##### Table of Contents



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 January 31, 2009
Commission file number 1-11609
 
 
 TOYS R US, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    22-3260693(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification Number)One Geoffrey WayWayne, New Jersey
    
    07470(Address of principal executive offices)
    
    (Zip code)
 (973) 617-3500
(Registrants telephone number, including area code)
 
 Securities registered pursuant to Section 12(b) or 12(g) of the Act:
None
 
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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Forward-Looking Statements




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##### 



INDEX
 PAGEPART I.Item 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    10Item 1B. Unresolved Staff Comments
    
    
    15Item 2. Properties
    
    
    16Item 3. Legal Proceedings
    
    
    16Item 4. Submission of Matters to a Vote of Security Holders
    
    
    16PART II.Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    17Item 6. Selected Financial Data
    
    
    17Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 8. Financial Statements and Supplementary Data
    
    
    38Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    88Item 9A. Controls and Procedures
    
    
    88Item 9B. Other Information
    
    
    90PART III.Item 10. Directors, Executive Officers and Corporate Governance
    
    
    90Item 11. Executive Compensation
    
    
    92Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    111Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    112Item 14. Principal Accounting Fees and Services
    
    
    113PART IV.Item 15. Exhibits and Financial Statement Schedules
    
    
    115SIGNATURES
    
    
    116SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
    
    
    117INDEX TO EXHIBITS
    
    
    118EX-4.3: FIRST SUPPLEMENTAL INDENTUREEX-10.26: AMENDMENT #2 TO ADVISORY AGREEMENTEX-10.32: AMENDMENT NO 1 TO SUPPLEMENTAL EXECUTIVE RETIREMENT PLANEX-10.35: FORM OF NON-QUALIFIED STOCK OPTION FOR EXECUTIVE OFFICERSEX-10.36: FORM OF RESTRICTED STOCK AGREEMENT (WITH CONSIDERATION) FOR EXECUTIVE OFFICERSEX-10.37: FORM OF RESTRICTED STOCK AGREEMENT (WITHOUT CONSIDERATION) FOR EXECUTIVE OFFICERSEX-10.39: AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENTEX-10.41: AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENTEX-10.43: AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENTEX-10.45: AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENTEX-10.47: AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENTEX-12: STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGESEX-18: LETTER RE: CHANGE IN ACCOUNTING PRINCIPLEEX-21: SUBSIDIARIESEX-24: POWER OF ATTORNEYEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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PART I
 
 ITEM 1. BUSINESS
  Our Business
       
    
    side-by-side store, which ranges in size from 45,000 to 50,000 square feet and
devotes approximately 30,000 square feet to traditional toy products and 15,000 square
feet to specialty juvenile products;
    
    R superstore, which typically ranges from 64,000 to 70,000 square feet by
combining a traditional toy store of approximately 34,000 square feet with a specialty
juvenile store of approximately 30,000 square feet;
    
    traditional toy store, which typically ranges in size from 30,000 to 50,000 square
feet and devotes approximately 5,500 square feet to boutique areas for specialty juvenile
products (BRU Express and Juvenile Expansion formats devote approximately an additional
4,500 square feet and 1,000 square feet, respectively, for juvenile products); and
    
    specialty juvenile store, which typically ranges from 30,000 to 40,000 square feet
and devotes approximately 2,000 to 5,000 square feet to specialty name brand and private
label clothing.
  1




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Us - Domestic
 
    
    Domestic.Our Domestic segment sells a variety of products in the juvenile,
learning, entertainment, core toys, and seasonal categories through 846 stores that
operate in 49 states in the United States and Puerto Rico and through the Internet.
Domestic Net sales are derived from 512 traditional toy stores (including 75 BRU Express
and Juvenile Expansion formats), 262 specialty juvenile stores, 53 side-by-side stores
and 19 R superstores. On average, our stores offer approximately 10,000 active items
year-round. We believe we offer customers the most comprehensive selection of merchandise
in the retail toy and specialty juvenile industries and are able to provide vendors with a year-round
distribution outlet for the broadest assortment of their products.
    
    International.Our International segment sells a variety of products in the
juvenile, learning, entertainment, core toys, and seasonal categories through 713 owned,
licensed and franchised stores that operate in 33 countries and through the Internet. Net
sales (including fees received from licensed and franchised stores) in our International
segment are derived from 625 traditional toy stores (including 2 BRU Express formats), as
well as 66 side-by-side stores and 22 specialty juvenile stores that operate in
Australia, Austria, Canada, France, Germany, Japan, Portugal, Spain, Switzerland and the
United Kingdom. On average, a typical International store carries approximately 8,500
active items year-round. Our differentiated assortment, proportionately higher private
label or exclusively licensed product offerings, and quality service levels enable us to
command a reputation as the shopping destination for toys, games, juvenile and family
leisure products.
 Domestic
   
    
    focusing on the expansion of our juvenile product offerings through our
side-by-side store, R superstore, BRU Express and Juvenile Expansion formats;
    
    enhancing our product offerings and adding more private label and exclusive products
to our mix;
    
    offering great value to customers through a convenient multi-channel (store and
Internet) shopping experience;
    
    renovating our stores in the United States to freshen our stores and enhance the
shopping experience;
    
    reaching customers, through differentiated value propositions, with our expanded
portfolio of ecommerce brands; and
    
    providing exceptional service through our state of the art baby registry and
reorganizing our store management teams to improve customer service.
 Product Selection and Merchandise
  
    
    Juvenile our juvenile product selection is focused to serve newborns and children
up to four years of age. Consequently, we market a broad array of product sizes within
multiple product categories, such as baby gear, infant care products, apparel,
commodities, furniture, bedding, room décor and infant toys;
    
    Learning educational electronics and developmental toys, such as our Imaginarium
products and pre-school merchandise, such as pre-school learning products, activities and
toys;
    
    Entertainment video game hardware and software, electronics, computer software,
DVDs and other related products;
 2




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
    
    Core Toy boys and girls toys, such as dolls and doll accessories, action figures,
role play toys and vehicles, games, plush and puzzles; and
    
    Seasonal toys and other products geared toward the Christmas and Halloween
holidays and the summer season, as well as bikes, sporting goods, play sets and other
outdoor products.
  Marketing
    Customer Service
    Market and Competition
   3




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Seasonality
  4




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Geographic Distribution of Domestic Stores
 Location
    
    Number of StoresAlabama
    
    
    9Alaska
    
    
    1Arizona
    
    
    15Arkansas
    
    
    5California
    
    
    106Colorado
    
    
    10Connecticut
    
    
    14Delaware
    
    
    3Florida
    
    
    57Georgia
    
    
    28Hawaii
    
    
    1Idaho
    
    
    3Illinois
    
    
    38Indiana
    
    
    17Iowa
    
    
    7Kansas
    
    
    6Kentucky
    
    
    10Louisiana
    
    
    10Maine
    
    
    3Maryland
    
    
    19Massachusetts
    
    
    21Michigan
    
    
    32Minnesota
    
    
    11Mississippi
    
    
    5Missouri
    
    
    16Montana
    
    
    1Nebraska
    
    
    4Nevada
    
    
    8New Hampshire
    
    
    7New Jersey
    
    
    41New Mexico
    
    
    3New York
    
    
    54North Carolina
    
    
    21North Dakota
    
    
    1Ohio
    
    
    37Oklahoma
    
    
    7Oregon
    
    
    8Pennsylvania
    
    
    45Rhode Island
    
    
    2South Carolina
    
    
    10South Dakota
    
    
    2Tennessee
    
    
    17Texas
    
    
    60Utah
    
    
    8Vermont
    
    
    1Virginia
    
    
    27Washington
    
    
    16West Virginia
    
    
    4Wisconsin
    
    
    11Puerto Rico
    
    
    4Total
    
    
    846
 5




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International
    
    
    focusing on the expansion of our juvenile product offerings through our
side-by-side store, R superstore and BRU Express formats;
    
    enhancing our product offering and adding more private label and exclusive products
to our mix;
    
    continually reviewing our International store portfolio for new store opportunities
and potential renovations to freshen our stores and enhance the shopping experience;
    
    offering great value to customers through a convenient multi-channel (store and
Internet) shopping experience; and
    
    providing exceptional service and reorganizing our store management teams to
improve customer service.
 Product Selection and Merchandise
  
    
    Juvenile our juvenile product selection is focused to serve newborns and children
up to four years of age. Consequently, we market a broad array of product sizes within
multiple product categories, such as baby gear, infant care products, apparel,
commodities, furniture, bedding, room décor and infant toys;
    
    Learning educational electronics and developmental toys such as our World of
Imagination products and pre-school merchandise, such as pre-school learning products,
activities and toys;
    
    Entertainmentvideo game hardware and software, electronics, computer software,
DVDs, and other related products;
    
    Core Toy boys and girls toys, such as dolls and doll accessories, action figures,
role play toys and vehicles, games, plush and puzzles; and
    
    Seasonal toys and other products geared toward the Christmas and other major
holidays such as Three Kings, Carnival, Easter, and Golden Week and other seasonal
products such as bicycles, sporting goods, play sets and other outdoor products.
 Marketing
  Customer Service
  6




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Market and Competition
   Seasonality
  License agreements
  7




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Geographic Distribution of International Stores
 Location
    
    Number of StoresAustralia
    
    
    33Austria
    
    
    14*
    
    Bahrain
    
    
    1Canada
    
    
    67*
    
    China
    
    
    13*
    
    Denmark
    
    
    13*
    
    Egypt
    
    
    4*
    
    Finland
    
    
    4France
    
    
    38Germany
    
    
    57*
    
    Hong Kong
    
    
    11*
    
    Iceland
    
    
    3*
    
    Israel
    
    
    24Japan
    
    
    167*
    
    Korea
    
    
    4*
    
    Macau
    
    
    1*
    
    Malaysia
    
    
    14*
    
    Netherlands (1)
    
    
    17*
    
    Norway
    
    
    8*
    
    Oman
    
    
    1*
    
    Philippines
    
    
    7Portugal
    
    
    8*
    
    Qatar
    
    
    1*
    
    Saudi Arabia
    
    
    10*
    
    Singapore
    
    
    7*
    
    South Africa
    
    
    23Spain
    
    
    42*
    
    Sweden
    
    
    14Switzerland
    
    
    5*
    
    Taiwan
    
    
    16*
    
    Thailand
    
    
    8*
    
    United Arab Emirates
    
    
    5United Kingdom
    
    
    73Total (2)
    
    
    713
 
 *
    
    Franchised or licensed(1)
    
    During the first quarter of fiscal 2009, our franchise agreement in the Netherlands expired.
Accordingly, the stores owned by the former franchisee will no longer be operated as Toys R
Us stores, all branding was removed and the Company will have no franchised stores in the
Netherlands.(2)
    
    During fiscal 2007, we terminated our franchise agreement in Turkey. Accordingly, the stores
owned by the former franchisee are no longer operated as Toys R Us stores and all branding
was removed during fiscal 2008. Employees
  Distribution Centers
  8




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Vendor Service
   Financial Information About Our Segments
  Trademarks and Licensing
 ® ® ® ® ® ® ® ® ® ®
 Available Information
     9




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ITEM 1A. RISK FACTORS
 Risks Associated with Our Business
  Our business is highly seasonal, and our financial performance depends on the results of the fourth
quarter of each fiscal year.
  Our industry is highly competitive and competitive conditions may adversely affect our revenues and
overall profitability.
     Our sales may be adversely affected by changes in consumer spending patterns.
   10




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Our operations have significant liquidity and capital requirements and depend on the availability
of adequate financing.
  We may not retain or attract customers if we fail to successfully implement our strategic
initiatives.
  Our sales may be adversely affected if we fail to respond to changes in consumer preferences in a
timely manner.
  Sales of video games tend to be cyclical and may result in fluctuations in our results of
operations.
  We depend on key vendors to supply the merchandise that we sell to our customers.
    11




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International events could delay or prevent the delivery of products to our stores.
  Product safety issues, including product recalls, could harm our reputation, divert resources,
reduce sales and increase costs.
  International factors could negatively affect our business.
  
    
    economic downturns;
    
    currency exchange rate and interest rate fluctuations;
    
    changes in governmental policy, including, among others, those relating to taxation
or safety regulations;
    
    international military, political, diplomatic and terrorist incidents;
    
    government instability;
    
    nationalization of assets; and
    
    tariffs and governmental trade policies.
  The success of our online business depends on our ability to provide quality service to our
Internet customers.
  
    
    changes in consumer willingness to purchase goods via the Internet;
    
    increases in software filters that may inhibit our ability to market our products
through e-mail messages to our customers and increases in consumer privacy concerns
relating to the Internet;
    
    changes in applicable federal and state regulation, such as the Federal Trade
Commission Act, the Childrens Online Privacy Act, the Fair Credit Reporting Act and the
Gramm-Leach-Bliley Act;
    
    breaches of Internet security;
    
    failure of our Internet service providers to properly perform their services in a
timely and efficient manner;
    
    failures in our Internet infrastructure or the failure of systems or third parties,
such as telephone or electric power service, resulting in website downtime or other
problems; and
    
    failure by us to properly and timely process on-line orders by customers, which may
negatively impact future on-line and in-store purchases by such customers.
 12




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Our business exposes us to personal injury and product liability claims which could result in
adverse publicity and harm to our brands and our results of operations.
  Our business operations could be disrupted if our information technology systems fail to perform
adequately or we are unable to protect the integrity and security of our customers information.
   If we are unable to renew or replace our current store leases or if we are unable to enter into
leases for additional stores on favorable terms, or if one or more of our current leases are
terminated prior to expiration of their stated term and we cannot find suitable alternate
locations, our growth and profitability could be negatively impacted.
  Our results of operations could suffer if we lose key management or are unable to attract and
retain experienced senior management for our business.
  We are subject to certain regulatory and legal developments. If we fail to comply with regulatory
or legal requirements, our business and financial results may be adversely affected.
  We may experience fluctuations in our tax obligations and effective tax rate.
  13




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Changes to accounting rules or regulations may adversely affect our results of operations.
  Our total assets include substantial amounts of property, equipment and goodwill. Changes to
estimates or projections related to such assets, or operating results that are lower than our
current estimates at certain store locations, may cause us to incur impairment charges.
  The Sponsors control us and may have conflicts of interest with us in the future.
    Risks Related to Our Substantial Indebtedness
 Our substantial indebtedness could adversely affect our ability to raise additional capital to fund
our operations, limit our ability to react to changes in the economy
or our industries, expose us to
interest rate risk to the extent of our variable rate debt and prevent us from meeting our
obligations under the various debt instruments.
  
    
    increasing our vulnerability to general economic and industry conditions;
    
    requiring a substantial portion of cash flows from operating activities to be
dedicated to the payment of principal and interest on our indebtedness, and as a result,
reducing our ability to use our cash flows to fund our operations and capital
expenditures, capitalize on future business opportunities and expand our business and
execute our strategy;
    
    making it more difficult for us to make payments on the debt, as our business may
not be able to generate sufficient cash flows from operating activities to meet our debt
service obligations;
    
    exposing us to the risk of increased interest expense as certain of our borrowings
are at variable rates of interest;
    
    causing us to make non-strategic divestitures;
    
    limiting our ability to obtain additional financing for working capital, capital
expenditures, debt service requirements and general, corporate or other purposes; and
 14




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
    
    limiting our ability to adjust to changing market conditions and reacting to
competitive pressure and placing us at a competitive disadvantage compared to our
competitors who are less highly leveraged.
  We may not be able to generate sufficient cash to service all of our indebtedness and may not be
able to refinance our indebtedness on favorable terms. If we are unable to do so, we may be forced
to take other actions to satisfy our obligations under our indebtedness, which may not be
successful.
   Our debt agreements contain covenants that limit our flexibility in operating our business.
  
    
    incur additional indebtedness;
    
    pay dividends on, repurchase or make distributions with respect to our capital
stock or make other restricted payments;
    
    issue stock of subsidiaries;
    
    make certain investments, loans or advances;
    
    transfer and sell certain assets;
    
    create or permit liens on assets;
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our
assets;
    
    enter into certain transactions with our affiliates; and
    
    amend certain documents.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  15




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ITEM 2. PROPERTIES
  GroundOwned
    
    Leased (1)
    
    Leased
    
    TotalStores:Domestic
    
    
    301
    
    
    
    242
    
    
    
    303
    
    
    
    846International
    
    
    79
    
    
    
    26
    
    
    
    399
    
    
    
    504380
    
    
    
    268
    
    
    
    702
    
    
    
    1,350Distribution Centers:Domestic
    
    
    7
    
    
    
    
    
    
    
    2
    
    
    
    9International
    
    
    5
    
    
    
    
    
    
    
    4
    
    
    
    912
    
    
    
    
    
    
    
    6
    
    
    
    18Total Operating Stores and Distribution Centers
    
    
    392
    
    
    
    268
    
    
    
    708
    
    
    
    1,368
 
 (1)
    
    Owned buildings on leased land.    
 ITEM 3. LEGAL PROCEEDINGS
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  16




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PART II
 
 ITEM 5.
    
    MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
   
 ITEM 6. SELECTED FINANCIAL DATA
 Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,
    
    
    January 28,
    
    
    January 29,(In millions, except earnings per share data and number of stores)
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005OperationsNet Sales (1)
    
    $
    13,724
    
    
    $
    13,794
    
    
    $
    13,050
    
    
    $
    11,333
    
    
    $
    11,155Net earnings (loss) (2)
    
    
    218

(3)(4)
    
    
    153

(4)
    
    
    109
    (4)(5)
    
    
    (384
    )      (6)
    
    
    252Basic earnings per share
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    1.17Diluted earnings per share
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    1.16Financial Position at Year EndWorking capital
    
    $
    617
    
    
    $
    685
    
    
    $
    347
    
    
    $
    348
    
    
    $
    1,806Property and equipment, net
    
    
    4,187
    
    
    
    4,385
    
    
    
    4,333
    
    
    
    4,175
    
    
    
    4,339Total assets
    
    
    8,411
    
    
    
    8,952
    
    
    
    8,295
    
    
    
    7,863
    
    
    
    9,272Long-term debt (7)
    
    
    5,447
    
    
    
    5,824
    
    
    
    5,722
    
    
    
    5,540
    
    
    
    1,860Stockholders (deficit) equity
    
    
    (274
    )
    
    
    (389
    )
    
    
    (675
    )
    
    
    (724
    )
    
    
    4,325Common shares outstanding
    
    
    49.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215.9Number of Stores at Year EndDomestic
    
    
    846
    
    
    
    845
    
    
    
    837
    
    
    
    901
    
    
    
    898International (8)
    
    
    713
    
    
    
    715
    
    
    
    678
    
    
    
    641
    
    
    
    601Total Stores
    
    
    1,559
    
    
    
    1,560
    
    
    
    1,515
    
    
    
    1,542
    
    
    
    1,499
 
 (1)
    
    Includes Net sales of $1,786 million, $1,643 million and $1,650 million due to
consolidation of Toys  Japan for the fiscals 2008, 2007 and 2006, respectively.(2)
    
    Includes the impact of restructuring and other charges. See Note 11 to our
Consolidated Financial Statements entitled RESTRUCTURING AND OTHER CHARGES for further
information.(3)
    
    Includes $59 million of gift card breakage income related to a change in accounting
estimate effected by a change in accounting principle, $33 million of impairment losses on
long-lived assets and a $39 million gain related to the substantial liquidation of the
operations of TRU (HK) Limited, our wholly-owned subsidiary. See Note 1 to our Consolidated
Financial Statements entitled SUMMARY OF SIGINIFICANT ACCOUNTING POLICIES and Note 2 to our
Consolidated Financial Statements entitled ACCOUNTING CHANGES for further details.(4)
    
    Includes the impact of net gains on sales of properties of $5 million, $33 million
and $110 million in fiscals 2008, 2007 and 2006, respectively.(5)
    
    In the fourth quarter of fiscal 2006, we accumulated a sufficient level of
historical data to determine an estimated gift card breakage of $15 million.(6)
    
    Includes $410 million of transaction and related costs and $22 million of contract settlement and other fees related to the Merger.(7)
    
    Excludes current portion of long-term debt.(8)
    
    Includes licensed and franchised stores. 17




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
       EXECUTIVE OVERVIEW
 Our Business
      
    
    side-by-side store, which ranges in size from 45,000 to 50,000 square feet and
devotes approximately 30,000 square feet to traditional toy products and 15,000 square
feet to specialty juvenile products;
    
    R superstore, which typically ranges from 64,000 to 70,000 square feet by
combining a traditional toy store of approximately 34,000 square feet with a specialty
juvenile store of approximately 30,000 square feet;
 18




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
    
    traditional toy store, which typically ranges in size from 30,000 to 50,000 square
feet and devotes approximately 5,500 square feet to boutique areas for specialty juvenile
products (BRU Express and Juvenile Expansion formats devote approximately an additional
4,500 square feet and 1,000 square feet, respectively, for juvenile products); and
    
    specialty juvenile store, which typically ranges from 30,000 to 40,000 square feet
and devotes approximately 2,000 to 5,000 square feet to specialty name brand and private
label clothing.
    
