Item 1. Business
Toys 'R' Us, Inc. and its subsidiaries2 are principally engaged in the operation of 1,022 children's specialty retail stores consisting of 581 U.S. and 234 international toy stores under the name 'Toys 'R' Us' and 207 children's clothing stores under the name 'Kids 'R' Us', as of April 11, 1994.
Recent Developments
In April 1994, the Company entered into an agreement with Petrie Stores Corporation, a New York corporation ('Petrie'), the holder of approximately 14.0% of the Company's outstanding Common Stock. Pursuant to the agreement, (i) Petrie will sell or otherwise transfer its retail apparel business and other assets to a third party, (ii) the Company will exchange 37.1 million shares of newly-issued Common Stock for the 40.4 million shares currently owned by Petrie (subject to adjustment if Petrie sells any of the Common Stock it holds), and (iii) the Company will sell to Petrie additional shares of Common Stock (at market value) for up to $250 million in cash. Following these transactions Petrie will dissolve and distribute the Common Stock it holds (other than shares placed in escrow to cover contingent liabilities) to its shareholders. The exchange is expected to be completed in the latter part of 1994 or early 1995. The exchange is subject to, among other conditions, approval by holders of two-thirds of Petrie's outstanding common stock, Petrie's disposition of its retail operations, receipt of a
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2 When used in this report the term 'Company' refers to Toys 'R' Us, Inc. and its subsidiaries, the term 'Toys 'R' Us' refers only to the Toys 'R' Us U.S.A. toy specialty retail chain and the term 'registrant' refers only to Toys 'R' Us, Inc., a Delaware corporation.
favorable ruling from the Internal Revenue Service that the exchange will be tax-free and the ability of Petrie to reduce its liabilities remaining at the time of its dissolution. Milton Petrie, the owner of approximately 60% of Petrie's outstanding common stock (or 54% on a fully diluted basis), has agreed to vote in favor of the exchange.
Toys 'R' Us - United States
The Company believes that Toys 'R' Us is the largest and fastest growing 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 46 states and Puerto Rico and sells children's and adult toys, games, bicycles and other wheel goods, sporting goods, electronic and video games, small pools, records, books, infant's and juvenile furniture, infant's and children's clothing and similar items.
Most of the Toys 'R' Us stores conform to a prototype design consisting of approximately 46,000 square feet and are freestanding units or located in strip centers. As an integral part of its long- range growth plans, Toys 'R' Us has been increasing its toy store square footage by opening 40 to 45 new toy stores each year. At April 11, 1994, Toys 'R' Us utilized 19 warehouse/distribution centers averaging approximately 369,000 square feet each in size, and a large fleet of tractors and trailers, which it owns and maintains, to service its 581 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.
Item 2. Properties
As of April 11, 1994, Toys 'R' Us operated 19 distribution centers, 15 of which are owned and four of which are leased. The distribution centers average approximately 369,000 square feet each in size.
As of April 11, 1994, Toys 'R' Us operated 581 toy stores, 354 of which are owned and 227 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.
Prior to 1980, Toys 'R' Us leased most of its properties pursuant to long-term leases with multiple renewal options. Since 1981, a significant portion of the properties constructed by Toys 'R' Us have been owned. Toys 'R' Us plans to continue this policy in 1994.
The following chart sets forth certain information concerning the operating properties of Toys 'R' Us as of April 11, 1994:
The Company also has corporate offices, which it leases, in Paramus and Rochelle Park, New Jersey.
Kids 'R' Us
As of April 11, 1994, Kids 'R' Us operated 207 children's clothing stores, of which 95 are owned and 112 are leased. Most of the stores conform to prototypical designs consisting of approximately 18,000 to 21,500 square feet. Kids 'R' Us is also opening 15,000 square foot stores in smaller markets. The clothing stores are typically freestanding units or located in strip centers.
As of April 11, 1994, 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 11, 1994:
Toys 'R' Us - International
Toys 'R' Us-International owns or leases properties in Australia, Austria, Belgium, Canada, France, Germany, Japan, the Netherlands, Portugal, Singapore, Spain, 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 11, 1994:
Four of the warehouse/distribution centers are owned and seven are leased. 82 of the stores are owned and 143 are leased.
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.
(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:
(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 1989 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 1989 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 1989 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 since February 1989 as 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 Merchandise Manager for the Kids 'R' Us Division, and from prior to 1989 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 1989 to March 1990, he was Vice President - Treasurer.
