UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 2, 2002
Commission file number 1-11609
TOYS "R" US, INC.
Incorporated pursuant to the Laws of Delaware
Internal Revenue Service - Employer Identification No. 22-3260693
461 From Road, Paramus, New Jersey 07652
(201) 262-7800
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.10 par value New York Stock Exchange
Registrant has filed all reports to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and has been
subject to such filing requirements for the past 90 days.
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. [v ]
At April 10, 2002, the aggregate market value of voting stock held by
non-affiliates was $3,216,191,291 based on the 197,312,349 shares of Common
Stock which were outstanding at that date.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended February 2, 2002 are incorporated by reference into Parts I and II of this
Form 10-K.
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held June 5, 2002 are incorporated by reference into Part III
of this Form 10-K.
INDEX
PAGE
----
PART I.
Item 1. Business .......................................................... 2
Item 2. Properties ........................................................ 11
Item 3. Legal Proceedings ................................................. 12
Item 4. Submission of Matters to a Vote of Security Holders ............... 13
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters ................................. 14
Item 6. Selected Financial Data ........................................... 14
Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition ................... 14
Item 7a. Qualitative and Quantitative Disclosures About Market Risk ....... 14
Item 8. Financial Statements and Supplementary Data ....................... 14
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .......................... 15
PART III
Item 10. Directors and Executive Officers of the Registrant ............... 16
Item 11. Executive Compensation ........................................... 18
Item 12. Security Ownership of Certain Beneficial
Owners and Management .......................................... 18
Item 13. Certain Relationships and Related Transactions ................... 19
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K .................................................... 20
1
PART I
ITEM 1. BUSINESS
We are one of the world's leading retailers of toys, children's apparel and baby
products based on our net sales in 2001. As of February 2, 2002, we operated
1,599 retail stores consisting of 1,092 United States locations comprised of 701
toy stores under the name "Toys "R" Us," 184 children's clothing stores under
the name "Kids "R" Us," 165 infant-toddler stores under the name "Babies "R"
Us", and 42 educational specialty stores under the name "Imaginarium."
Internationally, as of February 2, 2002, we operated 507 toy stores, including
licensed and franchised stores, under the name "Toys "R" Us." We also sell
merchandise through our Internet sites at www.toysrus.com, www.babiesrus.com and
www.imaginarium.com. Toys "R" Us, Inc. is incorporated in the state of Delaware.
(a) General Development of the Business
Since inception, Toys "R" Us has built its reputation as a leading destination
for toys and children's products. Based upon our net sales in 2001, we are a
market share leader in most of the largest markets in which we operate,
including the United States, the United Kingdom and Japan. Our toy stores offer
approximately 10,000 distinct items year-round, which we believe is more than
twice the items found in other discount or specialty stores selling toys. We
believe that one of our key competitive advantages, and a differentiating factor
in the eyes of our customers, is our broad and deep product selection.
Mission Possible Store Format
In early 2000, in order to further strengthen our market position and enhance
the shopping experience of consumers, we embarked on a three-year program to
reposition the U.S. toy stores. A key part of this repositioning involves the
renovation of the U.S. toy stores to our "Mission Possible" format. This format
allows the merchandise to be presented in a more dynamic selling environment and
to create a more enjoyable shopping experience for both adults and children. The
Mission Possible format enhances store layout by creating lower gondolas,
widening the aisles and reorganizing the merchandise in logical categories to
improve shopping patterns. In addition, the staff in the Mission Possible stores
adheres to an elevated standard of guest service, based on training which
focuses on deeper product knowledge and more targeted selling skills. Each
Mission Possible store has designated "World Leaders" in each of the major
product categories. The World Leaders are senior sales personnel who assist our
guests and help to train other sales associates. At the end of 2001, we had
completed the renovation of 433 U.S. toy stores to the Mission Possible format.
We plan to complete the balance of these renovations by year-end 2002.
Approximately 130 to 140 stores will receive a full Mission Possible renovation
and approximately 100 stores will receive a partial renovation that includes the
addition of an Imaginarium boutique. Although the conversion process is still
underway, we believe that Mission Possible stores offer higher productivity,
profitability and return on investment measures relative to non-renovated
locations.
2
Times Square Flagship Store
In November 2001, we opened the new Times Square flagship store in New York
City. This 110,000 square foot, multi-level store offers families a vast array
of toys and dramatic retail attractions including a 60-foot tall, indoor Ferris
Wheel. During its first six weeks of operation, an estimated two million
shoppers visited Toys "R" Us Times Square to see The Center of the Toy
Universe(TM). In addition, we believe that our flagship store provides us with
increased visibility for the Toys "R" Us brand, an effective platform for new
product launches, and also serves to further strengthen our standing with the
vendor community.
Other Growth Initiatives
In mid-2001, we began testing a concept called "Toys "R" Us Toybox" in a limited
number of grocery stores. The Toys "R" Us Toybox consists of approximately 500
to 1,000 square feet containing small toy items with price points generally
below $25. The results of the initiative are currently in the process of being
evaluated. In 2002, we also plan to open selected stores that are intended to
serve secondary and tertiary markets by combining Toys "R" Us, Kids "R" Us and
Babies "R" Us in a 40,000 to 45,000 square foot format. Tests of other new
growth initiatives are also in development.
Restructuring and Other Charges
On January 28, 2002, we announced the planned closing of 37 Kids "R" Us stores
and 27 Toys "R" Us stores, the elimination of 1,900 store and headquarters
positions and the consolidation of the five New Jersey store support center
facilities into our new headquarters in Wayne, New Jersey. In conjunction with
these actions, we recorded restructuring and other charges totaling $237 million
on a pre-tax basis. Of this $237 million, $79 million was associated with
facilities consolidation, severance and other actions designed to improve
efficiency in the store support functions. Expected costs associated with store
closings were $73 million for Kids "R" Us stores and $85 million for Toys "R" Us
stores, of which $27 million were recorded in cost of goods sold. We also
reversed $24 million of previously accrued charges that, after final evaluation,
have been deemed no longer needed. Accordingly, based on these actions, we
recorded restructuring and other charges that total $213 million pre-tax, or
$126 million after-tax, in the fourth quarter of 2001. These actions are
expected to increase free cash flow in 2002 and beyond and to yield improvements
to pre-tax earnings of approximately $25 million in 2002, and approximately $45
million annually beginning in 2003. Payroll savings associated with changes in
support functions are expected to account for $30 million of the $45 million.
The Wayne facility will enable us to implement a shared-services model across a
range of finance, human resources, administration and other support functions.
The shared-services model is expected to improve the efficiency and
cost-effectiveness of our operations and support future growth initiatives. The
expected savings and results of this restructuring are based on management's
assumptions and are subject to inherent risk and uncertainties. We cannot assure
that these savings and results will be achieved or that the results will not be
different. Further details of the above charges are described in Management's
Discussion and Analysis of Results of Operations and Financial Condition and
Notes to Consolidated Financial Statements on pages 24, 25, 40 and 41,
respectively, in our 2001 Annual Report, which sections are incorporated herein
by reference.