    
    Domestic  Our Domestic segment sells a variety of products in the juvenile,
learning, entertainment, core toys, and seasonal categories through 846 stores that
operate in 49 states in the United States and Puerto Rico and through the Internet.
Domestic Net sales are derived from 512 traditional toy stores (including 75 BRU Express
and Juvenile Expansion formats), 262 specialty juvenile stores, 53 side-by-side stores
and 19 R superstores. On average, our stores offer approximately 10,000 active items
year-round. We believe we offer customers the most comprehensive selection of merchandise
in the retail toy and specialty juvenile industries and are able to provide vendors with
a year-round distribution outlet for the broadest assortment of their products.
    
    International  Our International segment sells a variety of products in the
juvenile, learning, entertainment, core toys, and seasonal categories through 713 owned,
licensed and franchised stores that operate in 33 countries and through the Internet. Net
sales (including fees received from licensed and franchised stores) in our International
segment are derived from 625 traditional toy stores (including 2 BRU Express formats), as
well as 66 side-by-side stores and 22 specialty juvenile stores that operate in
Australia, Austria, Canada, France, Germany, Japan, Portugal, Spain, Switzerland and the
United Kingdom. On average, a typical International store carries approximately 8,500
active items year-round. Our differentiated assortment, proportionately higher private
label or exclusively licensed product offerings, and quality service levels enable us to
command a reputation as the shopping destination for toys, games, juvenile and family
leisure products.
  
    
    SeasonalityOur business is highly seasonal with sales and earnings highest in
the fourth quarter. During the last three fiscal years, more than 39% of the sales from
our worldwide business and a substantial portion of the operating earnings and cash flows
from operations were generated in the fourth quarter. Our results of operations depend
significantly upon the holiday selling season in the fourth quarter.
    
    Spending patterns and product migration Many economic and other factors
outside our control, including consumer confidence, consumer spending levels, employment
levels, consumer debt levels and inflation, as well as the availability of consumer
credit, affect consumer spending habits. During fiscal 2008, there was significant
deterioration in the global financial markets and economic environment, which negatively
impacted consumer spending. In response, we have taken steps to increase opportunities to
profitably drive sales and to curtail capital spending and operating expenses wherever
prudent. If these adverse trends in economic conditions worsen, or if our efforts to
counteract the impacts of these trends are not sufficiently effective, there will be a
negative impact on our financial performance and position in future fiscal periods.In recent years, our sales have been impacted by children migrating from traditional play
categories at increasingly younger ages for more sophisticated products such as cell
phones, DVD players, CD players, MP3 devices and other electronic products. This pattern
or migration tends to decrease consumer demand for traditional toys. To the extent that we
are unable to offer consumers more sophisticated products or that these more sophisticated
products are also available at a wider range of retailers than our traditional
competitors, our Net sales and profitability could be adversely affected and we could
experience excess inventories.
    
    Increased competition Our businesses operate in a highly competitive retail
market. We compete on the basis of product variety, quality, availability, safety,
price, advertising and promotion, convenience or store location and customer service. We
face strong competition from discount and mass merchandisers, national and regional
chains and department
 19




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##### Table of Contents



stores, local retailers in the market areas we serve and Internet
and catalog businesses. Price competition in our retailing business continued to be
intense during the 2008 holiday season. In addition, price competition was further
enhanced by the liquidation of other retailers as a result of the weakening economic
environment during fiscal 2008.
    
    Video game business Video games represent a significant portion of   our
entertainment category. Over the course of a video cycle, from release of a video
platform until the release of the next generation of video platforms, video games have
tended to account for 10% to 15% of our Net sales. Competition in the video game market
has increased as the leading discounters, such as Wal-Mart and Target, have expanded, and
specialty players, such as Best Buy, Electronics Boutique, and GameStop, have all
experienced significant growth leading to greater competing demands for limited supplies
of popular products. Due to intense competition as well as the maturation of this
category, sales of video games will continue to experience volatility that may impact our
financial performance.
 RESULTS OF OPERATIONS
 Financial Performance
  Fiscal Years($ in millions)
    
    2008
    
    2007Net sales (decline) growth versus prior year
    
    
    (0.5
    )%
    
    
    5.7
    %Gross margin as a percentage of Net sales
    
    
    34.6
    %
    
    
    34.8
    %Selling, general and administrative expenses as a percentage of Net sales (1)
    
    
    28.1
    %
    
    
    27.6
    %Net
earnings
    
    $
    218
    
    
    $
    153
 
 (1)
    
    As of fiscal 2008, SG&A no longer includes certain items related to Other income such
as gift card breakage income, credit card program income, and impairment losses on
long-lived assets. Classification of prior period amounts has been corrected to conform
with our current year presentation. See Note 1 to the Consolidated Financial Statements
entitled SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for further details.     Comparable Store Net Sales
   
    
    stores that have been remodeled while remaining open;
    
    stores that have been relocated and/or expanded to new buildings within the same
trade area, in which the new store opens at the same time as the old store closes; and
    
    stores that have expanded within their current locations.
 20




---



##### Table of Contents



Fiscal Years EndedJanuary 31,
    
    February 2,
    
    February 3,2009
    

2008 (1)
    

2007 (1)Domestic
    
    
    (0.1
    )%
    
    
    2.7
    %
    
    
    0.2
    %International
    
    
    (3.4
    )%
    
    
    2.9
    %
    
    
    3.1
    %      (2)
 
 (1)
    
    Fiscal 2007 measures the variances between the 52 weeks ended February 2, 2008 and
the 52 weeks ended February 3, 2007.

Fiscal 2006 measures the variances between the 53 weeks ended February 3, 2007 and the 53
weeks ended February 4, 2006.(2)
    
    For comparative purposes, we have included Toys -Japan as if it was a wholly-owned
subsidiary in fiscal 2005 for purposes of calculating comparable store net sales in fiscal 2006. Percentage of Net Sales by Product Category
 Fiscal Years EndedJanuary 31,
    
    February 2,
    
    February 3,2009
    
    2008
    
    2007Juvenile
    
    
    32.1
    %
    
    
    31.6
    %
    
    
    30.9
    %Learning
    
    
    20.0
    %
    
    
    20.3
    %
    
    
    21.1
    %Entertainment
    
    
    18.0
    %
    
    
    17.4
    %
    
    
    16.1
    %Core Toy
    
    
    16.0
    %
    
    
    16.6
    %
    
    
    17.2
    %Seasonal
    
    
    12.8
    %
    
    
    12.9
    %
    
    
    13.5
    %Other (1)
    
    
    1.1
    %
    
    
    1.2
    %
    
    
    1.2
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    Consists primarily of shipping revenues on our Internet-based sales for our Domestic
segment and non-product related revenues. Store Count by Segment
 January 31,
    
    Fiscal 2008
    
    February 2,
    
    Fiscal 2007
    
    February 3,2009
    
    Opened
    
    Closed
    
    2008
    
    Opened
    
    Closed
    
    2007Domestic (1)
    
    
    846
    
    
    
    6
    
    
    
    (5
    )
    
    
    845
    
    
    
    12
    
    
    
    (4
    )
    
    
    837International - Wholly-Owned (2)
    
    
    504
    
    
    
    5
    
    
    
    (5
    )
    
    
    504
    
    
    
    18
    
    
    
    (2
    )
    
    
    488International - Licensed and Franchised
    
    
    209
    
    
    
    36
    (3)
    
    
    (38
    )      (3)
    
    
    211
    
    
    
    28
    
    
    
    (7
    )
    
    
    190Total
    
    
    1,559
    
    
    
    47
    
    
    
    (48
    )
    
    
    1,560
    
    
    
    58
    
    
    
    (13
    )
    
    
    1,515
 
 (1)
    
    Store count as of January 31, 2009 included 53 side-by-side stores, 19 R
superstores, 12 BRU Express stores and 63 Juvenile Expansions. As of February 2, 2008, there
were 28 side-by-side stores, 4 R superstores and 4 BRU Express stores. As of February 3,
2007, there were 6 side-by-side stores.(2)
    
    Store count includes 66, 31 and 12 side-by-side stores as of January 31, 2009,
February 2, 2008 and February 3, 2007, respectively. As of January 31, 2009, there were 2 BRU
Express stores.(3)
    
    Closed stores in fiscal 2008 include the closure of 35 stores related to the
termination of our franchise agreement in Turkey. Opened stores include new franchised stores
primarily in China, Malaysia and South Africa. 21




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##### Table of Contents



Fiscal 2008 Compared to Fiscal 2007
 Net Earnings
 Fiscal
    
    Fiscal(In millions)
    
    2008
    
    2007
    
    ChangeToys R Us
Consolidated
    
    $
    218
    
    
    $
    153
    
    
    $
    65
  Net Sales
 Percentage of Net salesFiscal
    
    
    Fiscal
    
    
    
    
    
    
    
    
    
    
    Fiscal
    
    
    Fiscal($ in millions)
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    % Change
    
    
    2008
    
    
    2007Domestic
    
    $
    8,480
    
    
    $
    8,450
    
    
    $
    30
    
    
    
    0.4
    %
    
    
    61.8
    %
    
    
    61.3
    %International
    
    
    5,244
    
    
    
    5,344
    
    
    
    (100
    )
    
    
    (1.9
    )%
    
    
    38.2
    %
    
    
    38.7
    %Total Net sales
    
    $
    13,724
    
    
    $
    13,794
    
    
    $
    (70
    )
    
    
    (0.5
    )%
    
    
    100.0
    %
    
    
    100.0
    %
   Domestic
   International
   22




---



##### Table of Contents



Cost of Sales and Gross Margin
   
    
    the cost of merchandise acquired from vendors;
    
    freight in;
    
    provision for excess and obsolete inventory;
    
    shipping costs;
    
    provision for inventory shortages; and
    
    credits and allowances from our merchandise vendors.
 Percentage of Net salesFiscal
    
    
    Fiscal
    
    
    
    
    
    
    Fiscal
    
    
    Fiscal($ in millions)
    
    2008
    
    
    2007
    
    
    $ Change
    
    
    2008
    
    
    2007
    
    
    ChangeDomestic
    
    $
    2,910
    
    
    $
    2,902
    
    
    $
    8
    
    
    
    34.3
    %
    
    
    34.3
    %
    
    
    International
    
    
    1,838
    
    
    
    1,905
    
    
    
    (67
    )
    
    
    35.0
    %
    
    
    35.6
    %
    
    
    (0.6
    )%Total Gross margin
    
    $
    4,748
    
    
    $
    4,807
    
    
    $
    (59
    )
    
    
    34.6
    %
    
    
    34.8
    %
    
    
    (0.2
    )%
  Domestic
   International
   Selling, General and Administrative Expenses (SG&A)
  
    
    store payroll and related payroll benefits;
    
    rent and other store operating expenses;
    
    advertising expenses;
    
    costs associated with operating our distribution network, including costs related
to moving merchandise from distribution centers to stores; and
    
    other corporate-related expenses.
 23




---



##### Table of Contents



Percentage of Net SalesFiscal
    
    Fiscal
    
    
    
    
    
    Fiscal
    
    Fiscal
    
    Percentage of Net($ in millions)
    
    2008
    
    2007
    
    $ Change
    
    2008
    
    2007
    
    Sales ChangeToys
R Us - Consolidated
    
    $
    3,856
    
    
    $
    3,801
    
    
    $
    55
    
    
    
    28.1
    %
    
    
    27.6
    %
    
    
    0.5
    %
    Depreciation and Amortization
 Fiscal
    
    Fiscal(In millions)
    
    2008
    
    2007
    
    ChangeToys
R Us - Consolidated
    
    $
    399
    
    
    $
    394
    
    
    $
    5
  Net Gains on Sales of Properties
 Fiscal
    
    Fiscal(In millions)
    
    2008
    
    2007
    
    ChangeToys
R Us - Consolidated
    
    $
    5
    
    
    $
    33
    
    
    $
    (28
    )
   Other Income, Net
  24




---



##### Table of Contents




    
    gift card breakage and dormancy income;
    
    gain on liquidation of a foreign subsidiary;
    
    credit card program income;
    
    impairment losses on long-lived assets;
    
    foreign exchange gains and losses; and
    
    other operating income and expenses.
 Fiscal
    
    Fiscal(In millions)
    
    2008
    
    2007
    
    ChangeToys
R Us - Consolidated
    
    $
    123
    
    
    $
    51
    
    
    $
    72
   Interest Expense
 Fiscal
    
    Fiscal(In millions)
    
    2008
    
    2007
    
    ChangeToys
R Us - Consolidated
    
    $
    419
    
    
    $
    503
    
    
    $
    (84
    )
  Interest Income
 Fiscal
    
    Fiscal(In millions)
    
    2008
    
    2007
    
    ChangeToys R Us -
Consolidated
    
    $
    16
    
    
    $
    27
    
    
    $
    (11
    )
  Income Tax Expense
 Fiscal
    
    Fiscal(In millions)
    
    2008
    
    2007
    
    ChangeToys
R Us - Consolidated
    
    $
    7
    
    
    $
    65
    
    
    $
    (58
    )Consolidated effective tax rate
    
    
    3.2
    %
    
    
    29.5
    %
    
    
    (26.3
    )%
  25




---



##### Table of Contents



Fiscal 2007 Compared to Fiscal 2006
 Net Earnings
 Fiscal
    
    Fiscal(In millions)
    
    2007
    
    2006
    
    ChangeToys R Us
Consolidated
    
    $
    153
    
    
    $
    109
    
    
    $
    44
  Net Sales
 Percentage of Net salesFiscal
    
    
    Fiscal
    
    
    
    
    
    
    
    
    
    
    Fiscal
    
    
    Fiscal($ in millions)
    
    2007
    
    
    2006
    
    
    $ Change
    
    
    % Change
    
    
    2007
    
    
    2006Domestic
    
    $
    8,450
    
    
    $
    8,270
    
    
    $
    180
    
    
    
    2.2
    %
    
    
    61.3
    %
    
    
    63.4
    %International
    
    
    5,344
    
    
    
    4,780
    
    
    
    564
    
    
    
    11.8
    %
    
    
    38.7
    %
    
    
    36.6
    %Total Net sales
    
    $
    13,794
    
    
    $
    13,050
    
    
    $
    744
    
    
    
    5.7
    %
    
    
    100.0
    %
    
    
    100.0
    %
   Domestic
   International
  26




---



##### Table of Contents



Cost of Sales and Gross Margin
 Percentage of Net SalesFiscal
    
    
    Fiscal
    
    
    
    
    
    
    Fiscal
    
    
    Fiscal($ in millions)
    
    2007
    
    
    2006
    
    
    $ Change
    
    
    2007
    
    
    2006
    
    
    ChangeDomestic
    
    $
    2,902
    
    
    $
    2,767
    
    
    $
    135
    
    
    
    34.3
    %
    
    
    33.5
    %
    
    
    0.8
    %International
    
    
    1,905
    
    
    
    1,645
    
    
    
    260
    
    
    
    35.6
    %
    
    
    34.4
    %
    
    
    1.2
    %Total Gross margin
    
    $
    4,807
    
    
    $
    4,412
    
    
    $
    395
    
    
    
    34.8
    %
    
    
    33.8
    %
    
    
    1.0
    %
   Domestic
   International
   27




---



##### Table of Contents



SG&A
 Percentage of Net SalesFiscal
    
    Fiscal
    
    
    
    
    
    Fiscal
    
    Fiscal
    
    Percentage of Net($ in millions)
    
    2007
    
    2006
    
    $ Change
    
    2007
    
    2006
    
    Sales ChangeToys
R Us - Consolidated
    
    $
    3,801
    
    
    $
    3,506
    
    
    $
    295
    
    
    
    27.6
    %
    
    
    26.9
    %
    
    
    0.7
    %
    Depreciation and Amortization
 Fiscal
    
    Fiscal(In millions)
    
    2007
    
    2006
    
    ChangeToys R Us -
Consolidated
    
    $
    394
    
    
    $
    409
    
    
    $
    (15
    )
  Net Gains on Sales of Properties
 Fiscal
    
    Fiscal(In millions)
    
    2007
    
    2006
    
    ChangeToys R Us -
Consolidated
    
    $
    33
    
    
    $
    110
    
    
    $
    (77
    )
   Other Income, Net
 Fiscal
    
    Fiscal(In millions)
    
    2007
    
    2006
    
    ChangeToys
R Us - Consolidated
    
    $
    51
    
    
    $
    42
    
    
    $
    9
  28




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##### Table of Contents



Interest Expense
 Fiscal
    
    Fiscal(In millions)
    
    2007
    
    2006
    
    ChangeToys
R Us - Consolidated
    
    $
    503
    
    
    $
    537
    
    
    $
    (34
    )
  Interest Income
 Fiscal
    
    Fiscal(In millions)
    
    2007
    
    2006
    
    ChangeToys
R Us - Consolidated
    
    $
    27
    
    
    $
    31
    
    
    $
    (4
    )
  Income Tax Expense
 Fiscal
    
    Fiscal(In millions)
    
    2007
    
    2006
    
    ChangeToys
R Us - Consolidated
    
    $
    65
    
    
    $
    35
    
    
    $
    30Consolidated effective tax rate
    
    
    29.5
    %
    
    
    24.5
    %
    
    
    5.0
    %
  LIQUIDITY AND CAPITAL RESOURCES
 
     29




---



##### Table of Contents



Cash Flows
 Fiscal
    
    
    Fiscal
    
    
    Fiscal(In millions)
    
    2008
    
    
    2007
    
    
    2006Net cash provided by operating activities
    
    $
    525
    
    
    $
    527
    
    
    $
    411Net cash used in investing activities
    
    
    (293
    )
    
    
    (416
    )
    
    
    (107
    )Net cash used in financing activities
    
    
    (189
    )
    
    
    (152
    )
    
    
    (566
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (11
    )
    
    
    27
    
    
    
    46Net increase (decrease) during period in cash and cash equivalents
    
    $
    32
    
    
    $
    (14
    )
    
    $
    (216
    )
 Cash Flows Provided by Operating Activities
   Cash Flows Used in Investing Activities
    Cash Flows Used in Financing Activities
  30




---



##### Table of Contents



Debt
   
    
    On March 31, 2008, Toys  Japan entered into an agreement with a syndicate of financial
institutions, which established two unsecured loan commitment lines of credit. During
fiscal 2008 Toys  Japan had net repayments on its unsecured credit lines of $119 million.
    
    We made net payments of $53 million related primarily to scheduled long-term debt
repayments including the final installment payment of $21 million on the Note due in
semi-annual installments on February 20, 2008.
    
    We received $33 million in landlord incentives related to finance obligations associated
with capital projects.
    
    On July 3, 2008, we exercised our second maturity date extension option on our $800
million secured real estate loans, which extended the maturity date of the loans from
August 9, 2008 to August 9, 2009. These amounts have been classified as Long-term debt on
our  Consolidated Balance Sheet as of January 31, 2009 because we have the contractual ability and
intent to extend the maturity date to August 9, 2010.
    
