilities ................ 4,058,026 3,588,545 2,136,943
Deferred income taxes ............................ 235,099 260,000 219,927
Long-term debt ................................... 782,223 780,824 785,448
Stockholders' equity:
Common stock .................................. 29,795 29,794 29,795
Additional paid-in capital .................... 505,412 443,722 521,295
Retained earnings ............................. 3,599,716 3,135,767 3,544,573
Foreign currency translation adjustments ...... 37,752 (6,970) (25,121)
Treasury shares, at cost ...................... (811,517) (728,351) (641,667)
3,361,158 2,873,962 3,428,875
$ 8,436,506 $ 7,503,331 $ 6,571,193
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Page 4
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands except per share information)
<CAPTION>
13 Weeks Ended 39 Weeks Ended
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales ............................................. $1,714,545 $1,631,345 $4,821,720 $4,545,395
Costs and expenses:
Cost of sales ....................................... 1,168,533 1,097,236 3,290,340 3,081,331
Selling, advertising, general & administrative ...... 436,154 394,876 1,237,198 1,100,976
Depreciation and amortization ....................... 50,715 43,202 140,403 116,631
Interest expense - net .............................. 26,031 20,845 66,252 51,281
1,681,433 1,556,159 4,734,193 4,350,219
Earnings before taxes on income ....................... 33,112 75,186 87,527 195,176
Taxes on income ....................................... 12,251 27,819 32,384 72,215
Net earnings .......................................... $ 20,861 $ 47,367 $ 55,143 $ 122,961
Earnings per share .................................... $.08 $.17 $.20 $.42
Common and common equivalent shares ................... 275,222 285,402 277,847 289,588
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Page 5
TOYS "R" US, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
39 Weeks Ended
October 28, October 29,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings ............................................ $ 55,143 $ 122,961
Adjustments to reconcile net earnings to net cash used by
operating activities:
Depreciation and amortization ....................... 140,403 116,631
Deferred income taxes ............................... (6,550) 14,884
Changes in operating assets and liabilities:
Accounts and other receivables .................... (19,939) (33,159)
Merchandise inventories ........................... (1,638,924) (1,429,941)
Prepaid expenses and other operating assets ....... (23,371) (56,174)
Accounts payable, accrued expenses and taxes ...... 539,986 536,142
Total adjustments ....................................... (1,008,395) (851,617)
Net cash used in operating activities ........... (953,252) (728,656)
Cash flows from investing activities:
Capital expenditures-net ................................ (347,746) (457,860)
Other assets ............................................ (40,025) (33,440)
Net cash used in investing activities ........... (387,771) (491,300)
Cash flows from financing activities:
Short-term borrowings, net .............................. 1,370,825 977,352
Long-term borrowings .................................... - 21,518
Long-term debt repayments ............................... (2,835) (839)
Exercise of stock options ............................... 14,505 23,382
Share repurchase program ................................ (200,238) (469,714)
Net cash provided by financing activities ....... 1,182,257 551,699
Effect of exchange rate changes on cash and cash
equivalents ............................................ 9,241 (20,092)
Cash and cash equivalents:
Decrease during period .................................. (149,525) (688,349)
Beginning of period ..................................... 369,833 791,893
End of period ........................................... $ 220,308 $ 103,544
<FN>
Supplemental disclosures of cash flow information:
The Company considers all highly liquid investments purchased as part of its daily cash
management activities to be cash equivalents.
During the thirty-nine weeks ended October 28, 1995 and October 29, 1994, the Company made
income tax payments of $204,579 and $253,080 and interest payments (net of amounts
capitalized) of $86,022 and $84,560, respectively.
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Page 6
TOYS "R" US, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim Reporting
The interim financial statements are unaudited and are subject to
year-end adjustments. However, in the opinion of management, all known
adjustments (which consist only of normal recurring accruals) have been
made to present fairly the consolidated operating results for the
unaudited periods. Because of the seasonal nature of the Company's
business, results for interim periods are not indicative of results to be
expected for the fiscal year.