3
During 1998, we announced strategic initiatives to reposition our worldwide
business, and recorded restructuring and other charges of $353 million. These
strategic initiatives included the closing/downsizing of certain toy stores,
distribution centers and administrative functions. We also recorded certain
changes in accounting estimates and provisions for legal settlements. The
remaining reserves related to these charges were $31 million at February 2,
2002. The remaining reserves, primarily related to long-term lease commitments,
will be utilized during 2002 and thereafter. Refer to Management's Discussion
and Analysis of Results of Operations and Financial Condition and Notes to
Consolidated Financial Statements on pages 25, 40 and 41, respectively, in our
2001 Annual Report for other actions taken with respect to the restructuring and
other charges recorded during 1998.
We have substantially completed our restructuring program that was announced in
1995, with the exception of long-term lease commitment reserves that will be
utilized throughout 2002 and thereafter. Refer to Management's Discussion and
Analysis of Results of Operations and Financial Condition and Notes to
Consolidated Financial Statements on pages 25, and 41, respectively, in our 2001
Annual Report for details of fiscal 2001 reversal of unused reserves established
in the 1995 restructuring program.
The initiatives, and other charges described above have had a positive effect on
the company's Economic Value Added or "EVA(R)". EVA(R) is the management system
that we adopted to determine whether our business initiatives and investments
provide an adequate return on investment.
Initial Public Offering of Toys "R" Us - Japan Ltd. ("Toys - Japan")
On April 24, 2000, we completed the initial public offering in Japan of shares
of Toys - Japan. As a result of this transaction, our ownership percentage in
the common stock of Toys - Japan was reduced from 80% to 48%. We are no longer
in a position to exert control over operations of Toys - Japan. Accordingly, we
no longer consolidate the financial statements of Toys - Japan. Toys - Japan
operates as a licensee of ours. We have accounted for our investment in the
common stock of Toys - Japan under the equity method of accounting since April
24, 2000. For further discussion of this transaction refer to Management's
Discussion and Analysis of Results of Operations and Financial Condition and to
Notes to Consolidated Financial Statements on pages 27 and 41, respectively, in
our 2001 Annual Report.
On-line Retailing Strategic Initiatives
As part of our strategy to become the global leader in the on-line retail market
for toys, children's and baby products, several major strategic initiatives were
implemented during 2000.
On February 24, 2000, we entered into a partnership agreement with SOFTBANK
Venture Capital and affiliates ("SOFTBANK") which included an investment of $60
million in Toysrus.com for a 20% ownership interest. Subsequent to that date,
Toysrus.com received additional capital contributions totaling $37 million from
SOFTBANK representing its then proportionate share of funding required for the
operation of Toysrus.com.
4
In August 2000, Toysrus.com entered into a 10-year strategic alliance with
Amazon.com to create a co-branded toy and video game on-line store, which was
launched in September 2000. In addition, a co-branded baby products on-line
store was launched in May 2001 and a co-branded creative and learning products
on-line store launched in July 2001. Toysrus.com is responsible for
merchandising and content for the co-branded stores and identifies, purchases,
owns and manages the inventory. Amazon.com handles site development, order
fulfillment, customer service and the housing of Toysrus.com's inventory in
Amazon.com's U.S. distribution centers.
For further discussion of Toysrus.com refer to Management's Discussion and
Analysis of Results of Operations and Financial Condition and to Notes to
Consolidated Financial Statements on pages 27 and 39, respectively, in our 2001
Annual Report.
Acquisition of Imaginarium Toy Centers, Inc.
On August 20, 1999, we acquired all of the capital stock of Imaginarium Toy
Centers, Inc., ("Imaginarium") an educational specialty retailer, for
approximately $43 million in cash and the assumption of certain liabilities. We
believe this acquisition accelerated our strategy to establish a leadership
position in the learning and educational category by incorporating "Imaginarium"
sections into certain existing and future Mission Possible format stores. In
addition, this division operated 42 leased store locations in 12 states under
the "Imaginarium" brand name as of February 2, 2002. We accounted for the
acquisition under the purchase method of accounting and the results of
Imaginarium operations have been combined with our results from the date of
acquisition. The operating results of Imaginarium from the date of acquisition
are not material to our overall results.
(b) Financial Information About Industry Segments
Information about industry segments, as set forth in the Notes to the
Consolidated Financial Statements on pages 39 and 40 of our 2001 Annual Report,
is incorporated herein by reference.
(c) Narrative Description of the Business
Toys "R" Us - United States
Toys "R" Us - United States ("Toys "R" Us") operates in 49 states and Puerto
Rico and sells toys, plush, games, bicycles, sporting goods, VHS and DVD movies,
electronic and video games, small pools, books and educational and development
products, infant and juvenile furniture and electronics, as well as educational
and entertainment computer software for children.
We seek to differentiate ourselves from competitors on several key dimensions
including product, presentation, service, in-store experience, and marketing.
One important component of this strategy is to offer consumers a broad and deep
selection of merchandise, including both nationally branded and exclusive
products. We believe we offer an unparalleled selection of popular national
brands such as Barbie, G.I. Joe, Lego and Fisher Price, including many SKUs
which are unique to, or launched at, Toys "R" Us. Several exclusive vendor
alliances and a broad selection of private label products further differentiate
these unique merchandise offerings. Over the past two years, we have announced
exclusive branded product agreements with Animal Planet, Home Depot,
5
Scholastic and OshKosh B'Gosh, enabling us to offer products that consumers will
not find elsewhere. Together with Universal Studios Consumer Products Group and
Amblin Entertainment, we have also announced a three-year merchandise program to
support the 20th anniversary of Steven Spielberg's E.T., The Extra-Terrestrial,
and Universal's re-release of the film in March 2002. A range of exclusive E.T.
products across all of our divisions have been developed, and we recently
introduced these products worldwide in Toys "R" Us, Kids "R" Us and Imaginarium
stores, as well as on Toysrus.com. In addition to exclusive vendor alliances, we
offer a broad assortment of private label merchandise under the names of Animal
Alley, Fast Lane, Fun Years and Dream Dazzlers in Toys "R" Us stores, K.R.U.,
New Legends and Miniwear Classics in Kids "R" Us stores, and Especially for
Baby, Koala Baby and Baby Trend in Babies "R" Us stores. We continually seek to
strengthen the "core merchandise content" (our top 1,500 selling items) to allow
consistent comparable store for store sales growth and to lessen the dependence
on "hot" merchandise items to drive sales. By focusing on the core merchandise,
we believe that we can maintain strong relationships with our vendors by
allowing them to better plan production and meet agreed upon delivery
timetables. This approach helps to ensure us a sufficient supply of core
merchandise items and allows us to satisfy our consumer's demand for these
items.
To further enhance the shopping experience of consumers, we utilize a
merchandise "world" concept in the U.S. toy stores. Each world has its own
unique customer franchise from juvenile to electronics and video products. Each
world establishes its own business plan and has a complete support team to
develop its business from product sourcing to advertising and promotion. As
noted above, each Mission Possible store also has designated "World Leaders" in
each of the major product categories. The World Leaders are senior sales
personnel who assist our guests and help train other sales associates. The
worlds presently consist of the following;
o R Zone (video game hardware and software, electronics, computer
software, related products and VHS and DVD movies);
o Action Central (vehicles, action figures, and other products);
o Dolls and Dress up (collectibles, accessories and lifestyle
products);
o Seasonal (Christmas, Halloween, summer, bikes, sports, playsets, and
other seasonal products);
o Juvenile (baby products and newborn to age four apparel);
o Imaginarium (educational and developmental products, accessories,
games and puzzles); and
o Apparel (shops within 273 combo stores with sizes ranging from
newborn to age ten). A combo store is a Toys "R" Us store with
approximately 5,500 square feet dedicated to apparel.