Mr. Friedman has been employed by the Company for more than five years. From April 1990 to date, he has been Vice President - Controller. From prior to 1989 to April 1990, he was Assistant Controller.
PART II
The following financial statements and supplementary data are hereby incorporated by reference to pages 7 to 15 of the Company's Annual Report.
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.
PART III
PART IV
All other 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) On January 4, 1994, the Company filed a Form 8-K in connection with certain changes in the management of the Company which were announced in the Press Release dated January 3, 1994.
On January 12, 1994, the Company filed a Form 8-K in connection with certain announcements made by the Company in the Press Release dated January 11, 1994.
No other 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.
REPORT AND 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 9, 1994, included in the 1993 Annual Report to Stockholders of Toys 'R' Us, Inc. and subsidiaries.
Our audit also included the financial statement schedules of Toys 'R' Us, Inc. and subsidiaries listed in the Index at Item 14(a)(2) for the years ended January 29, 1994 and January 30, 1993. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in Registration Statements (Form S-3 Numbers 2-87794, 33-23264, 33-34273, 33-42237 and 33-51359) and in Registration Statements (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 9, 1994, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedules included in this Annual Report (Form 10-K) of Toys 'R' Us, Inc. and subsidiaries.
/s/ Ernst & Young New York, New York March 9, 1994
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders Toys 'R' Us, Inc. Paramus, New Jersey
We have audited the accompanying consolidated statements of earnings, stockholders' equity and cash flows of Toys 'R' Us, Inc. and subsidiaries for the year ended February 1, 1992. Our audit also included the financial statement schedules listed in the Index at Item 14(a)(2). These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations of Toys 'R' Us, Inc. and subsidiaries and their cash flows for the year ended February 1, 1992 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche
New York, New York March 11, 1992
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE II -- AMOUNTS RECEIVABLE FROM UNDERWRITERS, PROMOTERS, DIRECTORS, OFFICERS, EMPLOYEES, AND PRINCIPAL HOLDERS (OTHER THAN AFFILIATES) OF EQUITY SECURITIES OF THE PERSON AND ITS AFFILIATES
YEAR ENDED JANUARY 30, 1993
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Represents a note receivable with interest at 6% in connection with the exercise of stock options.
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE II -- AMOUNTS RECEIVABLE FROM UNDERWRITERS, PROMOTERS, DIRECTORS, OFFICERS, EMPLOYEES, AND PRINCIPAL HOLDERS (OTHER THAN AFFILIATES) OF EQUITY SECURITIES OF THE PERSON AND ITS AFFILIATES
YEAR ENDED FEBRUARY 1, 1992
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(A) Represents a note receivable with interest at 6% due October 5, 1992 in connection with the exercise of stock options.
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED JANUARY 29, 1994
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(A) Transfers
(B) Translation adjustments
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED JANUARY 30, 1993
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(A) Transfers
(B) Translation adjustments
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED FEBRUARY 1, 1992
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(A) Transfers
(B) Translation adjustments
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED JANUARY 29, 1994
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(A) Transfers
(B) Translation adjustments
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED JANUARY 30, 1993
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(A) Transfers
(B) Translation adjustments
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED FEBRUARY 1, 1992
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(A) Transfers
(B) Translation adjustments
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
YEAR ENDED JANUARY 29, 1994
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(A) Average amount outstanding during the period is computed by dividing the total of daily outstanding principal balances by 365.
(B) Average interest rate for the year is computed by dividing the actual short-term interest expense by the average short-term debt outstanding.
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
YEAR ENDED JANUARY 30, 1993
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(A) Average amount outstanding during the period is computed by dividing the total of daily outstanding principal balances by 365.
(B) Average interest rate for the year is computed by dividing the actual short-term interest expense by the average short-term debt outstanding.
TOYS 'R' US, INC. AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
YEAR ENDED FEBRUARY 1, 1992
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(A) Average amount outstanding during the period is computed by dividing the total of daily outstanding principal balances by 365.
(B) Average interest rate for the year is computed by dividing the actual short-term interest expense by the average short-term debt outstanding.
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, 1994
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, 1994.
The foregoing constitute all of the Board of Directors and the Principal Executive, Financial and Accounting Officers of the Registrant.
GRAPHICS APPENDIX LIST
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this Report:
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