-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, IDh357REbNWHqzNRXuu8kTIvHDDlXAhkJNTnHa1GfRu9GcW23v/6n12GShOzAUtO wHjsHv8wV9k1PPrc0rPJHg== 0000950117-95-000110.txt : 19950427 0000950117-95-000110.hdr.sgml : 19950427 ACCESSION NUMBER: 0000950117-95-000110 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950128 FILED AS OF DATE: 19950425 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOYS R US INC CENTRAL INDEX KEY: 0000051734 STANDARD INDUSTRIAL CLASSIFICATION: 5945 IRS NUMBER: 135159250 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01117 FILM NUMBER: 95531032 BUSINESS ADDRESS: STREET 1: 461 FROM RD CITY: PARAMUS STATE: NJ ZIP: 07652 BUSINESS PHONE: 2012627800 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE STORES INC DATE OF NAME CHANGE: 19780525 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE DEPARTMENT STORES INC DATE OF NAME CHANGE: 19700702 10-K 1 TOYS 'R' US FORM 10-K 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. [ ] 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. - - -------------------- 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. 2 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 - - ---------------- 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. 3 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. 4 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. 5 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. 6 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. 7 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 8 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 === 9 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 10 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 11 (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 12 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. 13 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; 14 (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. 15 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. 16 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. 17 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. 18 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 19 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. 20 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 21 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. 22 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. 23 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 EX-3 2 EXHIBIT 3A 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 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 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 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 EX-13 3 EXHIBIT 13 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 TOYS "R" US, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS
(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 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
CONSOLIDATED NET SALES (BILLIONS) (GRAPHIC MATERIAL OMITTED) 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
1 [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
CONSOLIDATED NET EARNINGS (MILLIONS) (GRAPHIC MATERIAL OMITTED) FISCAL YEAR 1985 120 1986 152 1987 204 1988 268 1989 321 1990 326 1991 340 1992 438 1993 483 1994 532
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
CONSOLIDATED STOCKHOLDERS' EQUITY (BILLIONS) (GRAPHIC MATERIAL OMITTED) 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
3 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.
CONSOLIDATED NUMBER OF STORES (GRAPHIC MATERIAL OMITTED) FISCAL YEAR 1985 269 1986 338 1987 424 1988 522 1989 615 1990 712 1991 812 1992 918 1993 1,032 1994 1,115
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.
NET SALES - INTERNATIONAL DIVISION (BILLIONS) (GRAPHIC MATERIAL OMITTED) 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
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 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
NUMBER OF COUNTRIES - INTERNATIONAL DIVISION (GRAPHIC MATERIAL OMITTED) FISCAL YEAR 1985 3 1986 4 1987 5 1988 6 1989 8 1990 8 1991 10 1992 11 1993 16 1994 20
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 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 TOYS "R" US, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share information) Year Ended January 28, January 29, January 30, 1995 1994 1993 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 ______________ _____________ ____________ ______________ _____________ ____________
See notes to consolidated financial statements. 7 TOYS "R" US, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(In thousands) January 28, January 29, 1995 1994 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 ______________ ______________ ______________ ______________
See notes to consolidated financial statements. 8 TOYS "R" US, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Year Ended January 28, January 29, January 30, 1995 1994 1993 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 ____________ ____________ ____________ ____________ ____________ ____________
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 TOYS "R" US, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock _______________________________________ Issued In Treasury Additional ________________________ _____________ paid-in Retained (In thousands) Shares Amount Amount capital earnings ____________________________________________________________________________________________________________________________ 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 _________ __________ ____________ ___________ _____________ _________ __________ ____________ ___________ _____________
See notes to consolidated financial statements. 10 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
Useful Life January 28, January 29, (in years) 1995 1994 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 ______________ ______________ ______________ ______________
11 SEASONAL FINANCING AND LONG-TERM DEBT
January 28, January 29, 1995 1994 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 ___________ ___________ ___________ ___________
(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:
Year ending in 1996 $ 1,578 1997 5,559 1998 8,085 1999 9,740 2000 8,662 2001 and subsequent 753,402 ___________ $ 787,026 ___________ ___________
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:
Gross Net minimum Sublease minimum Year ending in rentals income rentals 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 ____________ ____________ ___________ ____________ ____________ ___________
Total rental expense was as follows:
Year ended January 28, January 29, January 30, 1995 1994 1993 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 ___________ ___________ ___________ ___________ ___________ ___________
12 STOCKHOLDERS' EQUITY The common shares of the Company, par value $.10 per share, were as follows:
January 28, January 29, 1995 1994 Authorized shares 550,000 550,000 _________ _________ _________ _________ Issued shares 297,954 297,938 _________ _________ _________ _________ Treasury shares 18,164 8,416 _________ _________ _________ _________
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:
Year ended January 28, January 29, January 30, 1995 1994 1993 Common and common equivalent shares 287,415 296,463 297,718 _________ _________ _________ _________ _________ _________
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:
Year ended January 28, January 29, January 30, 1995 1994 1993 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 ___________ ___________ ___________ ___________ ___________ ___________
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:
Year ended January 28, January 29, January 30, 1995 1994 1993 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% ______ ______ ______ ______ ______ ______
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 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:
Shares Under Option Non- Incentive Qualified Price Range 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 ____ _______ _______________ ____ _______ _______________
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.
Year ended January 28, January 29, January 30, 1995 1994 1993 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 _____________ _____________ _____________ _____________ _____________ _____________
QUARTERLY FINANCIAL DATA The following table sets forth certain unaudited quarterly financial information.
First Second Third Fourth Quarter Quarter Quarter Quarter 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
14 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.
High Low - - ----------------------------------------------------- 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
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 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 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 EX-21 4 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT AS OF JANUARY 28, 1995
Name Jurisdiction of Incorporation 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
Other subsidiaries are omitted because considered in the aggregate such subsidiaries would not constitute a significant subsidiary. * 80% owned ** 60% owned EX-23 5 EXHIBIT 23 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 EX-27 6 1994 10-K FDS
5 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. 1,000 YEAR JAN-28-1995 JAN-30-1994 JAN-28-1995 369,833 0 115,914 0 1,999,148 2,530,713 4,459,838 791,033 6,571,193 2,136,943 785,448 29,795 0 0 3,399,080 6,571,193 8,745,586 8,745,586 6,007,958 1,664,180 161,406 0 67,975 844,067 312,300 531,767 0 0 0 531,767 1.85 1.85
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