As of February 2, 2002, we operated 701 U.S. toy stores. These stores conform to
the prototypical designs consisting of approximately 30,000 to 45,000 square
feet of space and are typically freestanding units or located in strip centers.
This division also operated 42 Imaginarium stand-alone stores. An Imaginarium
boutique has also been incorporated into each of the 433 renovated Mission
Possible stores. We opened one new toy store in Times Square in New York City
while closing ten U.S. toy stores in 2001.
6
Toys "R" Us - International
Toys "R" Us - International ("International") operates, licenses or franchises
toy stores in 28 countries outside the United States. These stores generally
conform to traditional prototypical designs similar to those used by Toys "R"
Us. International also employs computerized inventory systems similar to those
utilized by Toys "R" Us. International introduced new proprietary brands and
shopping "worlds" that have been successful in the United States within some
store locations in 2001. The worlds included Imaginarium boutiques, which are
known as "World of Imagination" in some geographies, and a Babies "R" Us
boutique in some stores.
As of February 2, 2002, International operated 282 stores and licensed or
franchised 225 stores. International added 24 new toy stores, including licensed
or franchised stores, while closing eight stores in 2001. Utilizing demographic
data to determine which markets to enter, we intend to add approximately 25 new
toy stores in 2002, including approximately 20 licensed or franchised stores.
International has operations in several countries outside the United States,
including, among others, the United Kingdom, Canada, Germany and France.
International intends to pursue opportunities that may arise in these and other
countries. Net sales in these foreign countries (excluding sales by licensees
and franchisees) represented approximately 17% of consolidated net sales in
2001. We are subject to the risks inherent in conducting business across
national boundaries, many of which are outside our control. These risks include
the following;
o economic downturns;
o currency exchange rate and interest rate fluctuations;
o changes in governmental policy, including, among others, those
relating to taxation;
o international military, political and diplomatic incidents;
o government instability;
o nationalization of foreign assets; and
o tariffs and governmental trade policies.
We cannot ensure that one or more of these factors will not negatively affect
International and, as a result, harm our business and financial performance.
Kids "R" Us
Kids "R" Us children's clothing stores feature brand name and private label
children's clothing. These stores conform to prototypical designs consisting of
approximately 15,500 to 21,500 square feet of space and are typically
freestanding units or located in strip centers in the United States. As of
February 2, 2002, Kids "R" Us operated 184 stand-alone stores. Kids "R" Us is
also responsible for sourcing the apparel in Toys "R" Us/Kids "R" Us combo
stores and Babies "R" Us stores. Our Toys "R" Us/Kids "R" Us "combo" stores are
an important part of Kids "R" Us' strategy for improving its store formats. A
combo store is a toy store that combines our toy offering with approximately a
5,500 square foot apparel offering. We believe that the new prototypes,
discussed below, and combo stores represent the optimal strategic choices for
the Kids "R" Us Division. Consequently, a decision was made to close 37 Kids "R"
Us stores as described in the "Restructuring and Other Charges" section above.
In almost all of these locations, the nearest Toys "R" Us store will be
converted to a combo store in tandem with the Kids "R" Us store closing. In
addition, we intend to convert other Toys "R" Us stores to combo stores. We
currently operate 273 combo stores. By the end of 2002, we plan to have
approximately 375 combo stores.
7
In November 2000, Kids "R" Us completed renovation of a store in Freehold, New
Jersey incorporating significant design changes from a traditional Kids "R" Us
apparel store to an updated, easier to shop format. We believe that this store
format presents our core apparel offering in a fresh, compelling way. In
addition, these stores carry an assortment of non-apparel merchandise, such as
fashion accessories, bath and body products, cosmetics and home decor. During
2001, ten additional stores were renovated in various locations using the
Freehold store as a prototype. Kids "R" Us expects to convert approximately 30
additional stores to this new prototype during 2002. In an effort to improve
guest satisfaction, and after market testing, Kids "R" Us added a "Lifestyle
Shop" concept in 104 stores. These sections are filled with an assortment of
non-apparel merchandise such as fashion accessories, bath and body products,
cosmetics, home decor, kids' electronics, Animal Alley plush merchandise and
other items.
Babies "R" Us
Babies "R" Us stores target the pre-natal to preschool market by offering up to
35 room settings of juvenile furniture such as cribs and dressers as well as
playyards, bumper seats, high chairs, strollers, car seats, infant, toddler and
preschool toys, infant plush toys, and gifts. As of February 2, 2002, Babies "R"
Us operated 165 juvenile retail locations. All Babies "R" Us stores devote over
5,000 square feet to specialty name brand and private label clothing and offer a
wide range of feeding supplies, health and beauty aids and infant care products.
In addition, we offer a computerized baby registry service, and we believe that
Babies "R" Us registers more expectant parents than any other retailer in the
domestic market. The Babies "R" Us stores are designed with low profile
merchandise displays in the center of the stores providing a sweeping view of
the entire merchandise selection.
Based on demographic data used to determine which markets to enter, we opened 20
Babies "R" Us stores in 2001. As part of our long-range growth plan for this
successful concept, we plan to open approximately 20 new Babies "R" Us stores in
2002.
Distribution Centers
In our U.S toy store division our stores are supported by 11 distribution
centers. Five of these distribution centers also support our Babies "R" Us
stores. The distribution centers average approximately 716,000 square feet each
in size and are strategically located throughout the United States to support
our stores efficiently.
We also operate six International distribution centers that support our
International toy stores and four Kids "R" Us distribution centers that support
our Kids "R" Us stores. Our Babies "R" Us stores and our Toys "R" Us/Kids "R" Us
combo stores also receive apparel from these Kids "R" Us distribution centers.
Toys "R" Us believes the flexibility afforded by its warehouse/distribution
system and by ownership of a majority of its own fleet of trucks to distribute
merchandise provides efficiency and capacity to maintain in-stock inventory
position at stores. Toys "R" Us utilizes a computerized inventory system that
enables management to monitor the current activity and inventory in each region
and in each store. This system permits management to allocate merchandise to
stores and
8
keep them adequately stocked at all times. In addition, we have accelerated the
implementation of our major initiative to improve our supply chain management,
which is aimed at optimizing inventory assortment and presentation. We are also
expanding our automated replenishment system to maximize inventory turnover.
The distribution centers employ warehouse management systems and material
handling equipment that help to minimize overall inventory levels and
distribution costs. Certain product processing and ticketing activities are
performed at the distribution centers to improve labor efficiency and to allow
store employees to concentrate on guest service and store presentation.
Toysrus.com
Toysrus.com sells merchandise to the public via the Internet at www.toysrus.com,
www.babiesrus.com and www.imaginarium.com. We opened our virtual doors to the
public in June 1998. A redesigned website was launched in May 1999. In July
2000, we launched babiesrus.com, which specializes in baby and infant products.