    On September 5, 2008, we exercised our right to extend the maturity date of our $1.3
billion Unsecured credit agreement from December 9, 2008 to December 8, 2009. These
amounts have been classified as Long-term debt on our  Consolidated Balance  Sheet as of January 31, 2009
 because we have the contractual ability and intent to extend the maturity date to
December 7, 2010. Pursuant to the terms of this first extension, we are required to make
quarterly principal payments equal to 1.25% (approximately $65 million per year) of the
original principal amount of the loan. As such, these amounts have been classified as
Current portion of long-term debt on our Consolidated Balance Sheet as of January 31, 2009.
  31




---



##### Table of Contents



Contractual Obligations
  Payments Due By PeriodFiscalsFiscals
    
    
    Fiscals
    
    
    2014 and(In millions)
    
    Fiscal 2009
    
    
    2010 & 2011
    
    
    2012 & 2013
    
    
    thereafter
    
    
    TotalOperating leases
    
    $
    543
    
    
    $
    1,035
    
    
    $
    867
    
    
    $
    2,110
    
    
    $
    4,555Less: sub-leases to third parties
    
    
    22
    
    
    
    35
    
    
    
    22
    
    
    
    24
    
    
    
    103Net operating lease obligations
    
    
    521
    
    
    
    1,000
    
    
    
    845
    
    
    
    2,086
    
    
    
    4,452Capital lease obligations
    
    
    18
    
    
    
    28
    
    
    
    8
    
    
    
    38
    
    
    
    92Long-term debt (1)
    
    
    80
    
    
    
    2,725
    
    
    
    2,218
    
    
    
    430
    
    
    
    5,453Interest payments (2)
    
    
    306
    
    
    
    482
    
    
    
    192
    
    
    
    180
    
    
    
    1,160Purchase obligations (3)
    
    
    945
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    945Other (4)
    
    
    421
    
    
    
    212
    
    
    
    43
    
    
    
    40
    
    
    
    716Total contractual obligations
    
    $
    2,291
    
    
    $
    4,447
    
    
    $
    3,306
    
    
    $
    2,774
    
    
    $
    12,818
 
 (1)
    
    We have classified our $800 million secured real estate loans due August 9, 2009 and
our $1.3 billion unsecured credit agreement due December 9, 2009 as annual maturities of 2010
because we have the contractual ability and intent to extend the due dates to August 9, 2010
and December 7, 2010, respectively. Refer to Note 3 to our Consolidated Financial Statements
entitled LONG-TERM DEBT.(2)
    
    In an effort to manage interest rate exposure, we have entered into interest rate
swaps to achieve an acceptable balance between fixed and variable rate debt. $2.4 billion of
debt was effectively subject to fixed interest rates and $3.1 billion of debt was effectively
subject to variable interest rates. The interest payments in the table for the $3.1 billion of
variable rate debt were based on the indexed interest rates in effect at January 31, 2009.(3)
    
    Purchase obligations consist primarily of open purchase orders for merchandise as
well as an agreement to purchase fixed or minimum quantities of goods that are not included in
our Consolidated Balance Sheet as of January 31, 2009.(4)
    
    Includes gift card liabilities, FIN 48 liabilities, pension obligations, risk
management liabilities, and other general obligations and contractual commitments.  Fiscal
    
    
    Fiscal
    
    
    Fiscal(In millions)
    
    2008
    
    
    2007
    
    
    2006Real estate taxes
    
    $
    62
    
    
    $
    60
    
    
    $
    61Maintenance and insurance
    
    
    55
    
    
    
    47
    
    
    
    44Contingent rent
    
    
    9
    
    
    
    10
    
    
    
    9Total
    
    $
    126
    
    
    $
    117
    
    
    $
    114
 Off-balance Sheet Arrangements
  32




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##### Table of Contents



Credit Ratings
  Moodys
    

Standard and PoorsLong-term debt
    
    
    B2
    
    
    
    BOutlook
    
    Stable
    
    Negative
     CRITICAL ACCOUNTING POLICIES
   Merchandise Inventories
    33




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##### Table of Contents



Store Closures and Long-lived Asset Impairment
    Goodwill Impairment
     Self-Insured Liabilities
   34




---



##### Table of Contents



Revenue Recognition
  Gift Cards and Breakage
    Income Taxes
    35




---



##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
 Partial Adoption of SFAS 157
  Adoption of FSP SFAS 140-4 and FIN 46 (R)-8
   
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Exchange Exposure
   
    
    We enter into short-term, cross-currency intercompany loans with our foreign
subsidiaries as part of our global cash management strategy. This exposure is economically
hedged through the use of foreign currency exchange forward contracts. As a result, a 10%
change in foreign currency exchange rates against the U.S. dollar would not have an impact
on our pre-tax earnings related to our short-term, cross-currency intercompany loans.
    
    In addition, our foreign subsidiaries make U.S. dollar denominated merchandise purchases
through the normal course of business. From time to time, we enter into foreign exchange
forward contracts under our merchandise import program. As of January 31, 2009, we had no
outstanding contracts.
  36




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##### Table of Contents



Interest Rate Exposure
   Impact of
    
    
    Impact of(In millions)
    
    1% Increase
    
    
    1% DecreaseInterest rate swaps
    
    $
    24
    
    
    $
    (24
    )Variable rate debt
    
    
    (34
    )
    
    
    34Total pretax income exposure to interest rate risk
    
    $
    (10
    )
    
    $
    10
  37




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 PAGEReport of Independent Registered Public Accounting Firm
    
    
    39Consolidated Statements of Operations
    
    
    40Consolidated Balance Sheets
    
    
    41Consolidated Statements of Cash Flows
    
    
    42Consolidated Statements of Stockholders Deficit
    
    
    43Notes to Consolidated Financial Statements
    
    
    44Quarterly Results of Operations (Unaudited)
    
    
    81Schedule I  Parent Company Condensed Financial Statements and Notes to the Condensed Financial Statements
    
    
    82
 38




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
          39




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##### Table of Contents



Toys R Us, Inc. and Subsidiaries
 
 Consolidated Statements of Operations
 Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,(In millions)
    
    2009
    
    
    2008
    
    
    2007Net sales
    
    $
    13,724
    
    
    $
    13,794
    
    
    $
    13,050Cost of sales
    
    
    8,976
    
    
    
    8,987
    
    
    
    8,638Gross margin
    
    
    4,748
    
    
    
    4,807
    
    
    
    4,412Selling, general and administrative expenses
    
    
    3,856
    
    
    
    3,801
    
    
    
    3,506Depreciation and amortization
    
    
    399
    
    
    
    394
    
    
    
    409Net gains on sales of properties
    
    
    (5
    )
    
    
    (33
    )
    
    
    (110
    )Other income, net
    
    
    (123
    )
    
    
    (51
    )
    
    
    (42
    )Total operating expenses
    
    
    4,127
    
    
    
    4,111
    
    
    
    3,763Operating earnings
    
    
    621
    
    
    
    696
    
    
    
    649Interest expense
    
    
    (419
    )
    
    
    (503
    )
    
    
    (537
    )Interest income
    
    
    16
    
    
    
    27
    
    
    
    31Earnings before income taxes and minority interest
    
    
    218
    
    
    
    220
    
    
    
    143Income tax expense
    
    
    7
    
    
    
    65
    
    
    
    35Minority interest, net of tax
    
    
    (7
    )
    
    
    2
    
    
    
    (1
    )Net earnings
    
    $
    218
    
    
    $
    153
    
    
    $
    109
  40




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##### Table of Contents



Toys R Us, Inc. and Subsidiaries
 
 Consolidated Balance Sheets
 January 31,
    
    
    February 2,(In millions - except share amounts)
    
    2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    783
    
    
    $
    751Short-term investments
    
    
    
    
    
    
    168Accounts and other receivables
    
    
    251
    
    
    
    256Merchandise inventories
    
    
    1,781
    
    
    
    1,998Current deferred tax assets
    
    
    84
    
    
    
    80Prepaid expenses and other current assets
    
    
    124
    
    
    
    140Total current assets
    
    
    3,023
    
    
    
    3,393Property and equipment, net
    
    
    4,187
    
    
    
    4,385Goodwill, net
    
    
    380
    
    
    
    366Deferred tax assets
    
    
    180
    
    
    
    197Restricted cash
    
    
    193
    
    
    
    131Other assets
    
    
    448
    
    
    
    480$
    8,411
    
    
    $
    8,952LIABILITIES AND STOCKHOLDERS DEFICITCurrent Liabilities:Accounts payable
    
    $
    1,412
    
    
    $
    1,534Accrued expenses and other current liabilities
    
    
    847
    
    
    
    996Income taxes payable
    
    
    49
    
    
    
    128Current portion of long-term debt
    
    
    98
    
    
    
    50Total current liabilities
    
    
    2,406
    
    
    
    2,708Long-term debt
    
    
    5,447
    
    
    
    5,824Deferred tax liabilities
    
    
    78
    
    
    
    21Deferred rent liabilities
    
    
    260
    
    
    
    261Other non-current liabilities
    
    
    372
    
    
    
    374Minority interest in Toys  Japan
    
    
    122
    
    
    
    153Stockholders Deficit:Common stock (par value $0.001 and $0.01; shares authorized 55,000,000 and 3,000; shares issued and
outstanding 48,965,402 and 1,000 at January 31, 2009 and February 2, 2008, respectively)
    
    
    
    
    
    
    Additional paid-in capital
    
    
    19
    
    
    
    10Accumulated deficit
    
    
    (200
    )
    
    
    (419
    )Accumulated other comprehensive (loss) income
    
    
    (93
    )
    
    
    20Total stockholders deficit
    
    
    (274
    )
    
    
    (389
    )$
    8,411
    
    
    $
    8,952
  41




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##### Table of Contents



Toys R Us, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows
 Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,(In millions)
    
    2009
    
    
    2008
    
    
    2007Cash Flows from Operating Activities:Net earnings
    
    $
    218
    
    
    $
    153
    
    
    $
    109Adjustments to reconcile earnings to net cash provided by operating activities:Depreciation and amortization
    
    
    399
    
    
    
    394
    
    
    
    409Amortization of debt issuance costs
    
    
    34
    
    
    
    31
    
    
    
    63Net gains on sales of properties
    
    
    (5
    )
    
    
    (33
    )
    
    
    (110
    )Deferred income taxes
    
    
    64
    
    
    
    (115
    )
    
    
    (13
    )Non-cash portion of restructuring, other charges and impairments
    
    
    52
    
    
    
    20
    
    
    
    22Other
    
    
    5
    
    
    
    12
    
    
    
    1Changes in operating assets and liabilities:Accounts and other receivables
    
    
    25
    
    
    
    (13
    )
    
    
    21Merchandise inventories
    
    
    106
    
    
    
    (220
    )
    
    
    11Prepaid expenses and other operating assets
    
    
    27
    
    
    
    21
    
    
    
    (8
    )Accounts payable, accrued expenses and other liabilities
    
    
    (306
    )
    
    
    169
    
    
    
    (81
    )Income taxes payable and receivable
    
    
    (94
    )
    
    
    108
    
    
    
    (13
    )Net cash provided by operating activities
    
    
    525
    
    
    
    527
    
    
    
    411Cash Flows from Investing Activities:Capital expenditures
    
    
    (395
    )
    
    
    (326
    )
    
    
    (285
    )Sale (purchase) of short-term investments
    
    
    167
    
    
    
    (168
    )
    
    
    Purchase of Toys-Japan shares
    
    
    (34
    )
    
    
    
    
    
    
    (Increase) decrease in restricted cash
    
    
    (64
    )
    
    
    17
    
    
    
    (41
    )Proceeds from sale of fixed assets
    
    
    33
    
    
    
    61
    
    
    
    219Net cash used in investing activities
    
    
    (293
    )
    
    
    (416
    )
    
    
    (107
    )Cash Flows from Financing Activities:Long-term debt borrowings
    
    
    1,123
    
    
    
    906
    
    
    
    3,643Short-term debt borrowings
    
    
    156
    
    
    
    232
    
    
    
    158Long-term debt repayment
    
    
    (1,294
    )
    
    
    (1,020
    )
    
    
    (4,124
    )Short-term debt repayment
    
    
    (166
    )
    
    
    (268
    )
    
    
    (184
    )Capitalized debt issuance costs
    
    
    (6
    )
    
    
    
    
    
    
    (45
    )Other
    
    
    (2
    )
    
    
    (2
    )
    
    
    (14
    )Net cash used in financing activities
    
    
    (189
    )
    
    
    (152
    )
    
    
    (566
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (11
    )
    
    
    27
    
    
    
    46Cash and cash equivalents:Net increase (decrease) during period
    
    
    32
    
    
    
    (14
    )
    
    
    (216
    )Cash and cash equivalents at beginning of period
    
    
    751
    
    
    
    765
    
    
    
    981Cash and cash equivalents at end of period
    
    $
    783
    
    
    $
    751
    
    
    $
    765Supplemental Disclosures of Cash Flow Information:Income taxes paid, net of refunds
    
    $
    146
    
    
    $
    72
    
    
    $
    63Interest paid
    
    $
    352
    
    
    $
    444
    
    
    $
    496
  42




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##### Table of Contents



Toys R Us, Inc. and Subsidiaries
 
 Consolidated Statements of Stockholders Deficit
 AccumulatedCommon Stock (2)
    
    

    Additional
    
    
    Other
    
    
    
    
    
    
    TotalIssued
    
    

    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Stockholders(In millions)
    
    Shares
    
    
    Capital
    
    
    (Loss) Income
    
    
    Deficit
    
    
    DeficitBalance, January 28, 2006
    
    
    
    
    
    $
    
    
    
    $
    (55
    )
    
    $
    (669
    )
    
    $
    (724
    )Net earnings for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    109Foreign currency translation adjustments, net of tax
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    (42
    )Unrealized loss on hedged transactions, net of tax
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Minimum pension liability adjustments, net of tax
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69Cumulative effect of SAB 108 adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    (24
    )Stock compensation expense
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Balance, February 3, 2007
    
    
    
    
    
    $
    4
    
    
    $
    (95
    )
    
    $
    (584
    )
    
    $
    (675
    )Net earnings for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153
    
    
    
    153Foreign currency translation adjustments, net of tax
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    
    
    
    
    121Unrealized loss on hedged transactions, net of tax
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271Cumulative effect of change in accounting principle, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Cumulative effect of adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    21Effect of adoption of SFAS 158, net of tax
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Stock compensation expense
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Balance, February 2, 2008
    
    
    
    
    
    $
    10
    
    
    $
    20
    
    
    $
    (419
    )
    
    $
    (389
    )Net earnings for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218
    
    
    
    218Foreign currency translation adjustments, net of tax
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    
    
    
    
    (56
    )Unrealized loss on hedged transactions, net of tax
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    (21
    )Unrealized actuarial losses, net of tax and minority interest
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Foreign currency effect on liquidation of foreign subsidiary
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    (39
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105Cumulative effect of change in accounting principle, net of tax (Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Toys R Us Holdings, Inc. reorganization (1)
    
    
    49
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Stock compensation expense
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Balance, January 31, 2009
    
    
    49
    
    
    $
    19
    
    
    $
    (93
    )
    
    $
    (200
    )
    
    $
    (274
    )
 
 (1)
    
    Pursuant to the reorganization on June 10, 2008, our 1,000 shares, $0.01 par value,
were exchanged for 48,955,808 shares, $0.001 par value. See Note 20 entitled REORGANIZATION for
information on the issuance of the new common stock.(2)
    
    For all periods presented, the amount of Common Stock issued and
the amount of Common Stock in treasury are less than $1 million. The
number of Common Stock shares in treasury is also less than 1 million.  43




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##### Table of Contents



Toys R Us, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization
      Fiscal Year
  Fiscal Year
    
    Number of Weeks
    
    Ended2008
    
    
    
    
    52
    
    
    January 31, 20092007
    
    
    
    
    52
    
    
    February 2, 20082006
    
    
    
    
    53
    
    
    February 3, 2007
 Principles of Consolidation
  Investment in Toys R Us-Japan
  44




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##### Table of Contents



Variable Interest Entities
    Adoption of Securities and Exchange Commission Staff Accounting Bulletin No. 108
  CumulativeDeferred
    
    Income
    
    Deferred
    
    adjustmenttax
    
    taxes
    
    tax
    
    to Accumulated(In millions)
    
    assets
    
    payable
    
    liabilities
    
    deficitAccounting for income taxes
    
    $
    (5
    )
    
    $
    20
    
    
    $
    (1
    )
    
    $
    
    24
 Use of Estimates
  Reclassifications and Corrections of Previously Issued Financial Statements
  Cash and Cash Equivalents
  Restricted Cash
  45




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##### Table of Contents



Accounts and Other Receivables
  Short-Term Investments
  Merchandise Inventories
  Property and Equipment, Net
   Impairment of Long-Lived Assets and Costs Associated with Exit Activities
    Asset Retirement Obligations
  46




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##### Table of Contents



Goodwill, Net
  January 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Domestic
    
    $
    359
    
    
    $
    359International
    
    
    21
    
    
    
    7Total
    
    $
    380
    
    
    $
    366
     Debt Issuance Costs
  Insurance Risks
  Commitments and Contingencies
  Leases
  47




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##### Table of Contents



Deferred Rent
  Financial Instruments
  
    
    For designated fair value hedges, changes in fair values of the hedged items for
the risks being hedged are recorded in earnings.
    
    For designated cash flow hedges, the effective portion of the changes in the fair
value of derivatives are recorded in other comprehensive (loss) income and subsequently
recorded in the Consolidated Statements of Operations at the time the hedged item affects
earnings.
    
    For designated cash flow hedges, the ineffective portion of a hedged derivative
instruments change in fair value is immediately recognized in Interest expense in the
Consolidated Statements of Operations.
  Foreign Currency Translation
  
    
    Australian dollar for our subsidiary in Australia;
    
    British pound sterling for our subsidiary in the United Kingdom;
    
    Canadian dollar for our subsidiary in Canada;
    
    Euro for subsidiaries in Austria, France, Germany, Spain, and Portugal;
    
    Japanese yen for our subsidiary in Japan; and
    
    Swiss franc for our subsidiary in Switzerland.
  48




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##### Table of Contents



Revenue Recognition
   Reserve for Sales Returns
  Gift Cards and Breakage
   Credit Card Program
  49




---



##### Table of Contents



Cost of Sales and SG&A Expenses
  Cost of sales
    
    SG&A
    
    merchandise acquired from vendors;
    
    
    
    store payroll and related payroll
benefits;
    
    freight in;
    
    
    
    rent and other store operating expenses;
    
    provision for excess and obsolete inventories;
    
    
    
    advertising expenses;
    
    shipping costs;
provision for inventory shortages; and
    
    
    
    costs associated with operating our
distribution network, including costs
related to moving merchandise from
distribution centers to stores; and
    
    credits and allowances from our merchandise
vendors.
    