2. Earnings Per Share
Earnings per share for the thirteen and thirty-nine weeks ended
October 28, 1995 and October 29, 1994 are computed by dividing net
earnings by the weighted average number of common shares outstanding,
after reduction for treasury shares and assuming exercise of dilutive
stock options computed by the treasury stock method using the average
market price during the period.
<PAGE>
Page 7
MANAGEMENT'S DISCUSSION - RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations
Sales increased by $83 million or 5.1% in the third quarter and $276 million
or 6.1% for the thirty-nine weeks over the prior year's comparable periods due
primarily to sales from new toy and children's clothing stores, offset by the
closing of 19 children's clothing stores since the beginning of 1994.
Comparable USA toy store sales decreased by 3.0% for the third quarter and 4.5%
for the thirty-nine weeks, and excluding action figures, have increased 1.2%
for the quarter and decreased 3.4% for the thirty-nine weeks. International toy
stores also experienced a decline in comparable sales for both the quarter and
thirty-nine weeks due primarily to the continued poor retail environment in
much of Europe. Kids "R" Us had comparable store sales decreases for both the
quarter and thirty-nine weeks due to the weak apparel sales environment in the
U.S.
Cost of sales, as a percentage of sales, increased .9% in the third quarter
and .4% for the thirty-nine weeks versus the prior year's comparable periods
due to the Company's aggressive pricing strategy and changes in the sales mix,
predominately higher sales of low margin video game hardware and lower sales of
higher margin action figures.
Selling, advertising, general and administrative expenses as a percentage of
sales increased by 1.2% in the third quarter and 1.4% in the thirty-nine weeks
versus the prior year's comparable periods as a result of overall comparable
store sales declines, new store growth and the Company's initiatives to
promote customer service and strategically position the business for the
future.
Net interest expense increased in the third quarter and in the thirty-nine
weeks compared to the prior years comparable periods, principally as a result
of higher average short-term borrowings due primarily to higher inventories
and the share repurchase program.
The effective tax rate remained constant at 37% for all periods presented.
Since January 28, 1995, foreign currency exchange rates have experienced
fluctuations, however, the impact on net earnings was not significant.
Financial Condition
By the end of 1995, 35 USA and 45 international toy stores, and 9 Kids "R" Us
children's clothing stores will have opened. Annual capital expenditures for
new and existing facilities are estimated to be approximately $575 million.
Cash requirements for operations, capital expenditures, lease commitments and
the share repurchase program will be met primarily through operating
activities, borrowings under the $1 billion revolving credit facility, issuance
of short-term commercial paper and bank borrowings for foreign subsidiaries.
Other Matters
On October 26, 1995, the Company entered into an agreement to franchise its
Toys "R" Us store operations in Sweden and Denmark effective April 27, 1996.
The Company continues to evaluate its worldwide operations to enhance
shareholder value where appropriate.
<PAGE>
Page 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) The Company was not required to file any reports on
Form 8-K during the 13 weeks ended October 28, 1995.
<PAGE>
Page 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 8, 1995 Toys "R" Us, Inc.
(Registrant)
s/Louis Lipschitz
(Signature)
Louis Lipschitz
Senior Vice President - Finance and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this document:
<TABLE>
<CAPTION>
Exhibit Page
No. No. Document
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and Consolidated Statements of Earnings as
reported in the Form 10-Q and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000051734
<NAME> TOYS "R" US, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> OCT-28-1995
<CASH> 220,308
<SECURITIES> 0
<RECEIVABLES> 138,057
<ALLOWANCES> 0
<INVENTORY> 3,646,362
<CURRENT-ASSETS> 4,083,028
<PP&E> 4,874,175
<DEPRECIATION> 938,797
<TOTAL-ASSETS> 8,436,506
<CURRENT-LIABILITIES> 4,058,026
<BONDS> 782,223
<COMMON> 29,795
0
0
<OTHER-SE> 3,331,363
<TOTAL-LIABILITY-AND-EQUITY> 8,436,506
<SALES> 4,821,720
<TOTAL-REVENUES> 4,821,720
<CGS> 3,290,340
<TOTAL-COSTS> 1,237,198
<OTHER-EXPENSES> 140,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,252
<INCOME-PRETAX> 87,527
<INCOME-TAX> 32,384
<INCOME-CONTINUING> 55,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,143
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