In order to provide better customer service and order fulfillment in the rapid
growth and highly seasonal on-line toy retail business, a strategic alliance was
formed with Amazon.com and a co-branded toy store was launched in September of
2000. This co-branded store offers a broad selection of toys, games, video game
software, video game hardware and other products. In 2001, a redesigned
co-branded babiesrus.com site and a new co-branded imaginarium.com site were
launched. The alliance combines Toysrus.com's merchandising expertise and
trusted brand name with Amazon.com's strengths in web site operations, on-line
customer service and reliable fulfillment. Toysrus.com and Amazon.com continue
to work closely together to realize efficiencies and to reduce costs in this
on-line business.
(d) Trademarks
"TOYS "R" US", "KIDS "R" US", "BABIES "R" US" and "IMAGINARIUM", as well as
variations of our family of "R" Us marks either have been registered, or have
trademark applications pending, with the United States Patent and Trademark
Office and with the trademark registries of many foreign countries. We believe
that our rights to these properties are adequately protected.
(e) Seasonality
Our business is highly seasonal with net sales and earnings generally highest in
the fourth quarter. During the last three fiscal years, more than 40% of net
sales and the substantial portion of the operating earnings have been generated
in the fourth quarter. Our results of operations depend significantly upon the
holiday selling season in the fourth quarter. If less than satisfactory net
sales are achieved during the key fourth quarter, we may not be able to
compensate sufficiently for lower net sales during the first three quarters of
the year.
See the section, "Quarterly Financial Data", contained on page 44 of our 2001
Annual Report, which section is incorporated herein by reference.
9
(f) Working Capital
We have significant liquidity and capital requirements, and we depend on the
ability to generate cash flow from operations, borrow funds, and issue
securities in the capital markets. Although we currently retain lower-tier
investment grade ratings from each of the rating agencies, future rating agency
actions could affect the ability to obtain financing on satisfactory terms. We
currently have adequate sources of liquidity and capital resources; however, any
inability to have access in the future to financing when needed would have a
negative effect on results of our operations and financial condition.
For a discussion of our working capital requirements, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 25 of our 2001 Annual Report, which section is incorporated herein by
reference.
(g) Competition
The retailing industry is highly competitive, and our results of operations are
sensitive to, and may be adversely affected by, competitive pricing, promotional
pressures, additional store openings and other factors. We compete with discount
and mass merchandisers, such as Wal-Mart, Kmart and Target, national and
regional chains and local retailers in the market areas we serve. Competition is
principally based on price, store location, advertising and promotion, product
selection, quality and service. Some of our competitors may have greater
financial resources, lower merchandise acquisition costs and lower operating
expenses than our company, and we may be unable to compete successfully in the
future. If we fail to compete successfully, we could face lower net sales and be
required to offer greater discounts to our guests, which could result in
decreased profitability.
Most of the merchandise we sell is also available from various retailers at
competitive prices. Discount and mass merchandisers use aggressive pricing
policies and enlarged toy selling areas during the holiday season to build
traffic for other store departments. We address these competitive tactics by
continually building brand image, offering exclusive product, high value items,
and the best available selection of toys and toy related products relative to
the discount and mass merchandisers to attract consumers.
In addition, competition in the retail apparel business consists of national and
local department, specialty and discount store chains as well as Internet and
catalog businesses. Kids "R" Us is vulnerable to demand and pricing shifts and
to less than optimal selection as the result of these factors. Kids "R" Us
reviews its merchandise assortments in order to identify slow-moving items and
uses markdowns to clear such inventory.
(h) Other Risk Factors
We continue to implement a series of customer-oriented strategic initiatives,
including renovations of most of the U.S. toy stores to the "Mission Possible"
format and expansion of programs to differentiate and strengthen the core
merchandise content and service levels. We are also continuing with initiatives
to reduce and optimize our operating expense structure. The success of these
initiatives will depend on various factors, including the appeal of renovated
store formats and new products to customers, competitive conditions and economic
conditions. If we are unsuccessful at implementing some or all of our strategic
initiatives, we may be unable to retain or attract customers, which could result
in lower net sales and a failure to realize the benefit of the sizeable
expenditures incurred for these strategic initiatives.
10
Our financial performance depends on the ability to identify, originate and
define product trends as well as to anticipate, gauge and react to changing
consumer demands in a timely manner. Our toy and other products must appeal to a
broad range of consumers whose preferences cannot be predicted with certainty
and are subject to change. We cannot guarantee the ability to continue to meet
changing consumer demands in the future. If we misjudge the market for the
products, significant excess inventories for some products and missed
opportunities for other products will exist. In addition, because we place
orders for products well in advance of purchases by consumers, we could
experience excess inventory if consumers purchase fewer products than
anticipated.
Sales of toys and other products may depend upon discretionary consumer
spending, which may be affected by general economic conditions, consumer
confidence and other factors beyond our control. A decline in consumer spending
could, among other things, negatively affect our net sales and could also result
in excess inventories, which could, in turn, lead to increased inventory
financing expenses. As a result, changes in consumer spending patterns could
adversely affect our profitability.
A significant portion of the toys and other products sold by us is manufactured
outside the United States, particularly in Asia. As a result, any event causing
a disruption of imports, including the imposition of import restrictions or
trade restrictions in the form of tariffs or otherwise, could increase the cost
and reduce the supply of products available to us, which could, in turn,
negatively affect our net sales and profitability.
The retail apparel business fluctuates according to changes in consumer
preferences dictated in part by fashion, perceived value and season. These
fluctuations affect the merchandise in stock, since purchase orders are made
well in advance of the season and at times before fashion trends and "hot"
brands are evidenced by consumer purchases.
We depend upon our management information systems in the conduct of our
operations. We are in the process of upgrading the inventory management,
distribution and supply chain management systems, the point of sale systems and
the general ledger systems, as well as other essential information technology.
We have spent in excess of $100 million in each of 2001 and 2000 on our systems.
Implementation of major new systems and enhancements to existing systems could
cause disruptions in our operations. If our major management information systems
fail to perform as anticipated, we could experience difficulties in replenishing
inventories or in delivering toys and other products to store locations in
response to consumer demands. Any of these or other systems-related problems
could, in turn, adversely affect our net sales and profitability.
(i) Employees
At February 2, 2002, we employed approximately 71,000 individuals. Due to the
seasonality of our business, employment rose to approximately 113,000 during the
2001 Holiday Season.
ITEM 2. PROPERTIES
See the Note, "Leases," in our Notes to Consolidated Financial Statements
included on page 36 of our 2001 Annual Report, which note is incorporated herein
by reference. Also see the section "Store Locations" on the inside back cover
page of our 2001 Annual Report, which section is incorporated herein by
reference. The following information related to properties is as of February 2,
2002:
11
Toys "R" Us - United States
Toys "R" Us either purchases or leases properties depending on the economic
terms available. Where properties are leased, Toys "R" Us generally has
long-term leases with multiple renewal options.
Toys "R" Us operates 701 toy stores, 438 of which are owned and 263 are leased
and 11 distribution centers, seven of which are owned and four are leased. This
division also operates 42 Imaginarium stores, all of which are leased. The
distribution centers average approximately 716,000 square feet each in size and
are strategically located throughout the United States to efficiently service
our stores.
We lease corporate offices in Montvale and Paramus, New Jersey and own a
corporate office building in Montvale, New Jersey and a data center in
Parsippany, New Jersey. Refer to "Restructuring and Other Charges" section above
for planned consolidation of store support facilities.