    
    
    other corporate-related expenses.
 Credits and Allowances Received from Vendors
   Advertising Costs
  Pre-opening Costs
  Costs of Computer Software
  Income Taxes
  50




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##### Table of Contents



Stock-Based Compensation
  NOTE 2  ACCOUNTING CHANGES
 Gift card breakage
    51




---



##### Table of Contents



(In millions)As of January 31, 2009
    
    As Reported
    
    Pro Forma
    
    ChangeCurrent deferred tax assets
    
    
    84
    
    
    
    93
    
    
    
    (9
    )Total current assets
    
    
    3,023
    
    
    
    3,032
    
    
    
    (9
    )Total assets
    
    
    8,411
    
    
    
    8,420
    
    
    
    (9
    )Accrued expenses and other current liabilities
    
    
    847
    
    
    
    906
    
    
    
    (59
    )Income taxes payable
    
    
    49
    
    
    
    35
    
    
    
    14Total current liabilities
    
    
    2,406
    
    
    
    2,451
    
    
    
    (45
    )Accumulated deficit
    
    
    (200
    )
    
    
    (236
    )
    
    
    36Total stockholders deficit
    
    
    (274
    )
    
    
    (310
    )
    
    
    36
  (In millions)For Fiscal 2008
    
    As Reported
    
    Pro Forma
    
    ChangeOther income, net
    
    $
    123
    
    
    $
    64
    
    
    $
    59Operating earnings
    
    
    621
    
    
    
    562
    
    
    
    59Earnings before income taxes and minority interest
    
    
    218
    
    
    
    159
    
    
    
    59Income tax expense (benefit)
    
    
    7
    
    
    
    (16
    )
    
    
    23Net earnings
    
    
    218
    
    
    
    182
    
    
    
    36
 Merchandise Inventories
  
    
    37% of Merchandise inventories were previously valued at retail LIFO (last-in,
first-out) and were converted to LIFO cost;
    
    18% of Merchandise inventories were previously valued at retail FIFO (first-in,
first-out) and were converted to weighted average cost; and
    
    7% of Merchandise inventories were previously valued at retail LIFO and were
converted to weighted average cost.
     52




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##### Table of Contents



(In millions)As of January 31, 2009
    
    As Reported
    
    Pro Forma
    
    ChangeMerchandise inventories
    
    $
    1,781
    
    
    $
    1,745
    
    
    $
    36Total current assets
    
    
    3,023
    
    
    
    2,987
    
    
    
    36Total assets
    
    
    8,411
    
    
    
    8,375
    
    
    
    36Accrued expenses and other current liabilities
    
    
    847
    
    
    
    828
    
    
    
    19Total current liabilities
    
    
    2,406
    
    
    
    2,387
    
    
    
    19Accumulated deficit
    
    
    (200
    )
    
    
    (217
    )
    
    
    17Total stockholders deficit
    
    
    (274
    )
    
    
    (291
    )
    
    
    17Total liabilities and stockholders deficit
    
    
    8,411
    
    
    
    8,375
    
    
    
    36
  (In millions)For Fiscal 2008
    
    As Reported
    
    Pro Forma
    
    ChangeCost of sales
    
    $
    8,976
    
    
    $
    9,006
    
    
    $
    (30
    )Gross margin
    
    
    4,748
    
    
    
    4,718
    
    
    
    30Operating earnings
    
    
    621
    
    
    
    591
    
    
    
    30Earnings
before income taxes and minority interest
    
    
    218
    
    
    
    188
    
    
    
    30Income tax expense (benefit)
    
    
    7
    
    
    
    (5
    )
    
    
    12Net earnings
    
    
    218
    
    
    
    200
    
    
    
    18
 53




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##### Table of Contents



NOTE 3  LONG-TERM DEBT
  January 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Note due in semi-annual installments through February 20, 2008 (1.75%) (1)
    
    $
    
    
    
    $
    21Toys-Japan 0.77%-1.18% loans due fiscal 2008 (0.87%) (2)
    
    
    
    
    
    
    137Toys-Japan committed credit lines due fiscal 2011
    
    
    18
    
    
    
    Secured real estate loan, due August 9, 2009 (1.64% and 5.54%) (3)
    
    
    800
    
    
    
    800Unsecured credit agreement, due December 8, 2009 (6.14% and 6.26%) (4)
    
    
    1,300
    
    
    
    1,300$2.0 billion secured revolving credit facility, expires fiscal 2010
    
    
    
    
    
    
    Multi-currency revolving credit facility, expires fiscal 2010
    
    
    
    
    
    
    Toys-Japan 1.20%-2.80% loans due fiscals 2010-2014 (1.65% and 1.70% )
    
    
    171
    
    
    
    1537.625% notes, due fiscal 2011 (5)
    
    
    512
    
    
    
    517Secured term loan facility, due fiscal 2012 (4.58% and 9.55%)
    
    
    797
    
    
    
    797Unsecured credit facility, due fiscal 2012 (5.33% and 9.41%)
    
    
    180
    
    
    
    180French real estate credit facility, due fiscal 2012 (4.51% and 4.51%)
    
    
    81
    
    
    
    95Spanish real estate credit facility, due fiscal 2012 (4.51% and 4.51%)
    
    
    168
    
    
    
    196U.K. real estate senior credit facility, due fiscal 2013 (5.02% and 5.02%)
    
    
    514
    
    
    
    696U.K. real estate junior credit facility, due fiscal 2013 (6.84% and 6.84%)
    
    
    91
    
    
    
    1247.875% senior notes, due fiscal 2013 (5)
    
    
    393
    
    
    
    3927.375% senior notes, due fiscal 2018 (5)
    
    
    406
    
    
    
    4078.750% debentures, due fiscal 2021 (6)
    
    
    22
    
    
    
    22Other (7)
    
    
    92
    
    
    
    375,545
    
    
    
    5,874Less current portion (4)
    
    
    98
    
    
    
    50Total long-term debt (8)
    
    $
    5,447
    
    
    $
    5,824
 
 (1)
    
    On February 20, 2008, we paid the final installment of this note.(2)
    
    In fiscal 2008, we refinanced these borrowings under the Toys  Japan committed
credit line due fiscal 2011.(3)
    
    We have exercised our second maturity date extension option, which extended
the maturity date of the loans to August 9, 2009. These amounts have been classified as
Long-term debt as we have the contractual ability and intent to extend the maturity date to
August 9, 2010.(4)
    
    We have exercised our first maturity date extension option, which extended the
maturity date of this loan to December 8, 2009. These amounts have been classified as
Long-term debt as we have the contractual ability and intent to extend the maturity date to
December 7, 2010. Pursuant to the terms of the first extension, we are required to make
quarterly principal payments equal to 1.25% (approximately $65 million per year) of the
original principal amount of the loan. As such, these amounts have been classified as Current
portion of
long-term debt on our  Consolidated Balance Sheet as of January 31, 2009.(5)
    
    Represents obligations of Toys R Us, Inc. legal entity. For further details on
parent company information, refer to Schedule I  Parent Company Condensed Financial
Statements and Notes to the Condensed Financial Statements.(6)
    
    Represents obligations of Toys R Us, Inc. and Toys R Us-Delaware, Inc.
(Toys-Delaware).(7)
    
    Fiscal 2008 includes $55 million related to capital lease obligations and $37 million related to
finance obligations associated with capital projects.
Fiscal 2007 includes $33  million related to capital lease obligations
and $4 million related to finance obligations associated with capital
projects.(8)
    
    We maintain derivative instruments on certain of our long-term debt, which impact
our effective interest rates. Refer to Note 4 entitled DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES for further details.   54




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##### Table of Contents



Annual(In millions)
    
    Maturities2009 (1)
    
    $
    982010 (1)
    
    
    2,1932011
    
    
    5602012
    
    
    1,2362013
    
    
    9902014 and subsequent
    
    
    468Total
    
    $
    5,545
 
 (1)
    
    We have classified our $800 million secured real estate loan due August 9, 2009 and
our $1.3 billion unsecured credit agreement due December 8, 2009 as annual maturities of
fiscal 2010, because we have the contractual ability and intent to extend the due dates to
August 9, 2010 and December 7, 2010, respectively. Pursuant to the terms of the first
extension of our $1.3 billion unsecured credit agreement, we are required to make quarterly
principal payments equal to 1.25% (approximately $65 million per year) of the original
principal amount of the loan. As such, these amounts have been classified as Current portion
of long-term debt on our  Consolidated Balance Sheet as of January 31, 2009. Toys  Japan Credit Lines ($18 million at January 31, 2009)
      $2.0 billion secured revolving credit facility, expires fiscal 2010 ($0 at January 31, 2009)
  55




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##### Table of Contents



Multi-currency revolving credit facility, expires fiscal 2010 ($0 at January 31, 2009)
 
 Secured real estate loans, due August 9, 2009 ($800 million at January 31, 2009)
   Unsecured credit agreement, due December 8, 2009 ($1.3 billion at January 31, 2009)
    56




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##### Table of Contents



Secured term loan facility, due fiscal 2012 ($797 million at January 31, 2009)
  Unsecured credit facility, due fiscal 2012 ($180 million at January 31, 2009)
   63 million French and 131 million Spanish real estate credit facilities, due fiscal 2012 ($81
million and $168 million at January 31, 2009, respectively)
  £354 million U.K. real estate senior and £63 million U.K. real estate junior credit facilities, due
fiscal 2013 ($514 million and $91 million at January 31, 2009, respectively)
    57




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##### Table of Contents



Guarantees
  NOTE 4  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
    58




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##### Table of Contents



As of January 31, 2009
    
    As of February 2, 2008Notional
    
    Fair Value
    
    Notional
    
    Fair Value(In millions)
    
    
    
    
    
    Amount
    
    Assets/
    
    Amount
    
    Assets/Related Items (in Local Currency) (1)
    
    Effective Date
    
    Maturity Date
    
    (In USD)
    
    (Liabilities)
    
    (In USD)
    
    (Liabilities)Foreign Exchange ForwardsShort-term cross-currency intercompany loans (2)
    
    Varies
    
    Varies
    
    $
    74
    
    
    $
    (2
    )
    
    $
    57
    
    
    $
    Interest Rate SwapsFrench real estate credit facility due fiscal 2012 (EUR)
    
    February 2006
    
    February 2013
    
    
    81
    
    
    
    (1
    )
    
    
    95
    
    
    
    4Spanish real estate credit facility due fiscal 2012 (EUR)
    
    February 2006
    
    February 2013
    
    
    168
    
    
    
    (1
    )
    
    
    196
    
    
    
    8U.K. real estate junior credit facility due fiscal 2013 (GBP)
    
    February 2006
    
    April 2013
    
    
    88
    
    
    
    (4
    )
    
    
    120
    
    
    
    2U.K. real estate junior credit facility due fiscal 2013 (GBP) (3)
    
    April 2007
    
    April 2013
    
    
    3
    
    
    
    
    
    
    
    4
    
    
    
    Unsecured credit agreement due December 8, 2009 (USD) (3)
    
    May 2008
    
    December 2010
    
    
    1,300
    
    
    
    (44
    )
    
    
    
    
    
    
    Secured term
loan facility due fiscal 2012 (USD)
    
    August 2006
    
    August 2008
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    (8
    )Toys-Japan (JPY)
    
    May 2001
    
    March 2020
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    (4
    )Interest Rate CapsSecured real
estate loan due August 9, 2009 (USD)
    
    July 2005
    
    August 2009
    
    
    800
    
    
    
    
    
    
    
    800
    
    
    
    Unsecured
credit agreement due December 8, 2009 (USD)
    
    December 2005
    
    December 2009
    
    
    1,300
    
    
    
    
    
    
    
    1,300
    
    
    
    Unsecured credit facility due fiscal 2012 (USD)
    
    May 2007
    
    May 2009
    
    
    91
    
    
    
    
    
    
    
    91
    
    
    
    Secured term
loan facility due fiscal 2012 (USD)
    
    August 2008
    
    August 2010
    
    
    600
    
    
    
    
    
    
    
    600
    
    
    
    Interest Rate CorridorsSecured real estate loan due August 9, 2009 (USD)
    
    July 2006
    
    August 2008
    
    
    
    
    
    
    
    
    
    
    800
    
    
    
    Unsecured
credit agreement due December 8, 2009 (USD)
    
    July 2006
    
    December 2008
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    
 
 (1)
    
    Refer to Note 3 entitled LONG-TERM DEBT for detail on our related items, except
for Short-term, cross-currency intercompany loans.(2)
    
    We enter into foreign exchange forward contracts at various dates to economically
hedge the risk associated with short-term, cross-currency intercompany loans.(3)
    
    As of January 31, 2009, these derivatives qualified for hedge accounting as cash
flow hedges. We evaluate the effectiveness of the hedging relationships on an ongoing basis
and recalculate changes in fair values of the derivatives and the underlying hedged items
separately.  Toys  Japan interest rate swap
  Unsecured credit agreement, due December 8, 2009 ($1.3 billion at January 31, 2009)
   Secured real estate loan, due August 9, 2009 ($800 million at January 31, 2009)
  59




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##### Table of Contents



Foreign Currency Forward Contracts
   NOTE 5  FAIR VALUE MEASUREMENTS
    Short-term Investments
  Derivative Financial Instruments
   60




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##### Table of Contents



Cash Equivalents
   Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Assets and
    
    
    Observable Inputs
    
    
    Inputs
    
    
    Balance at(In millions)
    
    Liabilities (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    January 31, 2009Cash Equivalents
    
    $
    183
    
    
    $
    
    
    
    $
    
    
    
    $
    183Derivative financial instruments
    
    
    
    
    
    
    (46
    )
    
    
    (6
    )
    
    
    (52
    )Total
    
    $
    183
    
    
    $
    (46
    )
    
    $
    (6
    )
    
    $
    131
  (In millions)
    
    Level 3Balance, February 3, 2008
    
    $
    168Settlements
    
    
    (167
    )Total loss
    
    
    (1
    )Transfers in to Level 3
    
    
    (6
    )Balance, January 31, 2009
    
    $
    (6
    )
 NOTE 6  PROPERTY AND EQUIPMENT
 Useful life
    
    
    January 31,
    
    
    February 2,($ in millions)
    
    (in years)
    
    
    2009
    
    
    2008Land
    
    
    
    
    
    $
    756
    
    
    $
    838Buildings
    
    
    45-50
    
    
    
    2,067
    
    
    
    2,142Furniture and equipment
    
    
    5-20
    
    
    
    1,752
    
    
    
    1,748Leasehold improvements
    
    
    10-25
    
    
    
    2,253
    
    
    
    2,255Costs of computer software
    
    
    5
    
    
    
    261
    
    
    
    306Construction in progress
    
    
    
    
    
    
    44
    
    
    
    42Leased equipment under capital lease
    
    
    3-8
    
    
    
    93
    
    
    
    657,226
    
    
    
    7,396Less: accumulated depreciation and amortization
    
    
    
    
    
    
    3,033
    
    
    
    2,9964,193
    
    
    
    4,400Less: net assets held for sale
    
    
    
    
    
    
    6
    
    
    
    15Total
    
    
    
    
    
    $
    4,187
    
    
    $
    4,385
 61




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##### Table of Contents



Assets held for sale
 
 January 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Land
    
    $
    4
    
    
    $
    7Buildings
    
    
    3
    
    
    
    14Leasehold improvements
    
    
    1
    
    
    
    48
    
    
    
    25Less: accumulated depreciation and amortization
    
    
    2
    
    
    
    10Net assets held for sale
    
    $
    6
    
    
    $
    15
 Net gains on sales of properties
    62




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##### Table of Contents



NOTE 7  ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  January 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Accounts payable (1)
    
    $
    1,412
    
    
    $
    1,534Gift card and certificate liability (2)
    
    $
    132
    
    
    $
    206Accrued bonus
    
    
    32
    
    
    
    64Accrued interest
    
    
    55
    
    
    
    50Sales and use tax and value added tax payable
    
    
    76
    
    
    
    93FIN 48 liability for uncertain tax positions
    
    
    9
    
    
    
    62Other (3)
    
    
    543
    
    
    
    521Total accrued expenses and other current liabilities
    
    $
    847
    
    
    $
    996
 
 (1)
    
    Includes $157 million and $160 million of book overdraft cash as of January 31,
2009 and February 2, 2008, respectively.(2)
    
    Reduction in liability primarily relates to a change in accounting estimate effected by
a change in accounting principle related to gift card breakage, which reduced the liability by $59 million.
See Note 2 entitled ACCOUNTING CHANGES for further details.(3)
    
    Other includes, among other items, accrued payroll and other benefits, profit
sharing and other accruals. No individual amount included exceeds 10% of Other (shown above). NOTE 8  STOCK-BASED COMPENSATION
 Management Equity Plan
     Repurchase Obligations
  63




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##### Table of Contents



Modification of Stock Options
  Restricted Stock
   Valuation Assumptions
 
 Fiscal
    
    Fiscal
    
    Fiscal2008
    
    2007
    
    2006Volatility
    
    
    55.0
    %
    
    
    50.0
    %
    
    
    50.0
    %Risk-free interest rate
    
    
    2.6
    %
    
    
    4.2
    %
    
    
    4.6
    %Expected term
    
    3.2 years
    
    3.8 years
    
    5.4 yearsDividend Yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Weighted average grant-date fair value per option:Service-based
    
    $
    13.28
    
    
    $
    12.77
    
    
    $
    12.03Performance-based
    
    $
    11.48
    
    
    $
    10.81
    
    
    $
    10.41
 64




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##### Table of Contents



Service-Based Options
 Fiscal Years EndedJanuary 31, 2009
    
    February 2, 2008
    
    February 3, 2007Weighted Average
    
    
    
    
    
    Weighted Average
    
    
    
    
    
    Weighted AverageShares
    
    Exercise Price
    
    Shares
    
    Exercise Price
    
    Shares
    
    Exercise PriceOutstanding at beginning of fiscal year
    
    
    1,685,403
    
    
    $
    23.20
    
    
    
    1,532,164
    
    
    $
    20.31
    
    
    
    1,521,732
    
    
    $
    19.03Granted
    
    
    27,846
    
    
    
    34.00
    
    
    
    360,960
    
    
    
    32.00
    
    
    
    465,747
    
    
    
    26.75Exercised
    
    
    (101,529
    )
    
    
    14.04
    
    
    
    (136,094
    )
    
    
    11.52
    
    
    
    (104,722
    )
    
    
    8.79Forfeited
    
    
    (114,762
    )
    
    
    30.91
    
    
    
    (71,627
    )
    
    
    27.78
    
    
    
    (350,593
    )
    
    
    26.75Outstanding at end of fiscal year
    
    
    1,496,958
    
    
    $
    23.44
    
    
    
    1,685,403
    
    
    $
    23.20
    
    
    
    1,532,164
    
    
    $
    20.31
 Weighted AverageRemainingWeighted Average
    
    
    Contractual TermOptions
    
    
    Exercise Price $
    
    
    (Years)Vested or expected to vest at January 31, 2009
    
    
    1,408,100
    
    
    $
    22.63
    
    
    
    6.08Exercisable at January 31, 2009
    
    
    794,520
    
    
    $
    18.56
    
    
    
    5.04
  Performance-Based Options
 Fiscal Years EndedJanuary 31, 2009
    
    February 2, 2008
    
    February 3, 2007Weighted Average
    
    
    
    
    
    Weighted Average
    
    
    
    
    
    Weighted AverageShares
    
    Exercise Price
    
    Shares
    
    Exercise Price
    
    Shares
    
    Exercise PriceOutstanding at beginning of fiscal year
    
    
    2,424,731
    
    
    $
    28.25
    
    
    
    1,858,038
    
    
    $
    26.75
    
    
    
    1,545,822
    
    
    $
    26.75Granted
    
    
    55,690
    
    
    
    34.00
    
    
    
    721,920
    
    
    
    32.00
    
    
    
    931,495
    
    
    
    26.75Forfeited
    
    
    (271,392
    )
    
    
    30.26
    
    
    
    (155,227
    )
    
    
    27.70
    
    
    
    (619,279
    )
    
    
    26.75Outstanding at end of fiscal year
    
    
    2,209,029
    
    
    $
    28.15
    
    
    
    2,424,731
    
    
    $
    28.25
    
    
    
    1,858,038
    
    
    $
    26.75
 Weighted AverageRemainingWeighted Average
    
    
    Contractual TermOptions
    
    
    Exercise Price $
    
    
    (Years)Expected to vest at January 31, 2009
    
    
    2,012,747
    
    
    $
    28.26
    
    
    
    7.31Exercisable at January 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
  65




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##### Table of Contents



Non-vested Restricted Stock Activity
  Fiscal Years EndedJanuary 31, 2009
    
    
    February 2, 2008
    
    
    February 3, 2007Weighted Average
    
    
    
    
    
    
    Weighted Average
    
    
    
    
    
    
    Weighted AverageCommon
    
    
    Grant Date Fair Value
    
    
    Common
    
    
    Grant Date Fair Value
    
    
    Common
    
    
    Grant Date Fair ValueShares
    
    
    (In millions)
    
    
    Shares
    
    
    (In millions)
    
    
    Shares
    
    
    (In millions)Non-Vested, Beginning of Fiscal Year
    
    
    35,560
    
    
    $
    1.0
    
    
    
    41,121
    
    
    $
    1.1
    
    
    
    
    
    
    $
    Granted
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    0.5
    
    
    
    41,121
    
    
    
    1.1Vested
    
    
    (28,060
    )
    
    
    (0.8
    )
    
    
    (20,561
    )
    
    
    (0.6
    )
    
    
    
    
    