Toys "R" Us - International
International operates 282 stores, excluding 225 licensed or franchised stores,
101 of which are owned and 181 are leased. International also operates six
distribution centers of which are five are owned and one is leased.
Kids "R" Us
Kids "R" Us operates 184 stand-alone children's clothing stores, 95 of which are
owned and 89 are leased. Kids "R" Us operates four distribution centers, of
which two are owned and two are leased. These distribution centers average
approximately 158,000 square feet each in size.
Babies "R" Us
Babies "R" Us operates 165 juvenile retail stores, 59 of which are owned and 106
are leased. Babies "R" Us stores are served by existing Toys "R" Us, and Kids
"R" Us distribution centers discussed above.
Toysrus.com
Toysrus.com continues to lease a distribution center in Memphis, Tennessee as of
February 2, 2002. This distribution center is actively being marketed for sale.
Toysrus.com also leases corporate office space in Fort Lee, New Jersey. Refer to
"Restructuring and Other Charges" section above for planned consolidation of
store support facilities.
ITEM 3. LEGAL PROCEEDINGS
We are a party to the legal proceedings discussed below, which have arisen in
the normal course of business. In view of the inherent difficulty of predicting
the outcome of litigation and other legal proceedings, we cannot state what the
eventual outcome of these pending proceedings will be. It is our opinion, after
consultation with outside counsel, that the legal proceedings referred to below
12
will not, individually or in the aggregate, have a material adverse effect on
our financial position or results of operations.
Class Action Suits against Toys "R" Us, Inc., et al. In August 2000, eleven
purported class action lawsuits were filed (six in the United States District
Court for the District of New Jersey, three in the United States District court
for the Northern District of California, one in the United States District Court
for the Western District of Texas and one in the Superior Court of the State of
California, County of San Bernardino), against us and our affiliates
Toysrus.com, Inc. and Toysrus.com, LLC. In September 2000, three additional
purported class action lawsuits were filed (two in the United States District
Court for the District of New Jersey and one in the United States District Court
for the Western District of Texas). These actions generally purport to bring
claims on behalf of all persons who have visited one or more of our web sites
and either made an online purchase or allegedly had information about them
unlawfully "intercepted," "monitored," "transmitted," or "used." All the suits
(except one filed in the United States District Court for the District of New
Jersey) also named Coremetrics, Inc. ("Coremetrics"), an internet marketing
company, as a defendant.
These lawsuits assert various claims under the federal privacy and computer
fraud statutes, as well as under state statutory and common law, arising out of
an agreement between us and Coremetrics, alleging that we track our web site
users' activities online and share that information with third parties in
violation of the law. These suits seek damages in unspecified amounts and other
relief under state and federal law.
With Coremetrics we filed a joint application with the Multidistrict litigation
panel (the "MDL Panel") to have all of the federal actions consolidated and
transferred to the United States District court for the Northern District of
California. A hearing on that application was held on November 17, 2000, and all
matters have now been consolidated in the United States District Court for the
Northern District of California.
We moved for a stay of the action in the Superior Court of the State of
California, County of San Bernardino pending resolution of the actions filed in
federal court. The court granted our motion for stay on May 22, 2001.
Plaintiffs' subsequently voluntarily dismissed the action without prejudice.
We filed a motion to dismiss plaintiffs' federal causes of action on August 3,
2001. On October 9, 2001 the United States District Court, Northern California
District, granted in part and denied in part our motion to dismiss. The court's
order dismissed one cause of action without leave to amend, dismissed a second
cause of action with leave to amend and denied our motion as to the third cause
of action. On October 16, 2001 plaintiffs' filed an amended complaint to remedy
the defects in the cause of action previously dismissed with leave to amend.
We believe that we have substantial defenses to these claims and plan to
vigorously defend ourselves against these lawsuits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of stockholders during the fourth quarter
of the fiscal year ending February 2, 2002.
13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market prices and other information with respect to our common stock are hereby
incorporated by reference to page 44 of our 2001 Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data is hereby incorporated by reference to page 1 of our
2001 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Management's Discussion and Analysis of Results of Operations and Financial
Condition is hereby incorporated by reference to pages 23 through 29 of our 2001
Annual Report.
ITEM 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Qualitative and quantitative disclosures about market risk are hereby
incorporated by reference to pages 27 and 28 of our 2001 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplementary data are hereby
incorporated by reference to pages 30 through 42 of our 2001 Annual Report.
(a) Consolidated Balance Sheets as of February 2, 2002 and February 3, 2001
(b) Consolidated Statements of Earnings for each of the three years in the
period ended February 2, 2002
(c) Consolidated Statements of Cash Flows for each of the three years in the
period ended February 2, 2002
(d) Consolidated Statements of Stockholders' Equity for each of the three
years in the period ended February 2, 2002
(e) Notes to Consolidated Financial Statements; and
(f) Report of Ernst & Young LLP.
14
Individual financial statements of the registrant's subsidiaries are not
furnished because consolidated financial statements are furnished. The
registrant is primarily a holding company, the expenses and obligations of which
are paid by its consolidated subsidiaries through a fee based on expenses
incurred for management services provided to such subsidiaries by the
registrant. All subsidiaries of the registrant currently are at least 80%-owned.
Financial statements of our unconsolidated investee (refer to "Initial Public
Offering of Toys "R" Us - Japan Ltd. ("Toys - Japan") in Item 1 (a) above) are
not submitted because the investee is 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 our directors is hereby incorporated herein by
reference to the section, "Nominees for the Board of Directors", in our Proxy
Statement for the Annual Meeting of Stockholders to be held June 5, 2002 ("2002
Proxy Statement").
Executive Officers of the registrant
(a) The following persons are our Executive Officers as of April 10,
2002, having been elected to their respective offices by our Board
of Directors to serve until the election and qualification of their
respective successors:
- --------------------------------------------------------------------------------
Name Age Position with the registrant
- --------------------------------------------------------------------------------
John H. Eyler Jr. 54 Chairman and Chief Executive Officer
- --------------------------------------------------------------------------------
John Barbour 42 Executive Vice President and President - Toys "R"
Us International
- --------------------------------------------------------------------------------
Francesca L. Brockett 42 Executive Vice President - Strategic Planning and
Business Development
- --------------------------------------------------------------------------------
Michael D'Ambrose 44 Executive Vice President - Human Resources
- --------------------------------------------------------------------------------
James E. Feldt 47 Executive Vice President and President
Merchandising and Marketing of Toys "R" Us United
States Division
- --------------------------------------------------------------------------------
Christopher K. Kay 50 Executive Vice President - Operations and General
Counsel, Corporate Secretary
- --------------------------------------------------------------------------------
Warren F. Kornblum 49 Executive Vice President - Chief Marketing Officer
- --------------------------------------------------------------------------------
Louis Lipschitz 57 Executive Vice President - Chief Financial Officer
- --------------------------------------------------------------------------------
Richard L. Markee 48 Executive Vice President and President of Specialty
Businesses and International Operations
- --------------------------------------------------------------------------------
Gregory R. Staley 54 Executive Vice President and President of Toys "R"
Us United States Division
- --------------------------------------------------------------------------------
Dorvin D. Lively 43 Senior Vice President - Corporate Controller
- --------------------------------------------------------------------------------
16
(b) The following is a brief account of the business experience during the
past five years for each of our Executive Officers:
We have employed Mr. Eyler since January 2000. Effective June 2001, he became
Chairman of the Board in addition to Chief Executive Officer. From January 2000
to June 2001, he was President and Chief Executive Officer. Prior to his
employment with us he served as Chairman and Chief Executive Officer of FAO
Schwarz. He had held this position since prior to January 1997.