    
    Forfeited
    
    
    (6,250
    )
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Vested, End of Fiscal Year
    
    
    1,250
    
    
    $
    
    
    
    
    35,560
    
    
    $
    1.0
    
    
    
    41,121
    
    
    $
    1.1
   Fiscal
    
    Fiscal
    
    Fiscal(In millions)
    
    2008
    
    2007
    
    2006SG&A
    
    $
    8
    
    
    $
    6
    
    
    $
    4Total recognized tax benefit
    
    
    3
    
    
    
    1
    
    
    
    1
 Toys
 Japan Stock Plan
  NOTE 9  ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
  January 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Foreign currency translation adjustments, net of tax
    
    $
    (58
    )
    
    $
    37Unrealized loss on hedged transactions, net of tax
    
    
    (25
    )
    
    
    (4
    )Unrecognized actuarial losses, net of tax and minority interest (1)
    
    
    (10
    )
    
    
    (13
    )$
    (93
    )
    
    $
    20
 
 (1)
    
    In connection with the adoption of SFAS 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans  An Amendment of FASB Statements No. 87, 88,
106 and 132(R), on February 2, 2008, unrecognized net actuarial losses were recognized as an
adjustment to Accumulated other comprehensive (loss) income, net of tax. See Note 14 entitled
DEFINED BENEFIT PENSION PLANS for further details. In fiscal 2008, unrecognized actuarial
loss, net of tax is $(11) million adjusted by $1 million for minority interest. In fiscal
2007, we did not record a material minority interest charge. NOTE 10  LEASES
  66




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##### Table of Contents



Operating Leases
    
    
    Capital LeasesGross
    
    
    
    
    
    
    NetMinimum
    
    
    Sublease
    
    
    Minimum(In millions)
    
    Rentals
    
    
    Income
    
    
    Rentals
    
    
    Lease Obligation2009
    
    $
    543
    
    
    $
    22
    
    
    $
    521
    
    
    $
    182010
    
    
    531
    
    
    
    19
    
    
    
    512
    
    
    
    152011
    
    
    504
    
    
    
    16
    
    
    
    488
    
    
    
    132012
    
    
    459
    
    
    
    13
    
    
    
    446
    
    
    
    52013
    
    
    408
    
    
    
    9
    
    
    
    399
    
    
    
    32014 and subsequent
    
    
    2,110
    
    
    
    24
    
    
    
    2,086
    
    
    
    38Total
    
    $
    4,555
    
    
    $
    103
    
    
    $
    4,452
    
    
    $
    92
    NOTE 11  RESTRUCTURING AND OTHER CHARGES
   Fiscal
    
    
    Fiscal
    
    
    Fiscal(In millions)
    
    2008
    
    
    2007
    
    
    2006Restructuring charges and other (1)(2)
    
    $
    8
    
    
    $
    2
    
    
    $
    14Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    24Cost of sales
    
    
    
    
    
    
    
    
    
    
    3Total
    
    $
    8
    
    
    $
    2
    
    
    $
    41
 
 (1)
    
    Included in SG&A.(2)
    
    During fiscal 2006, net restructuring charges and other of $14 million
includes $22 million of charges relating to lease commitments and disposal charges, partially
offset by the reversal of $8 million. 67




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##### Table of Contents



1998 and2005
    
    
    2003
    
    
    2001
    
    
    1995(In millions)
    
    Initiative
    
    
    Initiative
    
    
    Initiative
    
    
    Initiatives
    
    
    TotalBalance at February 3, 2007
    
    $
    11
    
    
    $
    4
    
    
    $
    43
    
    
    $
    16
    
    
    $
    74Charges
    
    
    3
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    7Reversals
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    (5
    )Utilized
    
    
    (4
    )
    
    
    (2
    )
    
    
    (9
    )
    
    
    (6
    )
    
    
    (21
    )Balance at February 2, 2008
    
    $
    9
    
    
    $
    2
    
    
    $
    36
    
    
    $
    8
    
    
    $
    55Charges
    
    
    2
    
    
    
    
    
    
    
    5
    
    
    
    2
    
    
    
    9Reversals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Utilized
    
    
    (3
    )
    
    
    (1
    )
    
    
    (10
    )
    
    
    (2
    )
    
    
    (16
    )Balance at January 31, 2009
    
    $
    8
    
    
    $
    1
    
    
    $
    31
    
    
    $
    7
    
    
    $
    47
 NOTE 12  INCOME TAXES
  Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,(In millions)
    
    2009
    
    
    2008
    
    
    2007U.S.
    
    $
    20
    
    
    $
    131
    
    
    $
    121Foreign
    
    
    198
    
    
    
    89
    
    
    
    22Earnings before income taxes and minority interest
    
    $
    218
    
    
    $
    220
    
    
    $
    143
  Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,(In millions)
    
    2009
    
    
    2008
    
    
    2007Current:U.S. Federal
    
    $
    10
    
    
    $
    67
    
    
    $
    (14
    )Foreign
    
    
    (69
    )
    
    
    102
    
    
    
    61State
    
    
    2
    
    
    
    11
    
    
    
    1Total current income tax (benefit) expense
    
    $
    (57
    )
    
    $
    180
    
    
    $
    48Deferred:U.S. Federal
    
    $
    (14
    )
    
    $
    (35
    )
    
    $
    70Foreign
    
    
    83
    
    
    
    (62
    )
    
    
    (79
    )State
    
    
    (5
    )
    
    
    (18
    )
    
    
    (4
    )Total deferred income tax expense (benefit)
    
    $
    64
    
    
    $
    (115
    )
    
    $
    (13
    )Total Income tax expense
    
    $
    7
    
    
    $
    65
    
    
    $
    35
  68




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##### Table of Contents



Fiscal Years EndedJanuary 31,
    
    February 2,
    
    February 3,2009
    
    2008
    
    2007U.S. Federal statutory tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State taxes, net of U.S. Federal benefit
    
    
    (1.1
    )
    
    
    (3.8
    )
    
    
    (3.5
    )Foreign operations
    
    
    (15.9
    )
    
    
    (5.2
    )
    
    
    (33.3
    )Non-deductible compensation
    
    
    
    
    
    
    
    
    
    
    1.8U.S. Federal valuation allowance
    
    
    (21.7
    )
    
    
    12.7
    
    
    
    28.8U.S. Federal tax reserves
    
    
    
    
    
    
    
    
    
    
    (1.4
    )Unrecognized tax benefits
    
    
    8.0
    
    
    
    (11.2
    )
    
    
    Other
    
    
    (1.1
    )
    
    
    2.0
    
    
    
    (2.9
    )Effective tax rate
    
    
    3.2
    %
    
    
    29.5
    %
    
    
    24.5
    %
  January 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Deferred tax assets:U.S. Federal tax credit and other carry-forwards
    
    $
    91
    
    
    $
    131Foreign tax loss and other carryforwards
    
    
    250
    
    
    
    295State tax loss and other carryforwards
    
    
    69
    
    
    
    51Straight line rent
    
    
    111
    
    
    
    101Insurance loss reserve
    
    
    37
    
    
    
    33Foreign currency translation
    
    
    
    
    
    
    41Restructuring charges
    
    
    30
    
    
    
    32Other
    
    
    150
    
    
    
    168Gross deferred tax assets before valuation allowance
    
    
    738
    
    
    
    852Valuation allowance
    
    
    (235
    )
    
    
    (256
    )Total deferred tax assets
    
    $
    503
    
    
    $
    596Deferred tax liabilities:Fixed assets
    
    $
    (146
    )
    
    $
    (216
    )Earnings of Toys  Japan
    
    
    (65
    )
    
    
    (55
    )Undistributed earnings of foreign subsidiaries
    
    
    (5
    )
    
    
    (29
    )Foreign currency translation
    
    
    (68
    )
    
    
    Other
    
    
    (41
    )
    
    
    (42
    )Total deferred tax liabilities
    
    $
    (325
    )
    
    $
    (342
    )Net deferred tax assets
    
    $
    178
    
    
    $
    254
 69




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##### Table of Contents



January 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Current deferred tax assets
    
    $
    84
    
    
    $
    80Current deferred tax liabilities (1)
    
    
    (8
    )
    
    
    (2
    )Non-current deferred tax assets
    
    
    180
    
    
    
    197Non-current deferred tax liabilities
    
    
    (78
    )
    
    
    (21
    )$
    178
    
    
    $
    254
 
 (1)
    
    The current deferred tax liabilities are included in Accrued expenses and other
current liabilities.  Carryforwards
   Valuation Allowance
  Unrecognized Tax Benefits
   70




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##### Table of Contents



Fiscal Years EndedJanuary 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Beginning balance
    
    $
    261
    
    
    $
    228Additions for tax positions of the current year
    
    
    11
    
    
    
    57Additions for tax positions of prior years
    
    
    15
    
    
    
    71Reductions for tax positions of prior years
    
    
    (87
    )
    
    
    (73
    )Settlements
    
    
    (37
    )
    
    
    (4
    )Currency translation adjustment
    
    
    (28
    )
    
    
    13Lapse of statute of limitations
    
    
    (3
    )
    
    
    (31
    )Ending balance
    
    $
    132
    
    
    $
    261
    NOTE 13  SEGMENTS
    
    
    Domestic Our Domestic segment sells a variety of products in the juvenile,
learning, entertainment, core toys, and seasonal categories through 846 stores that
operate in 49 states in the United States and Puerto Rico and through the Internet.
Domestic Net sales are derived from 512 traditional toy stores (including 75 BRU Express
and Juvenile Expansion formats), 262 specialty juvenile stores, 53 side-by-side stores
and 19 R superstores.
    
    InternationalOur International segment sells a variety of products in the
juvenile, learning, entertainment, core toys, and seasonal categories through 713 owned,
licensed and franchised stores that operate in 33 countries and through the Internet.
Net sales (including fees received from licensed and franchised stores) in our
International segment are derived from 625 traditional toy stores (including 2 BRU
Express formats), as well as 66 side-by-side stores and 22 specialty
 71




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##### Table of Contents



Fiscal Years EndedJanuary 31,
    
    February 2,
    
    February 3,2009
    
    2008
    
    2007Juvenile
    
    
    32.1
    %
    
    
    31.6
    %
    
    
    30.9
    %Learning
    
    
    20.0
    %
    
    
    20.3
    %
    
    
    21.1
    %Entertainment
    
    
    18.0
    %
    
    
    17.4
    %
    
    
    16.1
    %Core Toy
    
    
    16.0
    %
    
    
    16.6
    %
    
    
    17.2
    %Seasonal
    
    
    12.8
    %
    
    
    12.9
    %
    
    
    13.5
    %Other (1)
    
    
    1.1
    %
    
    
    1.2
    %
    
    
    1.2
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    Consists primarily of shipping revenues on our Internet-based sales for our
Domestic segment and non-product related revenues.  Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,(In millions)
    
    2009
    
    
    2008
    
    
    2007Net salesDomestic
    
    $
    8,480
    
    
    $
    8,450
    
    
    $
    8,270International
    
    
    5,244
    
    
    
    5,344
    
    
    
    4,780Total Net sales
    
    $
    13,724
    
    
    $
    13,794
    
    
    $
    13,050Operating earnings (loss)Domestic (1)
    
    $
    593
    
    
    $
    654
    
    
    $
    675International (2)
    
    
    193
    
    
    
    340
    
    
    
    254Corporate and other income (charges) (3)
    
    
    (165
    )
    
    
    (298
    )
    
    
    (280
    )Operating earnings
    
    
    621
    
    
    
    696
    
    
    
    649Interest expense
    
    
    (419
    )
    
    
    (503
    )
    
    
    (537
    )Interest income
    
    
    16
    
    
    
    27
    
    
    
    31Earnings before income taxes and minority interest
    
    $
    218
    
    
    $
    220
    
    
    $
    143
 
 (1)
    
    Includes impairment losses on long-lived assets of $13 million and $6 million
for fiscals 2008 and 2007, respectively. In addition, includes $35
million, $39 million and $11 million of income related to the credit
card program for fiscals 2008, 2007 and 2006, respectively. Also includes the impact of Net gains on sales
of properties of $33 million and $89 million for fiscals 2007 and 2006, respectively.
Refer to Note 1 entitled SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES and Note 6
entitled PROPERTY AND EQUIPMENT for further details.(2)
    
    Includes impairment losses on long-lived assets of $20 million and $7 million
for fiscals 2008 and 2007, respectively. Also includes the impact of Net gains on sales
of properties of $4 million and $21 million for fiscals 2008 and 2006, respectively.
Refer to Note 1 entitled SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES and Note 6
entitled PROPERTY AND EQUIPMENT for further details.(3)
    
    Includes gift card breakage income of $78 million, $17 million and $15 million
for fiscals 2008, 2007 and 2006. In addition, fiscal 2008 includes a $39 million gain
related to the substantial liquidation of the operations of TRU (HK) Limited, our
wholly-owned subsidiary. Refer to Note 1 entitled SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES and Note 2 entitled ACCOUNTING CHANGES for further details.  72




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Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,(In millions)
    
    2009
    
    
    2008
    
    
    2007Depreciation and amortizationDomestic
    
    $
    225
    
    
    $
    223
    
    
    $
    238International
    
    
    138
    
    
    
    133
    
    
    
    127Corporate
    
    
    36
    
    
    
    38
    
    
    
    44Total depreciation and amortization
    
    $
    399
    
    
    $
    394
    
    
    $
    409Capital expendituresDomestic
    
    $
    249
    
    
    $
    193
    
    
    $
    133International
    
    
    105
    
    
    
    100
    
    
    
    120Corporate
    
    
    41
    
    
    
    33
    
    
    
    32Total capital expenditures
    
    $
    395
    
    
    $
    326
    
    
    $
    285
 Fiscal Years EndedJanuary 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Merchandise inventoriesDomestic (1)
    
    $
    1,165
    
    
    $
    1,242International
    
    
    616
    
    
    
    756Total merchandise inventories
    
    $
    1,781
    
    
    $
    1,998Total assetsDomestic (1)
    
    $
    4,887
    
    
    $
    5,249International
    
    
    2,505
    
    
    
    2,874Corporate and other (2)
    
    
    1,019
    
    
    
    829Total assets
    
    $
    8,411
    
    
    $
    8,952
 
 (1)
    
    Refer to Note 2 entitled ACCOUNTING CHANGES for the impact of the change in
accounting methods for valuing our Domestic Merchandise inventories.(2)
    
    Includes cash and cash equivalents, deferred tax assets and other corporate
assets.  Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,(In millions)
    
    2009
    
    
    2008
    
    
    2007Net salesUnited States
    
    $
    8,480
    
    
    $
    8,450
    
    
    $
    8,270Japan
    
    
    1,786
    
    
    
    1,643
    
    
    
    1,650Europe (1)
    
    
    1,611
    
    
    
    1,630
    
    
    
    1,388United Kingdom
    
    
    902
    
    
    
    1,146
    
    
    
    999Other (2)
    
    
    945
    
    
    
    925
    
    
    
    743Total Net sales
    
    $
    13,724
    
    
    $
    13,794
    
    
    $
    13,050
 
 (1)
    
    Includes our wholly-owned operations in Germany, Austria, Switzerland,
France, Spain and Portugal.(2)
    
    Includes our wholly-owned operations in Australia and Canada. 73




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Fiscal Years EndedJanuary 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Long-lived assetsUnited States
    
    $
    3,199
    
    
    $
    3,135Japan
    
    
    664
    
    
    
    623Europe (1)
    
    
    439
    
    
    
    519United Kingdom
    
    
    284
    
    
    
    398Other (2)
    
    
    242
    
    
    
    307Total long-lived assets
    
    $
    4,828
    
    
    $
    4,982
 
 (1)
    
    Includes our wholly-owned operations in Germany, Austria, Switzerland,
France, Spain and Portugal.(2)
    
    Includes our wholly-owned operations in Australia and Canada. NOTE 14  DEFINED BENEFIT PENSION PLANS
     Incremental Effect of Adoption of SFAS 158 (in millions):
 Prior to SFAS 158
    
    
    
    
    
    
    Post SFAS 158Adjustments
    
    
    Adjustments
    
    
    AdjustmentsPrepaid pension costs
    
    $
    5
    
    
    $
    (5
    )
    
    $
    Accrued benefit liability
    
    
    (36
    )
    
    
    2
    
    
    
    (34
    )Accumulated other comprehensive loss:Additional minimum pension liability (net of $4 million of tax)
    
    
    10
    
    
    
    (10
    )
    
    
    Unrecognized net actuarial losses (net of $6 million of tax)
    
    
    
    
    
    
    13
    
    
    
    13Total Accumulated other comprehensive loss
    
    $
    10
    
    
    $
    3
    
    
    $
    13
 74




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##### Table of Contents



Obligation and Funded Status at End of Fiscal Year:
 Fiscal
    
    
    Fiscal2008
    
    
    2007Change in projected benefit obligation:Projected benefit obligation at beginning of year
    
    $
    101
    
    
    $
    91Service cost
    
    
    6
    
    
    
    6Interest cost
    
    
    4
    
    
    
    4Employee contributions
    
    
    1
    
    
    
    1Benefits, expenses paid
    
    
    (2
    )
    
    
    (3
    )Actuarial gain
    
    
    (11
    )
    
    
    (1
    )Foreign currency impact
    
    
    (15
    )
    
    
    3Projected benefit obligation at end of year
    
    $
    84
    
    
    $
    101
 Fiscal
    
    
    Fiscal2008
    
    
    2007Change in fair value of plan assets:Fair value of plan assets at beginning of year
    
    $
    67
    
    
    $
    59Actual return on plan assets
    
    
    (14
    )
    
    
    (2
    )Employer contributions
    
    
    8
    
    
    
    9Employee contributions
    
    
    1
    
    
    
    1Benefits, expenses paid
    
    
    (2
    )
    
    
    (3
    )Foreign currency impact
    
    
    (8
    )
    
    
    3Fair value of plan assets at end of year
    
    $
    52
    
    
    $
    67
 Fiscal
    
    Fiscal2008
    
    2007Reconciliation of funded status to total amount recognized:Funded status
    
    $
    (32
    )
    
    $
    (34
    )Amounts recognized in Consolidated Balance Sheets:Non-current liability
    
    $
    (32
    )
    
    $
    (34
    )Amounts recognized in Accumulated other comprehensive (loss) income:Unrecognized net actuarial losses, net of tax
    
    $
    11
    
    
    $
    13
  Information for Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets:
 Fiscal
    
    Fiscal2008
    
    2007Projected benefit obligation
    
    $
    84
    
    
    $
    101Accumulated benefit obligation
    
    
    76
    
    
    
    89Fair value of plan assets
    
    
    52
    
    
    
    67
 75




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Components of Net Periodic Benefit Cost During Each Fiscal Year:
 Fiscal
    
    
    Fiscal
    
    
    Fiscal2008
    
    
    2007
    
    
    2006Service cost
    
    $
    6
    
    
    $
    6
    
    
    $
    6Interest cost
    
    
    4
    
    
    
    4
    
    
    
    4Expected return on plan assets
    
    
    (2
    )
    
    
    (3
    )
    
    
    (2
    )Amortization of:Recognized actuarial loss
    
    
    1
    
    
    
    1
    
    
    
    1Net periodic benefit cost
    
    $
    9
    
    
    $
    8
    
    
    $
    9
 Contributions
  Estimated Future Payments
  PensionBenefits2009
    
    $
    22010
    
    
    22011
    
    
    32012
    
    
    32013
    
    
    32014 and thereafter
    
    
    15Total
    
    $
    28
 Weighted-average Assumptions Used to Determine Net Periodic Benefit Costs at Fiscal Year End:
 Fiscal
    
    Fiscal
    
    Fiscal2008
    
    2007
    
    2006Discount rate
    
    
    4.7
    %
    
    
    4.4
    %
    
    
    3.9
    %Long-term rate of return on plan assets
    
    
    4.1
    %
    
    
    4.7
    %
    
    
    4.7
    %Rate of compensation increase
    
    
    4.3
    %
    
    
    4.0
    %
    
    
    3.7
    %
 Weighted-average Assumptions Used to Determine Benefit Obligations at Fiscal Year End:
 Fiscal
    