We have employed Mr. Barbour since August 1999. Effective February 2002, he was
appointed our Executive Vice President - President of Toys "R" Us International
Division. From August 1999 to February 2002 he served as Chief Executive Officer
of Toysrus.com, Inc. From 1997 until August 1999 he served as Sector Head of
Satellite Business Group of Hasbro, Inc. From prior to 1997 to August 1999 he
served as Chief Executive Officer of OddzOn.
We have employed Ms. Brockett since September 1998. Effective October 2000 she
was appointed Executive Vice President - Strategic Planning and Business
Development. From September 1998 to October 2000, she was our Senior Vice
President - Strategic Planning and Business Development. From August 1997 to
September 1998, she was Senior Vice President - Strategic Planning of Tricon
Global Restaurants. From prior to January 1997 to August 1997, she was Vice
President - Business Development of Taco Bell Corporation.
We have employed Mr. D'Ambrose since April 2001 as Executive Vice President -
Human Resources. From September 1997 to January 2001, he served as Senior Human
Resources Officer for Citigroup, Inc. From prior to January 1997 to September
1997, he served as Chief Operations Officer of Westwood One, Inc.
We have employed Mr. Feldt since March 1999. Effective March 2000, he was
appointed our Executive Vice President and President - Merchandising and
Marketing of Toys "R" Us United States Division. From March 1999 to March 2000,
he was Executive Vice President - Merchandising of Toys "R" Us United States
Division. From May 1997 to February 1999, he was Executive Vice President,
Merchandise and Marketing of Value City Department Stores. From prior to January
1997 to April 1997, he was Executive Vice President Merchandising, Allocation
and Merchandise Distribution of Hills Department Stores.
We have employed Mr. Kay since September 2000. Effective January 2002, he was
appointed Executive Vice President - Operations in addition to General Counsel
and Corporate Secretary. From September 2000 to January 2002 he served as
Executive Vice President - General Counsel and Corporate Secretary. From prior
to January 1997 to September 2000, he was the founding partner of Kay, Gronek &
Latham.
We have employed Mr. Kornblum since January 1999. Effective January 2002, he was
appointed Executive Vice President - Chief Marketing Officer. From March 2000 to
January 2002, he served as Executive Vice President - Worldwide Marketing and
Brand Management.
17
From January 1999 to March 2000, he was Senior Vice President and Chief
Marketing Officer. From prior to January 1997 to January 1999, he was Managing
Partner of Bozell Worldwide.
We have employed Mr. Lipschitz for more than five years as Executive Vice
President and Chief Financial Officer.
We have employed Mr. Markee for more than five years. Effective January 2002, he
was appointed Executive Vice President and President - Specialty Businesses and
International Operations. From October 1999 to January 2002, he served as
Executive Vice President, President of the Babies "R" Us division and Chairman
of the Kids "R" Us Division. From prior to January 1997 to October 1999, he
served as Executive Vice President, President of the Babies "R" Us Division and
President of the Kids "R" Us Division.
We have employed Mr. Staley for more than five years. Effective March 2000, he
was appointed President of the Toys "R" Us United States Division. From prior to
January 1997 to March 2000, he served as Executive Vice President and President
of the Toys "R" Us International Division.
We have employed Mr. Lively since January 2001 as Senior Vice President -
Corporate Controller. From October 1998 to January 2001, he was Vice President -
Corporate Controller of Reader's Digest Association, Inc. From prior to January
1997 to September 1998, he was Vice President and Chief Financial Officer of
Silverado Foods, Inc.
Information with respect to compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended is hereby incorporated by reference to the
section "Compliance with Section 16(a)" in our 2002 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is hereby incorporated herein
by reference to the sections, "Nominees for the Board of Directors", "Directors'
Compensation", "Executive Compensation", "Summary Compensation Table", "Option
Grant Table", "Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values", "Long-Term Incentive Plan - Awards" and "Toys "R" Us
Employment Agreements" in our 2002 Proxy Statement. The sections "Executive
Compensation: Report of the Compensation and Organizational Development
Committee" and "Stock Performance Graph" in our 2002 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, "Questions and
Answers, Question 13" and "Directors' and Officers' Ownership of Toys "R" Us
Stock", in our 2002 Proxy Statement.
18
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
(1) The response to this portion of Item 14 is set forth in Item 8 of Part
II of this report on Form 10-K.
(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. We will furnish to any
stockholder, upon written request, any exhibit listed in the accompanying
Index to Exhibits upon payment by such stockholder of our reasonable
expenses in furnishing any such exhibit.
(b) Cautionary Statement Regarding Forward Looking Information
This Form 10-K contains "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, which are intended to be covered by
the safe harbors created thereby. We may also make forward-looking
statements in other documents filed with the Securities and Exchange
Commission, our annual report to shareholders, our proxy statement and in
press releases. All statements that are not historical facts, including
statements about our beliefs or expectations, are forward-looking
statements. We generally identify these statements by words or phases such
as "anticipate," "estimate," "plan," "expect," "believe," "intend,"
"foresee," "will," "may," and similar words or phases. These statements
discuss, among other things, expected growth, strategy, store openings and
renovations, future performance and anticipated cost savings and results
of our 2001 restructuring. Such statements involve risks and uncertainties
that exist in our operations and business environment that could render
actual outcomes and results materially different than predicted. Our
forward-looking statements are based on assumptions about many factors,
including, but not limited to, ongoing competitive pressures in the retail
industry, changes in consumer spending and consumer preferences, general
economic conditions in the United States and other jurisdictions in which
we conduct business (such as interest rates, currency exchange rates and
consumer confidence) and normal business uncertainty. While we believe
that our assumptions are reasonable at the time forward-looking statements
were made, we caution that it is impossible to predict the actual outcome
of numerous factors and, therefore, readers should not place undue
reliance on such statements. Forward-looking statements speak only as of
the date they are made, and we undertake no obligation to update such
statements in light of new information or future events that involve
inherent risks and uncertainties. Actual results may differ materially
from those contained in any forward-looking statement.
(c) Reports on Form 8-K
On January 18, 2002, we announced the extension of the expiration date of
our offer to exchange all of our outstanding 7.625% Notes due 2011 for our
registered 7.625% Notes due 2011 to January 23, 2002.
On January 28, 2002, we announced restructuring and other charges totaling
$126 million after taxes. Refer to Item 1. (a) above for further details
regarding this filing.
20
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 /s/ Louis Lipschitz
----------------------------
Louis Lipschitz
Executive Vice President and Chief
Financial Officer
Date: May 3, 2002
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 26th day of April 2002.