    Fiscal2008
    
    2007Discount rate
    
    
    4.4
    %
    
    
    4.7
    %Rate of compensation increase
    
    
    4.0
    %
    
    
    4.3
    %
 Determination of Discount Rate
  Determination of Expected Return on Assets
  76




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##### Table of Contents



Weighted-average Asset Allocation by Asset Category
  2009 Target
    
    January 31,
    
    February 2,Allocation
    
    2009
    
    2008Equity securities
    
    
    41
    %
    
    
    35
    %
    
    
    56
    %Debt securities
    
    
    35
    %
    
    
    23
    %
    
    
    29
    %Insurance contracts
    
    
    11
    %
    
    
    11
    %
    
    
    8
    %Cash
    
    
    13
    %
    
    
    31
    %
    
    
    7
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
   NOTE 15  OTHER EMPLOYEE RETIREMENT AND COMPENSATION BENEFITS
    77




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##### Table of Contents



NOTE 16  LITIGATION AND LEGAL PROCEEDINGS
    NOTE 17  COMMITMENTS AND CONTINGENCIES
    NOTE 18  RELATED PARTY TRANSACTIONS
    78




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##### Table of Contents



NOTE 19  TOYS  JAPAN SHARE ACQUISITION
   NOTE 20  REORGANIZATION
    NOTE 21  RECENT ACCOUNTING PRONOUNCEMENTS
 .
  79




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##### Table of Contents



,
 In February 2008, SFAS 157 was amended by FSP SFAS 157-2, Effective Date of FASB Statement
No. 157: Fair Value Measurements
  80




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QUARTERLY RESULTS OF OPERATIONS
  For the 13 Weeks EndedMay 3,
    
    August 2,
    
    November 1,
    
    January 31,(In millions)
    
    2008
    
    2008
    
    2008
    
    2009(1)Fiscal 2008Net sales
    
    $
    2,719
    
    
    $
    2,771
    
    
    $
    2,773
    
    
    $
    5,461Gross margin
    
    
    977
    
    
    
    1,014
    
    
    
    960
    
    
    
    1,797Selling, general and administrative expenses (2)
    
    
    895
    
    
    
    885
    
    
    
    930
    
    
    
    1,146Depreciation and amortization
    
    
    100
    
    
    
    103
    
    
    
    95
    
    
    
    101Net gains on sales of properties
    
    
    
    
    
    
    (4
    )
    
    
    (1
    )
    
    
    Other income, net (2)
    
    
    (20
    )
    
    
    (49
    )
    
    
    (10
    )
    
    
    (44
    )Operating earnings (loss)
    
    
    2
    
    
    
    79
    
    
    
    (54
    )
    
    
    594Net (loss) earnings (3)
    
    $
    (36
    )
    
    $
    13
    
    
    $
    (104
    )
    
    $
    345
 For the 13 Weeks EndedMay 5,
    
    August 4,
    
    November 3,
    
    February 2,(In millions)
    
    2007
    
    2007
    
    2007
    
    2008(1)Fiscal 2007Net sales
    
    $
    2,581
    
    
    $
    2,605
    
    
    $
    2,781
    
    
    $
    5,827Gross margin
    
    
    910
    
    
    
    936
    
    
    
    977
    
    
    
    1,984Selling, general and administrative expenses (2)
    
    
    804
    
    
    
    830
    
    
    
    940
    
    
    
    1,227Depreciation and amortization
    
    
    96
    
    
    
    101
    
    
    
    94
    
    
    
    103Net gains on sales of properties (4)
    
    
    (3
    )
    
    
    (12
    )
    
    
    (18
    )
    
    
    Other income, net (2)
    
    
    (10
    )
    
    
    (11
    )
    
    
    (13
    )
    
    
    (17
    )Operating earnings (loss)
    
    
    23
    
    
    
    28
    
    
    
    (26
    )
    
    
    671Net (loss) earnings (3)
    
    $
    (41
    )
    
    $
    (42
    )
    
    $
    (76
    )
    
    $
    312
 
 (1)
    
    Our Domestic and International businesses are highly seasonal with sales and
earnings highest in the fourth quarter. During the last three fiscal years, more than 39% of
the sales from our Domestic and International business were generated in the fourth quarter.
Our results of operations depend significantly upon the holiday selling season in the fourth
quarter.(2)
    
    As of fiscal 2008, SG&A no longer includes certain items related to Other
income and expense, such as gift card breakage income, credit card program income and
impairment losses on long-lived assets. Classification of prior period amounts has been
corrected to conform with our current year presentation. See Note 1 to our Consolidated
Financial Statements entitled SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for further
details. In addition, during the fourth quarter of fiscal 2008, we recognized an additional
$59 million of gift card breakage income as a result of the change in estimate effected by a
change in accounting principle. Refer to Note 2 to our Consolidated Financial Statements
entitled ACCOUNTING CHANGES for the impact on our Consolidated Financial Statements and
further details. Partially offsetting this income was an impairment charge of $33 million on
long-lived assets. In addition, during the second quarter of fiscal 2008, the operations of
TRU (HK) Limited, our wholly-owned subsidiary, were substantially liquidated. As a result, we
recognized a $39 million gain representing a cumulative translation adjustment, in accordance
with SFAS No. 52 Foreign Currency Translation. Refer to Note 1 to our Consolidated Financial
Statements entitled SUMMARY OF SIGNIFICANT ACOUNTING POLICIES for further details.(3)
    
    During the fourth quarter of fiscal 2008, our valuation allowance decreased by $46
million related to certain tax credit and other carryforwards where we believe that it is more
likely than not that such carryforwards will be used. During the fourth quarter of fiscal
2007, our valuation allowance increased by $13 million related to certain tax credit and other
carryforwards where we believe that it is more likely than not that such carryforwards will
not be used.(4)
    
    During the second and third quarter of fiscal 2007, we recognized gains on the sale
of an idle distribution center and consummated a lease termination agreement. Refer to Note 6
to the Consolidated Financial Statements entitled PROPERTY AND EQUIPMENT for further
details. 81




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PARENT COMPANY INFORMATION
 Toys R Us, Inc.
 
 Schedule I  Condensed Statements of Operations
 Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,(In millions)
    
    2009
    
    
    2008
    
    
    2007Revenues, net
    
    $
    1
    
    
    $
    2
    
    
    $
    5General and administrative expenses
    
    
    20
    
    
    
    16
    
    
    
    16Depreciation and amortization
    
    
    2
    
    
    
    2
    
    
    
    3Total operating expenses
    
    
    22
    
    
    
    18
    
    
    
    19Other (expense) income:Interest expense, net
    
    
    (102
    )
    
    
    (96
    )
    
    
    (103
    )Inter-company interest income, net
    
    
    12
    
    
    
    21
    
    
    
    55Equity in pre-tax earnings of consolidated subsidiaries
    
    
    336
    
    
    
    309
    
    
    
    206Earnings before income taxes
    
    
    225
    
    
    
    218
    
    
    
    144Income tax expense
    
    
    7
    
    
    
    65
    
    
    
    35Net earnings
    
    $
    218
    
    
    $
    153
    
    
    $
    109
  82




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##### Table of Contents



Toys R Us, Inc.
 Schedule I  Condensed Balance Sheets
 January 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    212
    
    
    $
    97Short-term investments
    
    
    
    
    
    
    67Current deferred tax assets
    
    
    3
    
    
    
    10Prepaid expenses and other current assets
    
    
    4
    
    
    
    8Total current assets
    
    
    219
    
    
    
    182Property and equipment, net
    
    
    4
    
    
    
    8Investments in and advances to/from subsidiaries
    
    
    1,016
    
    
    
    1,002Deferred tax
assets
    
    
    82
    
    
    
    48Restricted
cash
    
    
    51
    
    
    
    Other
assets
    
    
    12
    
    
    
    12$
    1,384
    
    
    $
    1,252LIABILITIES AND STOCKHOLDERS DEFICITCurrent Liabilities:Accrued expenses and other current liabilities
    
    $
    94
    
    
    $
    48Income taxes payable
    
    
    25
    
    
    
    74Total current liabilities
    
    
    119
    
    
    
    122Long-term debt
    
    
    1,333
    
    
    
    1,338FIN 48
liabilities
    
    
    79
    
    
    
    60Other non-current liabilities
    
    
    127
    
    
    
    121Stockholders
deficit
    
    
    (274
    )
    
    
    (389
    )$
    1,384
    
    
    $
    1,252
  83




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Toys R Us, Inc.
 Schedule I  Condensed Statement of Cash Flows
 Fiscal Years EndedJanuary 31,
    
    
    February 2,
    
    
    February 3,(In millions)
    
    2009
    
    
    2008
    
    
    2007Cash Flows from Operating Activities
    
    $
    35
    
    
    $
    173
    
    
    $
    39Cash Flows from Investing Activities:Proceeds from sale of fixed assets
    
    
    4
    
    
    
    
    
    
    
    Sale (purchase) of short-term investments
    
    
    66
    
    
    
    (67
    )
    
    
    Investments (in) from subsidiaries
    
    
    (3
    )
    
    
    (105
    )
    
    
    24Increase in
restricted cash
    
    
    (51
    )
    
    
    
    
    
    
    Intercompany loan repayment by subsidiaries
    
    
    92
    
    
    
    
    
    
    
    Loans to
subsidiaries
    
    
    (28
    )
    
    
    
    
    
    
    (39
    )Net cash provided by (used in) investing activities
    
    
    80
    
    
    
    (172
    )
    
    
    (15
    )Cash Flows from Financing Activities:Borrowings from subsidiaries
    
    
    
    
    
    
    
    
    
    
    250Repayment of borrowings from subsidiaries
    
    
    
    
    
    
    
    
    
    
    (76
    )Long-term debt repayment
    
    
    
    
    
    
    
    
    
    
    (254
    )Net cash used in financing activities
    
    
    
    
    
    
    
    
    
    
    (80
    )Cash and cash equivalents:Net increase (decrease) during period
    
    
    115
    
    
    
    1
    
    
    
    (56
    )Cash and cash equivalents at beginning of period
    
    
    97
    
    
    
    96
    
    
    
    152Cash and cash equivalents at end of period
    
    $
    212
    
    
    $
    97
    
    
    $
    96Supplemental Disclosures of Cash Flow Information:Income taxes paid, net of refunds
    
    $
    1
    
    
    $
    1
    
    
    $
    4Interest
paid
    
    
    84
    
    
    
    99
    
    
    
    135
  84




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Toys R Us, Inc.
 Schedule I  Notes to Condensed Financial Statements
 NOTE A  BASIS OF PRESENTATION
        85




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NOTE B  DEBT
  January 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    20087.625% notes, due fiscal 2011
    
    $
    512
    
    
    $
    5177.875% senior notes, due fiscal 2013
    
    
    393
    
    
    
    3927.375% senior notes, due fiscal 2018
    
    
    406
    
    
    
    4078.750% notes, due fiscal 2021 (1)
    
    
    22
    
    
    
    22Total
    
    $
    1,333
    
    
    $
    1,338
 
 (1)
    
    Represents obligations of Toys R Us, Inc. and Toys-Delaware.   Annual(In millions)
    
    Maturities2009
    
    $
    2010
    
    
    2011
    
    
    5122012
    
    
    2013
    
    
    3932014 and subsequent
    
    
    428Total
    
    $
    1,333
     86




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##### Table of Contents



NOTE C  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
  As of January 31, 2009
    
    As of February 2, 2008Notional
    
    Fair Value
    
    Notional
    
    Fair Value(In millions)
    
    
    
    
    
    Amount
    
    Assets /
    
    Amount
    
    Assets /Related Items(1)
    
    Effective Date
    
    Maturity Date
    
    (In USD)
    
    Liabilities
    
    (In USD)
    
    LiabilitiesInterest Rate SwapUnsecured credit agreement due
December 8, 2009 (USD)
(2)
    
    May 2008
    
    December 2010
    
    $
    1,300
    
    
    $
    (44
    )
    
    $
    
    
    
    $
    Interest Rate CorridorsSecured real estate loan due

August 9, 2009 (3)
    
    July 2006
    
    August 2008
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    Unsecured credit agreement due
December 8, 2009
    
    July 2006
    
    December 2008
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    
 
 (1)
    
    The related debt is denominated in U.S. dollars. Refer to Note 3 to our Consolidated
Financial Statements entitled LONG-TERM DEBT for detail on our subsidiaries related debt.(2)
    
    As of January 31, 2009 these derivatives qualified for hedge accounting as cash flow
hedges and no material ineffectiveness existed. We evaluate the effectiveness of the hedging
relationships on an ongoing basis and recalculate changes in fair values of the derivatives
and the underlying hedged items separately.(3)
    
    $200 million of the total $800 million notional amount of this derivative related to
the Parent Company.    NOTE D  COMMITMENTS AND CONTINGENCIES
   NOTE E  DIVIDENDS AND CAPITAL CONTRIBUTIONS
  87




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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 (a) Disclosure Controls and Procedures
    (b) Managements Annual Report on Internal Control over Financial Reporting
  Internal ControlIntegrated Framework
   (c) Change in Internal Control over Financial Reporting
  88




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
          89




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ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors
 
 Name
    
    Age
    
    Principal Occupation and Business Experience During Past Five Years and Other DirectorshipsJoshua Bekenstein
    
    
    50
    
    
    Mr. Bekenstein has been our director since September 2005. Mr. Bekenstein is a Managing
Director of Bain Capital LLC. He has been with Bain Capital LLC since its founding in
1984. Mr. Bekenstein currently serves as a member of the boards of directors of Bombardier
Recreational Products Inc., Waters Corporation, Dollarama Capital Corporation, Burlington
Coat Factory, Michaels Stores, Inc. and Bright Horizons Family Solutions.Michael M. Calbert
    
    
    46
    
    
    Mr. Calbert has been our director since July 2005. Mr. Calbert has been an executive of
Kohlberg Kravis Roberts & Co. Ltd. since 2000.Michael D. Fascitelli
    
    
    52
    
    
    Mr. Fascitelli has been our director since July 2005. Mr. Fascitelli has been President
and a Trustee of Vornado Realty Trust since December 1996. Mr. Fascitelli has also been
President and a director of Alexanders, Inc. since August 1996.Matthew S. Levin
    
    
    43
    
    
    Mr. Levin has been our director since July 2005. Mr. Levin has been a Managing Director at
Bain Capital LLC since 2000. Mr. Levin also currently serves as a director of Bombardier
Recreational Products Inc., Dollarama Capital Corporation, Michaels Stores, Inc.,
Unisource Worldwide, Inc. and Guitar Centers, Inc.Sanjay Morey
    
    
    37
    
    
    Mr. Morey has been our director since June 2008. Mr. Morey has been an executive of
Kohlberg Kravis Roberts & Co. Ltd. since 2006. Mr. Morey was a Vice President of Fenway
Partners from August 2001 through February 2006. Mr. Morey is a director of U.S.
Foodservice.John Pfeffer
    
    
    40
    
    
    Mr. Pfeffer has been our director since September 2005. Mr. Pfeffer has been an executive
of Kohlberg Kravis Roberts & Co. Ltd. since 2000, heading the European Retail Sector Team.Steven Roth
    
    
    67
    
    
    Mr. Roth has been our director since September 2005. Mr. Roth has been Chairman of the
Board and Chief Executive Officer of Vornado Realty Trust since May 1989 and Chairman of
the Executive Committee of the Board of Vornado Realty Trust since April 1980. Mr. Roth is
currently the Managing General Partner of Interstate Properties, an owner of shopping
centers and investor in securities and partnerships. Mr. Roth has been a general partner
of Interstate Properties since 1968. He has also been the Chief Executive Officer of
Alexanders, Inc. since March 1995 and Chairman of the Board of Alexanders, Inc. since
2005 and a director since 1989.Wendy Silverstein
    
    
    48
    
    
    Ms. Silverstein has been our director since September 2005. Ms. Silverstein has been
Executive Vice President  Capital Markets of Vornado Realty Trust since 1998.Michael Ward
    
    
    45
    
    
    Mr. Ward has been our director since September 2007. Mr. Ward is a Managing Director of
Bain Capital Partners, LLC. He has been with Bain Capital Partners, LLC since 2002. Mr.
Ward is a member of the Board of Directors of Sensata Technologies, Inc. and The Weather
Channel, Inc.Gerald L. Storch
    
    
    52
    
    
    Mr. Storch has been our Chairman of the Board and Chief Executive Officer since February
2006. Mr. Storch was Vice Chairman of Target Corporation (Target) from 2001 to 2005 and
held various other positions at Target from 1993 (then Dayton-Hudson) to 2001. Prior to
joining Target, Mr. Storch was a Principal of McKinsey & Company where he served from 1982
to 1993.
 
 90




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##### Table of Contents



Name
    
    Age
    
    Position with the RegistrantGerald L. Storch(1)
    
    
    52
    
    
    Chairman of the Board; Chief Executive OfficerF. Clay Creasey, Jr.
    
    
    60
    
    
    Executive Vice President  Chief Financial OfficerClaire Babrowski
    
    
    51
    
    
    Executive Vice President  Chief Operating OfficerRonald D. Boire
    
    
    48
    
    
    Executive Vice President  President  R Us BrandsDeborah M. Derby
    
    
    45
    
    
    Executive Vice President  Chief Administrative OfficerAntonio Urcelay
    
    
    57
    
    
    President  Continental Europe; Managing Director, Toys R Us Iberia, S.A.David Rurka
    
    
    62
    
    
    Managing Director of Toys R Us Holdings, LimitedDaniel Caspersen
    
    
    56
    
    
    Executive Vice President  Human ResourcesDavid J. Schwartz
    
    
    41
    
    
    Senior Vice President  General Counsel & Corporate Secretary
 
 (1)
    
    See Directors above for Mr. Storchs biography.         91




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Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  Audit Committee
  
 ITEM 11. EXECUTIVE COMPENSATION
 COMPENSATION DISCUSSION AND ANALYSIS
  
    
    Chairman of the Board and CEO, Gerald L. Storch;
    
    Executive Vice President  Chief Financial Officer, F. Clay Creasey, Jr.;
    
    Executive Vice President  Chief Operating Officer, Claire Babrowski;
    
    Executive Vice President  President of R Us Brands, Ronald D. Boire;
    
    President of Continental Europe, Antonio Urcelay; and
    
    former Executive Vice President  Product Development, Safety & Sourcing, Richard
Ruppert.
 Role of Our Board of Directors in Compensation Decisions
  Objective of Our Compensation Program
  
    
    provide each executive officer with compensation opportunities that are competitive
with the compensation opportunities available to executives in comparable positions at
companies with whom we compete for talent;
    
    tie a significant portion of each executive officers compensation to our financial
performance and his or her individual performance; and
    
    align the interests of our executive officers with those of the Sponsors.
 92




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Elements of Our Compensation Program
  
    
    base salary;
    
    annual incentive awards;
    
    long-term incentives;
    
    perquisites;
    
    other benefits; and
    
    benefits upon termination without cause or change of control.
 Mix of Total Compensation
  Initial Determination of Compensation
  Base Salary
    
    
    Financialfocuses on financial metrics that we believe are good indicators of
whether the Company and our business segments are achieving their annual and long-term
business objectives;
    
    Operational Efficiencyfocuses on operational efficiencies and cost reduction, such
as supply chain optimization and reducing selling, general and administrative expenses;
 93




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##### Table of Contents




    
    Team Workfocuses on people individually and as a team, such as the hiring,
development and retention of employees, compensation initiatives, team building and
conflict resolution and communication and succession planning activities;
    
    Customer Satisfactionfocuses on operational execution, such as improving customer
satisfaction and testing new business initiatives and new product lines; and
    
    Future Developmentfocuses on growing our business, such as implementing new
business strategies, accelerating new store rollouts and developing financial strategies.
    Annual Incentive Awards
     94




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Long-Term Incentives
   95




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Perquisites
   Other Benefits
    
 96




---



##### Table of Contents



Benefits Upon Termination or Change of Control
  Tax and Accounting Considerations
  Equity Ownership Guidelines
  Equity Grant Practices
  COMPENSATION COMMITTEE REPORT
   