Signature Title
--------- -----
* Chairman and Chief Executive Officer
John H. Eyler Jr. (Principal Executive Officer)
/s/ Louis Lipschitz Executive Vice President and
- ------------------- Chief Financial Officer
Louis Lipschitz (Principal Financial Officer)
/s/ Dorvin D. Lively Senior Vice President - Corporate Controller
- --------------------
Dorvin D. Lively (Principal Accounting Officer)
*
RoAnn Costin Director
*
Roger N. Farah Director
*
Peter A. Georgescu Director
*
Michael Goldstein Director
21
Signature Title
--------- -----
*
Calvin Hill Director
*
Nancy Karch Director
*
Charles Lazarus Director, Chairman Emeritus
*
Norman S. Matthews Director
*
Arthur B. Newman Director
The foregoing constitutes all of the Board of Directors and the Principal
Executive, Financial and Accounting Officers of the Registrant.
* By /s/ Louis Lipschitz
---------------------------------
Louis Lipschitz, Attorney-In-Fact
22
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this Report:
Exhibit No. Document
----------- --------
2A Agreement and Plan of Merger, dated as of December 8, 1995,
by and among registrant, Toys "R" Us - Delaware, Inc. (f/k/a
Toys "R" Us, Inc.) and TRU Interim, Inc. Incorporated herein
by reference to Exhibit 2.1 to registrant's Registration of
Securities of Certain Successor Issuers on Form 8-B dated
January 3, 1996 (the "Form 8-B").
2B Agreement and Plan of Merger, dated as of October 1, 1996,
and as amended and restated as of December 26, 1996, among
registrant, BSST Acquisition Corp., Baby Superstore, Inc.
and Jack P. Tate. Incorporated by reference to Annex A to
the Proxy Statement/Prospectus Statement No. 333-18863.
3 i) Restated Certificate of Incorporation of registrant (filed
on January 2, 1996). Incorporated herein by reference to
Exhibit 3.1 to the Form 8-B.
ii) Amended and Restated By-Laws of registrant (as of January 1,
1996). Incorporated herein by reference to Exhibit 3.2 to
the Form 8-B. An amendment dated March 11, 1997 to Amended
and Restated By-Laws. Incorporated herein by reference to
Exhibit 3B to registrant's Annual Report on Form 10-K for
the year ended February 1, 1997.
4 i) Form of Indenture dated as of January 1, 1987 between
registrant and United Jersey Bank, as Trustee, pursuant to
which securities in one or more series in an unlimited
amount may be issued by registrant. Incorporated herein by
reference to Exhibit 4(a) to Registration Statement No.
33-11461.
ii) Form of registrant's 8 3/4% Debentures due 2021.
Incorporated herein by reference to Exhibit 4 to
registrant's Report on Form 8-K dated August 29, 1991.
iii) Form of Indenture between 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 to registrant. Incorporated herein by reference to
Exhibit 4 to registrant's Registration Statement No.
33-42237.
23
Exhibit No. Document
----------- --------
4 iv) Indenture, dated July 24, 2001, between the registrant and
the Bank of New York, as trustee (filed as Exhibit 4.1 to
the registrant's Registration Statement on Form S-4, No.
333-73800 filed on November 20, 2001 and incorporated herein
by reference.
v) Form of registrant's 6.875% Notes due 2006 and form
registrant's 7.25% Notes due 2011 (filed as Exhibit 4.1 to
the registrant's Registration Statement on Form S-4, No.
333-73800 filed on November 20, 2001 and incorporated herein
by reference.
vi) Five-Year Credit Agreement, dated as of September 19, 2001,
among the registrant, the lenders party thereto, The Bank of
New York, as Administrative Agent, Citibank, N.A., and J.P.
Morgan Chase Bank, as Co-Syndication Agents, and Credit
Suisse First Boston, First Union National Bank, The Dai-Ichi
Kangyo Bank, Ltd. And Societe General, as Co-Documentation
Agents, and BNY Capital Markets, Inc., as Lead Manager and
Book Manager.
vii) 364-Day Credit Agreement, dated as of September 19, 2001,
among the registrant, the lenders party thereto, The Bank of
New York, as Administrative Agent, Citibank, N.A., and J.P.
Morgan Chase Bank, as Co-Syndication Agents, and Credit
Suisse First Boston, First Union National Bank, The Dai-Ichi
Kangyo Bank, Ltd. And Societe General, as Co-Documentation
Agents, and BNY Capital Markets, Inc., as Lead Manager and
Book Manager.
viii) Lease Agreement dated as of September 26, 2001 between First
Union Development Corporation as Lessor and Toys "R" Us,
Inc. as Lessee.
ix) Participation Agreement dated as of September 26, 2001 among
Toys "R" Us, Inc., as the Construction Agent and as the
Lessee, First Union Development Corporation, as the Borrower
and as the Lessor, the various financial institutions and
other institutional investors which are parties hereto from
time to time, as the Tranche A Note Purchasers, the various
banks and other lending institutions which are parties
hereto from time to time, as the Tranche B Lenders, the
various banks and other lending institutions which are
parties hereto from time to time, as the Cash Collateral
Lenders, and First Union National Bank, as the Agent for the
Primary Financing Parties and, respecting the Security
Documents, as the agent for the Secured Parties and First
Union National Bank, as the Escrow Agent
24
Exhibit No. Document
----------- --------
4 x) Substantially all other long-term debt of 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, (i)
commercial paper, (ii) industrial revenue bonds issued by
industrial development authorities and guaranteed by
registrant, (iii) mortgages held by third parties on real
estate owned by registrant, (iv) stepped coupon guaranteed
bonds held by a third party and guaranteed by registrant and
(v) Euro bond public indebtedness issued to refinance
outstanding commercial paper obligations and (vi) yen
denominated note payable collateralized by the expected
future yen cash flows from license fees from Toys - Japan.
Registrant will file with the Securities and Exchange
Commission (the "Commission") copies of constituent
documents relating to such upon request of the Commission.
10A* Employment Agreement dated March 14, 1978 between registrant
and Charles Lazarus and an amendment thereto dated November
20, 1979 (incorporated herein by reference to Exhibit 2 in
Schedule 13D dated February 1, 1980 filed by Charles
Lazarus, et al). An amendment dated March 23, 1982 to such
employment agreement (incorporated herein by reference to
Exhibit 10B to registrant's Annual Report on Form 10-K for
the year ended January 31, 1982, Commission File Number
1-1117). An amendment dated December 7, 1982 to such
employment agreement (incorporated herein by reference to
Exhibit 10B to registrant's Annual Report on Form 10-K for
the year ended January 30, 1983, Commission File Number
1-1117). An amendment dated April 10, 1984 to such
employment agreement (incorporated herein by reference to
Exhibit 10B to registrant's Annual Report on Form 10-K for
the year ended January 29, 1989, Commission File Number
1-1117).
10B* Amendment dated as of June 10, 1998 to Employment Agreement
between registrant and Charles Lazarus. Incorporated herein
by reference to Exhibit 10B to registrant's Annual Report on
Form 10-K for the year ended January 30, 1999.
10C Form of Indemnification Agreement between registrant and
each director. Incorporated herein by reference to Exhibit
10F to registrant's Annual Report on Form 10-K for the year
ended February 1, 1987, Commission File Number 1-1117.
25
Exhibit No. Document
----------- --------
10D* Amended and Restated Toys "R" Us, Inc. Non-Employee
Directors' Stock Option Plan effective as of September 19,
1990. Incorporated herein by reference to Exhibit C to
registrant's Proxy Statement for the year ended February 1,
1997.