 97




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SUMMARY COMPENSATION TABLE
 
 Change inPension valueandNonqualifiedNon-Equity
    
    DeferredFiscal
    
    
    
    
    
    
    
    
    
    Stock
    
    Option
    
    Incentive Plan
    
    Compensation
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Awards
    
    Awards (1)
    
    Compensation (12)
    
    Earnings
    
    Compensation
    
    TotalGerald L. Storch,
    
    
    2008
    
    
    $
    1,084,615
    
    
    $
    
    
    
    $
    
    
    
    $
    2,291,334
    
    
    $
    1,278,265
    
    
    $
    
    
    
    
    187,363
    (2)
    
    $
    4,841,577Chairman of the
    
    
    2007
    
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    2,379,215
    
    
    
    2,423,490
    
    
    
    
    
    
    
    253,009
    
    
    
    6,055,714Board and Chief
    
    
    2006
    
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    2,379,215
    
    
    
    3,533,828
    
    
    
    
    
    
    
    275,610
    
    
    
    7,188,653Executive OfficerF. Clay Creasey, Jr.,
    
    
    2008
    
    
    
    512,692
    
    
    
    
    
    
    
    
    
    
    
    542,858
    
    
    
    299,230
    
    
    
    
    
    
    
    83,928
    (3)
    
    
    1,438,708EVP - Chief
    
    
    2007
    
    
    
    492,307
    
    
    
    
    
    
    
    
    
    
    
    271,429
    
    
    
    545,285
    
    
    
    
    
    
    
    170,586
    
    
    
    1,479,607Financial Officer
    
    
    2006
    
    
    
    346,154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    685,225
    
    
    
    
    
    
    
    194,836
    
    
    
    1,226,215Claire Babrowski,
    
    
    2008
    
    
    
    721,154
    
    
    
    
    
    
    
    
    
    
    
    453,794
    
    
    
    403,559
    
    
    
    
    
    
    
    119,463
    (4)
    
    
    1,697,970EVP - Chief
    
    
    2007
    
    
    
    473,846
    
    
    
    
    
    
    
    
    
    
    
    226,897
    
    
    
    817,544
    
    
    
    
    
    
    
    363,301
    
    
    
    1,881,588Operating OfficerRonald D. Boire,
    
    
    2008
    
    
    
    800,000
    
    
    
    
    
    
    
    68,749
    (5)
    
    
    1,099,671
    
    
    
    234,000
    
    
    
    
    
    
    
    116,612
    (6)
    
    
    2,319,032EVP - President of
    
    
    2007
    
    
    
    792,308
    
    
    
    
    
    
    
    412,495
    (5)
    
    
    1,099,671
    
    
    
    628,976
    
    
    
    
    
    
    
    222,958
    
    
    
    3,156,408R Us Brands
    
    
    2006
    
    
    
    418,269
    
    
    
    750,000
    (7)
    
    
    618,743
    (5)
    
    
    824,754
    
    
    
    1,987,553
    
    
    
    
    
    
    
    196,403
    
    
    
    4,795,722Antonio Urcelay, (8)
    
    
    2008
    
    
    
    695,458
    
    
    
    
    
    
    
    
    
    
    
    15,317
    
    
    
    539,665
    
    
    
    
    
    
    
    294,249
    (9)
    
    
    1,544,689EVP - President,Continental EuropeRichard Ruppert,
    
    
    2008
    
    
    
    406,827
    
    
    
    
    
    
    
    50,000
    (10)
    
    
    294,630
    
    
    
    22,924
    
    
    
    
    
    
    
    1,302,152
    (11)
    
    
    2,076,533EVP - Product
    
    
    2007
    
    
    
    558,461
    
    
    
    
    
    
    
    150,000
    (10)
    
    
    294,630
    
    
    
    535,119
    
    
    
    
    
    
    
    194,854
    
    
    
    1,733,064Development,
Safety & Sourcing
 
 (1)
    
    Represents the compensation costs of options to purchase shares of Common Stock recognized
for financial statement reporting purposes for fiscals 2008, 2007 and 2006, as applicable,
under SFAS 123(R). See Note 8 to our Consolidated Financial Statements entitled STOCK-BASED
COMPENSATION for the assumptions made in determining SFAS 123(R) values. In connection with
each executive officers purchase or grant of shares of Common Stock either at the time of the
Merger or at the time of his or her hire, each named executive officer received, at no further
cost, option awards to purchase shares of Common Stock. See the Outstanding Equity Awards at
2008 Fiscal Year-end table below for the vesting terms and conditions of these awards.(2)
    
    Includes $16,306 for a leased car, $4,400 for financial planning services, $163,328 of
Company contribution to the SERP, $789 for life insurance premiums, $1,040 for long-term
disability premiums, and $1,500 for an executive physical.(3)
    
    Includes $18,015 for a leased car, $10,121 for financial planning services, $11,168 of
Company matching contribution to the Savings Plan, $41,312 of Company contribution to
the SERP, $772 for life insurance premiums, $1,040 for long-term
disability premiums, and
$1,500 for an executive physical.(4)
    
    Includes $21,600 for car allowance, $17,814 for financial planning services, $12,929 of
Company matching contribution to the Savings Plan, $65,291 of Company contribution to the
SERP, $789 for life insurance premiums and $1,040 for long-term disability premiums.(5)
    
    Represents the compensation costs of shares of Common Stock recognized for financial
statement reporting purposes for fiscals 2008, 2007 and 2006, as applicable, under SFAS
123(R). See Note 8 to the Consolidated Financial Statements entitled STOCK-BASED
COMPENSATION for the assumptions made in determining SFAS 123(R) values. Mr. Boire was
granted 41,121 shares of Common Stock on July 17, 2006 (the Grant Date) in connection with
his employment with the Company. These shares of Common Stock time vested in two equal annual
installments commencing on the first anniversary of the Grant Date.(6)
    
    Includes $20,058 for a leased car, $20,000 for financial planning services, $13,276 of
Company matching contribution to the Savings Plan, $59,949 of Company contribution to the
SERP, $789 for life insurance premiums, $1,040 for long-term disability premiums, and $1,500
for an executive physical.(7)
    
    Represents his sign-on bonus.(8)
    
    Mr. Urcelay is compensated in Euros. His compensation has been converted to U.S. dollars
using a rate equal to the average monthly rate for fiscal 2008 of 1.0000 Euros = 1.4594 USD.(9)
    
    Includes $31,727 for a leased car, $855 for financial planning services, $181,139 of Company
contribution to the Spain Savings Plan and for the purchase annuity products under the MAPFRE
Policies, $71,119 for executive life insurance premiums, and $9,409 for executive medical
premiums.(10)
    
    Represents the compensation costs of shares of Common Stock recognized for financial
statement reporting purposes for the year under SFAS 123(R). See Note 8 to our Consolidated
Financial Statements entitled STOCK-BASED COMPENSATION for the 98




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##### Table of Contents



assumptions made in
determining SFAS 123(R) values. Mr. Ruppert was granted 12,500 shares of Common Stock on
August 6, 2007 (the Grant Date) in connection with his employment with the Company. These
shares of Common Stock time vest in two equal annual installments commencing on the first
anniversary of the Grant Date. Mr. Ruppert forfeited 6,250 of these shares when his employment
terminated on October 18, 2008.(11)
    
    Includes $15,369 for car allowance, $8,379 for financial planning services, $9,583 of Company
matching contributions to the Savings Plan, $595 for life insurance premiums, $760 for
long-term disability premiums, $1,500 for an executive physical, $1,253,869 for severance,
$9,885 for the continuation of certain benefits and $2,212 for vacation pay.(12)
    
    Non-Equity Incentive Plan Compensation for fiscals 2008 and 2007 is based on the actual
Adjusted EBITDA. Adjusted EBITDA is defined as EBITDA (earnings before interest income
(expense), provision for income taxes, depreciation and amortization), as further adjusted to
exclude the effects of certain period charges and gains or losses, including, among others,
changes in foreign currency, minority interest, gains or losses on liquidations of
subsidiaries or sales of properties, asset impairments and accounting changes. Although the
nature of many of these period charges and gains or losses is recurring, we have historically
excluded such impact from internal performance assessments. A reconciliation of Net earnings
to Adjusted EBITDA for fiscals 2008 and 2007 is as follows: For the Years EndedJanuary 31,
    
    
    February 2,(In millions)
    
    2009
    
    
    2008Net earnings
    
    $
    218
    
    
    $
    153Add:Interest expense
    
    
    419
    
    
    
    503Interest income
    
    
    (16
    )
    
    
    (27
    )Income tax expense
    
    
    7
    
    
    
    65Depreciation and amortization
    
    
    399
    
    
    
    394EBITDA
    
    
    1,027
    
    
    
    1,088Adjustments:Foreign
currency translation (a)
    
    
    33
    
    
    
    (34
    )Impairment
losses on long-lived assets
    
    
    33
    
    
    
    13Sponsor
management and advisory fees
    
    
    18
    
    
    
    18McDonalds
Japan contract termination
    
    
    14
    
    
    
    5Gift card
breakage accounting change
    
    
    (59
    )
    
    
    Minority
interest (b)
    
    
    (49
    )
    
    
    (46
    )Gain on
liquidation of TRU (HK) Limited
    
    
    (39
    )
    
    
    Gains on sales of properties
    
    
    (5
    )
    
    
    (33
    )Other
(c)
    
    
    29
    
    
    
    8Adjusted
EBITDA  Consolidated (d)
    
    $
    1,002
    
    
    $
    1,019
 
 (a)
    
    Represents the difference between budgeted  foreign
translation rates which were set as
last years period-end rates and the actual translation impact on our results of
operations. The functional currencies of our foreign subsidiaries are their respective
local currencies. The operating results of our subsidiaries are translated into U.S.
dollars using the average exchange rates. 99




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##### Table of Contents



(b)
    
    Represents the minority interest in Toys-Japan. Prior to fiscal 2008, we
owned approximately 48% of Toys-Japan common stock. In 2008, we increased our
investment in Toys-Japan by purchasing an additional 14.35% share of Toys-Japan to
bring our total ownership percentage in Toys-Japan to approximately 62%. See Note 19
to our Consolidated Financial Statements entitled
TOYS-JAPAN SHARE ACQUSITION for further details. The adjustments for both fiscal 2008
and fiscal 2007 represent the elimination of the minority interest in the Adjusted
EBITDA of Toys-Japan. For fiscal 2008, although our ownership percentage of Toys-Japan
increased to 62%, our adjustment to EBITDA reflects the 48% ownership percentage at the
date we developed our compensation targets.(c)
    
    Represents miscellaneous other charges consisting primarily of store closing
costs, insurance settlements, restructuring, and severance which are not individually
significant for separate disclosure.(d)
    
    Included in Consolidated Adjusted EBITDA are actual Adjusted EBITDA results
for certain business units used in calculating Management Incentive Plan compensation.
Actual Adjusted EBITDA results in fiscal 2008 were $420,304,988 for
Toys R Us  U.S.
(now part of our Domestic segment), $407,265,023 for Babies R Us (now part of our
Domestic segment), $370,183,862 for International, $35,908,000 for Central Europe,
$54,766,000 for France, $67,773,000 for Iberia and $81,005,000 for Canada. 100




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##### Table of Contents



GRANTS OF PLAN-BASED AWARDS IN FISCAL 2008
 AllOther
    
    All OtherStock
    
    Option
    
    Per ShareEstimated Number of Future Payouts
    
    Awards:
    
    Awards:
    
    Exercise
    
    Grant DateEstimated Potential Payouts Under
    
    Under
    
    Number of
    
    Number of
    
    or Base
    
    Fair Value ofNon-Equity
    
    Equity Incentive
    
    Shares
    
    Securities
    
    Price of
    
    Stock andIncentive Plan Awards(1)
    
    Plan Awards
    
    of Stock
    
    Underlying
    
    Option
    
    OptionName
    
    Threshold(2)
    
    Target
    
    Maximum
    
    Threshold
    
    Target
    
    Maximum
    
    or Units
    
    Options
    
    Awards
    
    AwardsStorch
    
    $
    550,000
    
    
    $
    2,200,000
    
    
    $
    5,940,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    Creasey
    
    
    128,750
    
    
    
    515,000
    
    
    
    1,390,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Babrowski
    
    
    199,375
    
    
    
    797,500
    
    
    
    2,153,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Boire
    
    
    260,000
    
    
    
    1,040,000
    
    
    
    2,808,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Urcelay
    
    
    175,105
    
    
    
    700,419
    
    
    
    1,891,130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ruppert
    
    
    143,750
    
    
    
    575,000
    
    
    
    1,552,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    These amounts reflect estimated possible payouts under our annual incentive awards
granted in fiscal 2008. Our Executive Committee approves the threshold, target and maximum
payment amounts at the beginning of each fiscal year. In fiscal 2008, they were approved on
August 19, 2008. The maximum, which refers to the maximum payout possible under the Management
Incentive Plan, for fiscal 2008 is 300% of the Financial Component target and 200% of the
Personal Component target.For a further description of these awards, see the Compensation
Discussion and Analysis Elements of Our Compensation Program  Annual Incentive Awards
section set forth above. The following Financial Component weightings have been set for our
named executive officers: 
    
    For Messrs. Storch, Creasey, and Ruppert, and Ms. Babrowski, who serve in
corporate positions for the Company (i.e., they are not directly responsible for a
specific business unit), the Financial Component of their annual incentive target is based 50%
on the Adjusted EBITDA results for the total Company, 50% on the Adjusted EBITDA results
of the Toys R Us  U.S., Babies R Us and International business units weighted
one-third each.
    
    For Mr. Boire, in his capacity as the President of Toys R Us, North America for
fiscal year 2008, the Financial Component target is based 50% on the Adjusted EBITDA
results for the total Company, 45% on the Adjusted EBITDA results for the Toys R
Us  U.S. business unit and 5% on the Adjusted EBITDA results for Toys R Us, Canada.
    
    For Mr. Urcelay, the President of Continental Europe, the Financial Component
target is based 25% on the Adjusted EBITDA results for the total Company, 25% on the
Adjusted EBITDA results for Toys R Us, Iberia, 25% on the Adjusted EBITDA results for
Toys R Us, France and 25% on the Adjusted EBITDA results for Toys RUs, Central
Europe.
 
 (2)
    
    The Threshold amount shown is 25% of the Target amount, which is comprised of the
Financial Component and the Personal Component. The Financial Component pays out at 25% of the
Target amount if the threshold payout level is met. If the Threshold payout level is not met,
no Financial Component will be paid. The Personal Component threshold amount is set each year.
In fiscal 2008, the Threshold was 25%. 101




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##### Table of Contents



OUTSTANDING EQUITY AWARDS AT 2008 FISCAL YEAR-END
 Option Awards
    
    Stock AwardsEquityIncentive
    
    EquityEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Plan
    
    IncentiveIncentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    Plan Awards:Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of
    
    Market orAwards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    Market
    
    Unearned
    
    Payout ValueNumber of
    
    
    
    
    
    Number of
    
    
    
    
    
    
    
    
    
    Number of
    
    Value of
    
    Shares,
    
    of UnearnedSecurities
    
    Number of Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    Shares or
    
    Shares or
    
    Units or
    
    Shares, UnitsUnderlying
    
    Underlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    Units of
    
    Units of
    
    Other
    
    or OtherUnexercised
    
    Unexercised
    
    Unexercised
    
    Option
    
    Option
    
    Stock That
    
    Stock That
    
    Rights That
    
    Rights ThatGrant
    
    Options
    
    Options
    
    Unearned
    
    Exercise
    
    Expiration
    
    Have Not
    
    Have Not
    
    Have Not
    
    Have NotName
    
    Date
    
    Exercisable(1)
    
    Unexercisable(2)
    
    Options (3)
    
    Price
    
    Date
    
    Vested
    
    Vested
    
    Vested
    
    VestedStorch
    
    
    2/7/2006
    
    
    
    99,689
    
    
    
    149,533
    
    
    
    498,442
    
    
    $
    26.75
    
    
    
    2/7/2016
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Creasey
    
    
    8/6/2007
    
    
    
    
    
    
    
    40,947
    
    
    
    81,894
    
    
    
    32.00
    
    
    
    8/6/2017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Babrowski
    
    
    8/6/2007
    
    
    
    
    
    
    
    34,229
    
    
    
    68,458
    
    
    
    32.00
    
    
    
    8/6/2017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Boire
    
    
    7/17/2006
    
    
    
    45,042
    
    
    
    67,562
    
    
    
    225,208
    
    
    
    26.75
    
    
    
    7/17/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Urcelay
    
    
    7/21/2005
    
    
    
    24,568
    
    
    
    16,379
    
    
    
    81,894
    
    
    
    26.75
    
    
    
    7/21/2015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4/1/2003
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    8.25
    
    
    
    4/1/2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10/16/2000
    
    
    
    12,383
    
    
    
    
    
    
    
    
    
    
    
    15.53
    
    
    
    10/16/2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ruppert (4)
    
    
    8/6/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    In connection with the Merger, holders of vested stock options (Pre-Merger
Options) to purchase equity in the Company were permitted to exchange these Pre-Merger
Options for a like value of fully vested stock options (Rollover Options) to purchase shares
of Common Stock under the Management Equity Plan. The stock options listed in this column
include the rollover options held by those named executive officers that elected to receive
Rollover Options rather than receive a cash distribution. In addition, this column also
includes Tranche I Options (as defined below).(2)
    
    These options (Tranche I Options) time vest 40% on the second anniversary of the
grant date, 20% on the third anniversary of the grant date, 20% on the fourth anniversary of
the grant date and 20% on the fifth anniversary of the grant date.(3)
    
    These options will vest if both the time and performance criteria are met. The
options time vest 40% on the second anniversary of the grant date, 20% on the third
anniversary of the grant date, 20% on the fourth anniversary of the grant date and 20% on the
fifth anniversary of the grant date. Certain of the options (Tranche II Options) will
performance vest upon the earlier to occur of: (i) a Change in Control (as defined in the
Management Equity Plan) in which both (A) the Sponsor IRR (as defined in the Management Equity
Plan) upon the consummation of the Change in Control is equal to or greater than 15%, and
(B) the Sponsor Inflows (as defined in the Management Equity Plan) prior to and in connection
with such Change in Control are at least two times the Sponsor Outflows (as defined in
Management Equity Plan) prior to such Change in Control; or (ii) any day on which both (A) the
Sponsor IRR measured as of such measurement date is equal to or greater than 15%, and (B) the
Sponsor Inflows through such date are at least two times the Sponsor Outflows through such
measurement date. The remaining options (Tranche III Options) will performance vest upon the
earlier to occur of: (i) a Change in Control in which both (A) the Sponsor IRR upon the
consummation of the Change in Control is equal to or greater than 20%, and (B) the Sponsor
Inflows prior to and in connection with such Change in Control are at least three times the
Sponsor Outflows prior to such Change in Control; or (ii) any day on which both (A) the
Sponsor IRR measured as of such measurement date is equal to or greater than 20%, and (B) the
Sponsor Inflows through such date are at least three times the Sponsor Outflows through such
measurement date. Notwithstanding the foregoing, all Tranche II Options and Tranche III
Options shall vest in full on the date which is eight years after the date on which such
options were first granted so long as the executive officer remains employed by the Company.(4)
    
    Mr. Ruppert forfeited 6,250 unvested restricted shares when his employment was
terminated on October 18, 2008. 102




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##### Table of Contents



OPTION EXERCISES AND STOCK VESTED FOR FISCAL 2008
 Option Awards
    
    Stock AwardsNumber of
    
    
    
    
    
    Number ofShares
    
    Value
    
    Shares
    
    ValueAcquired on
    
    Realized on
    
    Acquired on
    
    Realized onName
    
    Exercise(1)
    
    Exercise
    
    Vesting
    
    Vesting(3)Storch
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Creasey
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Babrowski
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Boire
    
    
    
    
    
    
    
    
    
    
    20,560

(2)
    
    
    699,040Urcelay
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ruppert
    
    
    
    
    
    
    
    
    
    
    6,250
    (2)
    
    
    212,500
 
 (1)
    
    None of our named executive officers exercised any stock options during fiscal 2008.(2)
    