10E* 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.
10F* 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.
10G* Amended and Restated Toys "R" Us, Inc. 1994 Stock Option and
Performance Incentive Plan effective as of November 1, 1993.
Incorporated herein by reference to Exhibit A to
registrant's Proxy Statement for the year ended February 1,
1997.
10H* Stock Unit Plan for Non-Employee Directors of Toys "R" Us,
Inc., effective as of May 1, 1997. Incorporated herein by
reference to Exhibit 10H to registrant's Annual Report on
Form 10-K for the year ended January 30, 1999.
10I* Amended and Restated Toys "R" Us, Inc. Management Incentive
Compensation Plan, effective beginning with the registrant's
fiscal year ending January 28, 1995. Incorporated herein by
reference to Exhibit B to registrant's Proxy Statement for
the year ended February 1, 1997.
10J* Toys "R" Us, Inc. Partnership Group Deferred Compensation
Plan effective as of May 17, 1995. Incorporated herein by
reference to Exhibit 10.13 to the Form 8-B.
10K* Toys "R" Us, Inc. Grantor Trust Agreement dated as of
October 1, 1995 between registrant and American Express
Trust company. Incorporated herein by reference to Exhibit
10.14 to the Form 8-B.
10L* Toys "R" Us, Inc. Supplemental Executive Retirement Plan,
effective as of December 6, 1995. Incorporated by reference
to Exhibit 10N to registrant's Annual Report on Form 10-K
for the year ended February 3, 1996.
26
Exhibit No. Document
----------- --------
10M* Toys "R" Us, Inc. Grantor Trust Agreement dated as of April
1, 1996 between registrant and Allmerica Trust company, N.A.
Amendment No. 1 to Grantor Trust Agreement, effective as of
April 1, 1996. Amendment No. 2 to Grantor Trust Agreement,
effective as of April 1, 1996. Incorporated herein by
reference to Exhibit 10P to registrant's Annual Report on
Form 10-K for the year ended January 30, 1999.
10N Shareholders Agreement, dated October 1, 1996, by and among
registrant, Jack P. Tate and Linda M. Robertson.
Incorporated by reference to Exhibit A to Exhibit 2 to
registrant's Quarterly Report on Form 10-Q for the quarter
ended November 2, 1996, File No. 1-11609.
10O* Retention Agreements
- Retention Agreement between Toys "R" Us, Inc. and Louis
Lipschitz dated as of May 1, 1997.
- Retention Agreement between Toys "R" Us, Inc. and Richard
L. Markee dated as of May 1, 1997.
- Retention Agreement between Toys "R" Us, Inc. and Gregory
R. Staley dated as of May 1, 1997.
Each incorporated herein by reference to Exhibit 10P to
registrant's Quarterly Report on Form 10-Q for the quarterly
period ended May 3, 1997.
10P* Amendment to Retention Agreement between Toys "R" Us, Inc.
and Richard L. Markee dated May 6, 1999. Incorporated herein
by reference to Exhibit 10P to registrant's Annual Report on
Form 10-K for the year ended January 29, 2000.
10Q* Amendments to Retention Agreement between Toys "R" Us, Inc.
and Gregory R. Staley dated May 6, 1999 and March 2, 2000,
respectively. Incorporated herein by reference to Exhibit
10Q to registrant's Annual Report on Form 10-K for the year
ended January 29, 2000.
10R Amended and Restated Rights Agreement, dated as of April 16,
1999, between Toys "R" Us, Inc. and American Stock Transfer
& Trust Company, which includes as Exhibit A the Form of
Rights Certificate and, as Exhibit B, the Summary of Rights
to Purchase Common Stock (incorporated herein by reference
to Exhibit 1 to registrant's Report on Form 8-K dated April
16, 1999).
27
Exhibit No. Document
----------- --------
10S* Retention Agreement between Toys "R" Us, Inc. and Michael
Goldstein dated as of February 25, 1998. Incorporated herein
by reference to Exhibit 10R to registrant's Annual Report on
Form 10-K for the year ended January 31, 1998.
10T* Retention Agreement between Toys "R" Us, Inc. and Michael G.
Shannon dated October 12, 1998. Incorporated herein by
reference to Exhibit 10Y to registrant's Annual Report on
Form 10-K for the year ended January 30, 1999.
10U* Amended Form of Retention Agreement for Executive
Officers of Toys "R" Us, Inc. Incorporated herein by
reference to Exhibit 10U to registrant's Annual
Report on Form 10-K for the year ended February 3,
2001.
10V* Retention Agreement between Toys "R" Us, Inc. and John H.
Eyler, Jr. dated January 6, 2000. Incorporated herein by
reference to Exhibit 10BB to registrant's Annual Report on
Form 10-K for the year ended January 29, 2000.
10W* Toys "R" Us, Inc. Non-Employee Directors' Stock Unit Plan,
effective as of June 10, 1999. Incorporated herein by
reference to Exhibit A to registrant's Proxy Statement for
the year ended January 30, 1999.
10X* Toys "R" Us, Inc. Non-Employee Directors' Stock Option Plan,
effective as of June 10, 1999. Incorporated herein by
reference to Exhibit B to registrant's Proxy Statement for
the year ended January 30, 1999.
10Y* Toys "R" Us, Inc. Non-Employee Directors' Deferred
Compensation Plan, effective as of June 10, 1999.
Incorporated herein by reference to Exhibit C to
registrant's Proxy Statement for the year ended January 30,
1999.
10Z* Separation agreement between Toys "R" Us, Inc. and Bruce
Krysiak dated as of March 25, 1999. Incorporated herein by
reference to Exhibit 10X to registrant's Annual Report on
Form 10-K for the year ended January 30, 1999.
10AA* Separation agreement between Toys "R" Us, Inc. and Keith Van
Beek dated as of June 9, 1999. Incorporated herein by
reference to Exhibit 10X to registrant's Annual Report on
Form 10-K for the year ended January 29, 2000.
28
Exhibit No. Document
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10BB* Separation and Release Agreement between Toys "R" Us, Inc.
and Robert C. Nakasone dated as of August 26, 1999.
Incorporated herein by reference to Exhibit 10.1 to
registrant's Quarterly Report on Form 10-Q for the quarterly
ended July 31, 1999.
10CC* Separation agreement between Toys "R" Us, Inc. and Michael
J. Madden dated as of September 24, 1999. Incorporated
herein by reference to Exhibit 10AA to registrant's Annual
Report on Form 10-K for the year ended January 29, 2000.
10DD* Separation and Release agreement between Toys "R" Us, Inc.
and Michael G. Shannon dated as of February 27, 2002.
10EE* Consulting Agreement between Toys "R" Us, Inc. and Michael
Goldstein dated as of June 6, 2001.
10FF Toys "R" Us, Inc. 2001 Stock Option and Performance
Incentive Plan effective as of June 6, 2001. Incorporated
herein by reference to Exhibit B to registrant's Proxy
Statement for the year ended February 3, 2001.
13 Registrant's Annual Report to Stockholders for the year
ended February 2, 2002. Except for the portions thereof that
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.
23 Consent of Independent Auditors, Ernst & Young LLP.
24 Power of Attorney, dated in March 2002.
* 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.
29