    Mr. Boire and Mr. Ruppert had shares of restricted stock vest on July 17, 2008 and August 6,
2008, respectively.(3)
    
    Value realized on vesting represents the fair value of our stock of $34.00 on the day of
vesting multiplied by the number of shares that vested. NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL 2008
 Executive
    
    Registrant
    
    Aggregate
    
    Aggregate
    
    AggregateContributions
    
    Contributions in
    
    Earnings
    
    Withdrawals /
    
    Balance at LastName
    
    in Last FY
    
    Last FY (1)(2)
    
    at Last FY (3)
    
    Distributions
    
    FYE (4)Storch
    
    $
    
    
    
    $
    163,328
    
    
    $
    12,402
    
    
    $
    
    
    
    $
    426,286Creasey
    
    
    
    
    
    
    41,312
    
    
    
    2,560
    
    
    
    
    
    
    
    95,136Babrowski
    
    
    
    
    
    
    65,291
    
    
    
    587
    
    
    
    
    
    
    
    74,283Boire
    
    
    
    
    
    
    59,949
    
    
    
    6,524
    
    
    
    
    
    
    
    199,845Urcelay (5)
    
    
    
    
    
    
    162,897
    
    
    
    35,479
    
    
    
    
    
    
    
    792,632Ruppert
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6)
 
 (1)
    
    We make an annual contribution to the SERP for each U.S. executive officer who is employed on
the last day of the SERP plan year. The amount of the contribution is equal to 5% of that
portion of the executive officers total compensation in excess of the dollar limits under
Internal Revenue Code Section 401(a)(17). Effective January 1, 2009, the contribution
percentage was changed to 4%. Generally, total compensation means compensation as reported on
Form W-2 with the Internal Revenue Service or such other definition as is utilized under the
Savings Plan. However, total compensation includes amounts paid pursuant to our Management
Incentive Plan but does not include sign-on bonuses, retention bonuses, project completion
bonuses or other types of success bonuses. The Executive Committee may at its discretion also
credit additional notional contributions if the Company had an exceptional year. Each U.S.
executives SERP account will be credited or debited with Declared Interest, which will be
based upon hypothetical investments selected by the executive officer pursuant to procedures
established by the administrative committee that administers the SERP. The Administrator of
the SERP determines the number of investment options available under the SERP and such
investment options are comprised of a subset of the investment options available under the
Savings Plan. Participants in the SERP have the right to change their hypothetical investment
selections on a daily basis. The contributions made by the Company vest five years after the
executive officers first day of employment with the Company. All SERP distributions are paid
in lump sums.(2)
    
    All contributions that we made for each executive officer during fiscal 2008 were included in
the All Other Compensation column of the Summary Compensation Table above.(3)
    
    Earnings on nonqualified deferred compensation were not required to be reported in the
Summary Compensation Table.(4)
    
    Of the aggregate balance amount set forth in this column, $248,672, $51,050,
$8,404, $133,042 and $22,683 were previously reported in the Summary Compensation table for
Messrs. Storch, Creasey, Ms. Babrowski, Mr. Boire and Mr. Ruppert respectively, for prior
fiscal years.(5)
    
    These amounts reflect the annuity products purchased for the benefit of Mr. Urcelay under the
MAPFRE Polices.(6)
    
    Mr. Ruppert forfeited his balance when his employment was terminated on October 18,
2008. 103




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##### Table of Contents



PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
 Employment Agreements
  For Messrs. Storch, Creasey and Boire and Ms. Babrowski:
 Termination for Cause, Resignation Without Good Reason or Retirement
 
    
    any base salary earned, but unpaid as of the date of his or her termination; and
    
    any employee benefits that he or she may be entitled to under the Companys
employee benefit plans.
  Termination Due to Death or Disability
 
    
    any base salary earned, but unpaid as of the date of his or her termination;
    
    any employee benefits that he or she may be entitled to under the Companys
employee benefit plans;
    
    any annual incentive award for the immediately preceding fiscal year that is
earned, but unpaid as of the date of his or her termination; and
    
    a pro-rata portion of his or her annual incentive award for the current fiscal
year earned through the date of termination, based on the Companys actual results as
opposed to his or her target annual incentive award.
 Termination Without Cause or Resignation for Good Reason.
 
    
    any base salary earned, but unpaid as of the date of his or her termination;
    
    any employee benefits that he or she may be entitled to under the Companys
employee benefit plans;
    
    any annual incentive award for the immediately preceding fiscal year that is
earned, but unpaid as of the date of his or her termination;
    
    a pro-rata portion of his or her annual incentive award earned through the date
of termination, based on the Companys actual results as opposed to his or her target
annual incentive award;
    
    for Mr. Storch, an amount equal to the sum of (x) two times his base salary and
(y) the product of (i) the actual annual incentive award he received for the fiscal year
immediately preceding the year of the termination of his employment and (ii) the
Severance Period, as expressed in years (the Severance Period shall initially be a
twelve month period commencing on the executives termination of employment, which
period shall be increased by three months on each anniversary of the hire date prior to
such termination of employment, up to a maximum of twenty-four months);
    
    for each of Messrs. Creasey and Boire and Ms. Babrowski, an amount equal to the
sum of (x) the product of the Severance Period, as expressed in years, times his or her
base salary and (y) one times the actual annual incentive award he or she received for
the fiscal year immediately preceding the year of the termination of his or her
employment; and
    
    continuation of medical, dental and life insurance benefits, with the executive
paying a portion of such costs as if his or her employment had not terminated, until the
earlier to occur of (i) the end of the Severance Period or (ii) the date on which the
executive commences to be eligible for coverage under substantially comparable medical,
dental and life insurance benefit plans from any subsequent employer.
 Restrictive Covenants
 
    
    engage in any business that directly or indirectly is a Competitive Business (as
defined in each of their employment agreements);
    
    enter the employ of, or render any services to, any person who or which engages
in a Competitive Business;
 104




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##### Table of Contents




    
    acquire a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly;
    
    interfere with, or attempt to interfere with, business relationships between the
Company or any of its affiliates and customers, clients, suppliers, partners, members or
investors of the Company or its affiliates;
    
    solicit to leave the employment of, or encourage any employee of the Company or
its affiliates to leave the employment of, the Company or its affiliates;
    
    hire any such employee who was employed by the Company or its affiliates as of
the date of his or her termination of employment with the Company or who left the
employment of the Company or its affiliates coincident with, or within one year prior
to, the termination of his or her employment with the Company; and
    
    solicit to leave the employment of, or encourage to cease to work with, as
applicable, the Company or its affiliates or any consultant, supplier or service
provider under contract with the Company or its affiliates.
  For Mr. Urcelay:
 Termination Without Cause or Due to Relocation
 
    
    eighteen months base salary;
    
    actual achieved annual incentive award up to a maximum of his target annual
incentive award for the eighteen month period after his termination, based on the
Companys actual results, as opposed to his target annual incentive award;
    
    continuation of car benefit for eighteen months, excluding gas, maintenance and
other usage-related expenses;
    
    continuation of health benefits for eighteen months;
    
    continuation of the use of his Company provided laptop computer and cell phone
for eighteen months, except that he will be responsible for the costs of all telephone
calls;
    
    any stock options and restricted stock will continue vesting for ninety days
after the date of termination, subject to the vesting provision of the Management Equity
Plan, but once the ninety day period has elapsed any unvested stock options will be
automatically cancelled;
    
    up to thirty days following the expiration of the eighteen-month period after his
termination date, he may exercise any vested stock options; subject to the vesting
provisions of the Management Equity Plan; and
    
    continuation of Company contributions to his defined contribution plan and
provision of tax advice for eighteen months.
 Termination Due to Change in Control or Resignation Due to Relocation or Change in Position after
Change in Control
 Restrictive Covenants
 
    
    carry out any other business, similar or equal to the Company or which
otherwise competes with the business of the Company directly or indirectly, individually
or as an employee, consultant, or in any other capacity, unless the competitive business
represents less than ten percent of the whole business turnover;
    
    call upon, communicate with, attempt to communicate with or solicit business
from any client or customer of the Company or any person responsible for referring
business to the Company, or any competitor of the Company, or for his own interest if he
should become a competitor of the Company; and
    
    take any action to assist any successor employer or entity in employment
solicitation or recruiting any employee who had worked for the Company during the
immediate six months prior to his termination.
 Management Equity Plan
  105




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##### Table of Contents



Summary of Payments and Benefits Upon Termination or Change In Control
  Gerald
L. Storch
 TerminationWithout Cause orResignationTermination
    
    
    Termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    for Goodfor Cause or
    
    
    Without
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reason inResignation
    
    
    Cause or
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    connection with aWithout
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    Long-Term
    
    
    Change of
    
    
    Change inType of Payment
    
    Good Reason
    
    
    For Good Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    Control
    
    
    ControlSeverance
    
    $
    
    
    
    $
    5,835,235
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,835,235
    
    
    $
    Fiscal 2008
Annual Bonus earned but unpaid
    
    
    1,278,265
    
    
    
    1,278,265
    
    
    
    1,278,265
    
    
    
    1,278,265
    
    
    
    1,278,265
    
    
    
    1,278,265
    
    
    
    Fiscal 2006 Stock Option Grant (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,084,114
    
    
    
    1,084,114SERP balance
    
    
    
    
    
    
    
    
    
    
    426,286
    
    
    
    426,286
    
    
    
    426,286
    
    
    
    
    
    
    
    Benefit Continuation (2)
    
    
    
    
    
    
    11,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,862
    
    
    
    TOTAL
    
    $
    1,278,265
    
    
    $
    7,125,362
    
    
    $
    1,704,551
    
    
    $
    1,704,551
    
    
    $
    1,704,551
    
    
    $
    8,209,476
    
    
    $
    1,084,114
 
 (1)
    
    The unvested portion of Tranche I Options will accelerate and become vested upon a change in
control. In calculating the amount set forth in the table, we utilized a per share value of
$34.00, which was the fair value of our shares of Common Stock as of October 1, 2008. As we
are a privately held company, the value of shares of Common Stock is only available when a
valuation is performed. The shares of Common Stock were not valued as of our fiscal year end,
and the fair value for such shares is likely to have declined since the date of the most
recent valuation. Accordingly, the amount set forth in the table is likely to be higher than
the amount that would have been determined if a valuation had been conducted at fiscal year
end.(2)
    
    Represents estimated Company costs based on fiscal 2009 projections for medical, dental and
life insurance coverage for the duration of the Severance Period. Pursuant to the Management Equity Plan, if the Company terminates Mr. Storchs employment for Cause
(as defined in the Management Equity Plan), the Company and the Sponsors may purchase, solely
at their option, Mr. Storchs shares of Common Stock at the lesser of (i) the value on the
date of issuance and (ii) the fair value. If Mr. Storch resigns with or without Good Reason
(as defined in his employment agreement) or if the Company terminates Mr. Storchs employment
without Cause (as defined in the Management Equity Plan), the Company and the Sponsors may
purchase, solely at their option, Mr. Storchs shares of Common Stock at fair value. If Mr.
Storch retires, dies or becomes disabled, the Company may purchase, or Mr. Storch may require
the Company to purchase, Mr. Storchs shares of Common Stock at fair value. These repurchase
rights also apply to the shares of Common Stock underlying each vested stock option.
   106




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##### Table of Contents



F.
Clay Creasey, Jr.
 TerminationWithout Cause orResignationTermination
    
    
    Termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    for Goodfor Cause or
    
    
    Without
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reason inResignation
    
    
    Cause or
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    connection with aWithout
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    Long-Term
    
    
    Change of
    
    
    Change inType of Payment
    
    Good Reason
    
    
    For Good Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    Control
    
    
    ControlSeverance
    
    $
    
    
    
    $
    1,317,785
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,317,785
    
    
    $
    Fiscal 2008 Annual Bonus earned but unpaid
    
    
    
    
    
    
    299,230
    
    
    
    
    
    
    
    299,230
    
    
    
    299,230
    
    
    
    299,230
    
    
    
    Fiscal 2007 Stock Option Grant (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,894
    
    
    
    81,894SERP balance
    
    
    
    
    
    
    
    
    
    
    95,136
    
    
    
    95,136
    
    
    
    95,136
    
    
    
    
    
    
    
    Benefit Continuation (2)
    
    
    
    
    
    
    7,019
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,019
    
    
    
    TOTAL
    
    $
    
    
    
    $
    1,624,034
    
    
    $
    95,136
    
    
    $
    394,366
    
    
    $
    394,366
    
    
    $
    1,705,928
    
    
    $
    81,894
 
 (1)
    
    The unvested portion of Tranche I Options will accelerate and become vested upon a
change in control. In calculating the amount set forth in the table, we utilized a per share
value of $34.00, which was the fair value of our shares of Common Stock as of October 1, 2008. As
we are a privately held company, the value of shares of Common Stock is only available when a
valuation is performed. The shares of Common Stock were not valued as of our fiscal year end,
and the fair value for such shares is likely to have declined since the date of the most
recent valuation. Accordingly, the amount set forth in the table is likely to be higher than
the amount that would have been determined if a valuation had been conducted at fiscal year
end.(2)
    
    Represents estimated Company costs based on fiscal 2009 projections for medical,
dental and life insurance coverage for the duration of the Severance Period.    107




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##### Table of Contents



Claire Babrowski
 TerminationWithout Cause orResignationTermination
    
    
    Termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    for Goodfor Cause or
    
    
    Without
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reason inResignation
    
    
    Cause or
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    connection with aWithout
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    Long-Term
    
    
    Change of
    
    
    Change inType of Payment
    
    Good Reason
    
    
    For Good Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    Control
    
    
    ControlSeverance
    
    $
    
    
    
    $
    1,723,794
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,723,794
    
    
    $
    Fiscal 2008 Annual Bonus earned but unpaid
    
    
    403,559
    
    
    
    403,559
    
    
    
    403,559
    
    
    
    403,559
    
    
    
    403,559
    
    
    
    403,559
    
    
    
    Fiscal 2007 Stock Option 
Grant (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,458
    
    
    
    68,458SERP balance
    
    
    
    
    
    
    
    
    
    
    74,283
    
    
    
    74,283
    
    
    
    74,283
    
    
    
    
    
    
    
    Benefit Continuation (2)
    
    
    
    
    
    
    3,915
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,915
    
    
    
    TOTAL
    
    $
    403,559
    
    
    $
    2,131,268
    
    
    $
    477,842
    
    
    $
    477,842
    
    
    $
    477,842
    
    
    $
    2,199,726
    
    
    $
    68,458
 
 (1)
    
    The unvested portion of Tranche I Options will accelerate and become vested upon a
change in control. In calculating the amount set forth in the table, we utilized a per share
value of $34.00, which was the fair value of our shares of Common Stock as of October 1, 2008. As
we are a privately held company, the value of shares of Common Stock is only available when a
valuation is performed. The shares of Common Stock were not valued as of our fiscal year end,
and the fair value for such shares is likely to have declined since the date of the most
recent valuation. Accordingly, the amount set forth in the table is likely to be higher than
the amount that would have been determined if a valuation had been conducted at fiscal year
end.(2)
    
    Represents estimated Company costs based on fiscal 2009 projections for medical,
dental and life insurance coverage for the duration of the Severance Period.    108




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##### Table of Contents



Ronald
D. Boire
 TerminationWithout Cause orResignationTermination
    
    
    Termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    for Goodfor Cause or
    
    
    Without
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reason inResignation
    
    
    Cause or
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    connection with aWithout
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    Long-Term
    
    
    Change of
    
    
    Change inType of Payment
    
    Good Reason
    
    
    For Good Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    Control
    
    
    ControlSeverance
    
    $
    
    
    
    $
    1,828,976
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,828,976
    
    
    $
    Fiscal 2008 Annual Bonus earned but unpaid
    
    
    
    
    
    
    234,000
    
    
    
    
    
    
    
    234,000
    
    
    
    234,000
    
    
    
    234,000
    
    
    
    Fiscal 2006 Stock Option Grant (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    489,825
    
    
    
    489,825SERP balance
    
    
    
    
    
    
    
    
    
    
    199,845
    
    
    
    199,845
    
    
    
    199,845
    
    
    
    
    
    
    
    Benefit Continuation (2)
    
    
    
    
    
    
    7,019
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,019
    
    
    
    TOTAL
    
    $
    
    
    
    $
    2,069,995
    
    
    $
    199,845
    
    
    $
    433,845
    
    
    $
    433,845
    
    
    $
    2,559,820
    
    
    $
    489,825
 
 (1)
    
    The unvested portion of Tranche I Options will accelerate and become vested upon a change in
control. In calculating the amount set forth in the table, we utilized a per share value of
$34.00, which was the fair value of our shares of Common Stock as of October 1, 2008. As we are a
privately held company, the value of shares of Common Stock is only available when a valuation
is performed. The shares of Common Stock were not valued as of our fiscal year end, and the
fair value for such shares is likely to have declined since the date of the most recent
valuation. Accordingly, the amount set forth in the table is likely to be higher than the
amount that would have been determined if a valuation had been conducted at fiscal year end.(2)
    
    Represents estimated Company costs based on fiscal 2009 projections for medical, dental and
life insurance coverage for the duration of the Severance Period.    109




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##### Table of Contents



Antonio Urcelay (1)
 TerminationWithout Cause orResignationTermination
    
    
    Termination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    for Goodfor Cause or
    
    
    Without
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reason inResignation
    
    
    Cause or
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    connection with aWithout
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    Long-Term
    
    
    Change of
    
    
    Change inType of Payment
    
    Good Reason
    
    
    For Good Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    Control
    
    
    ControlSeverance(2)
    
    $
    
    
    
    $
    2,101,256
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,101,256
    
    
    $
    Fiscal 2008 Annual Bonus earned but unpaid
    
    
    
    
    
    
    539,665
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    539,665
    
    
    
    Fiscal 2005 Stock Option Grant (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118,748
    
    
    
    118,748Executive Retirement Plan balance (4)
    
    
    
    
    
    
    
    
    
    
    792,632
    
    
    
    792,632
    
    
    
    792,632
    
    
    
    
    
    
    
    Executive Life Insurance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,502,093
    
    
    
    3,502,093
    
    
    
    
    
    
    
    Company Car (5)
    
    
    
    
    
    
    47,591
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Use of Company provided laptop and cell
phone (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax advice (5)
    
    
    
    
    
    
    1,283
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Company contributions to defined
contribution plan (5)
    
    
    
    
    
    
    271,709
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefit Continuation (5)
    
    
    
    
    
    
    14,113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TOTAL
    
    $
    
    
    
    $
    2,975,617
    
    
    $
    792,632
    
    
    $
    4,294,725
    
    
    $
    4,294,725
    
    
    $
    2,759,669
    
    
    $
    118,748
 
 (1)
    
    All amounts calculated in Euros have been converted to U.S. dollars using the rate of 1.0000
Euro = 1.4594 U.S. dollars.(2)
    
    Represents the maximum amount of severance that Mr. Urcelay may receive.(3)
    
    The unvested portion of Tranche I Options will accelerate and become vested upon a change in
control. In calculating the amount set forth in the table, we utilized a per share
value of $34.00, which was the fair value of our shares of Common Stock as of October 1, 2008. As
we are a privately held company, the value of shares of Common Stock is only available when a
valuation is performed. The shares of Common Stock were not valued as of our fiscal year end,
and the fair value for such shares is likely to have declined since the date of the most
recent valuation. Accordingly, the amount set forth in the table is likely to be higher than
the amount that would have been determined if a valuation had been conducted at fiscal year
end.(4)
    
    This amount represents his benefit entitlement under the MAPFRE Policies.(5)
    
    Represents estimated Company costs of various benefits and perquisites based on fiscal 2008
actual amounts for the duration of the Severance Period.    Richard Ruppert
  DIRECTOR COMPENSATION FOR FISCAL 2008
  110




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##### Table of Contents



ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Amount and Nature ofBeneficial Ownership *OptionsExercisable
    
    
    
    
    
    Percent ofWithin 60
    
    Total Beneficial
    
    OutstandingName of Beneficial Owner
    
    Shares
    
    Days
    
    Ownership
    
    Shares (1)Affiliates of Bain Capital Partners, LLC (2)
    
    
    16,012,464
    
    
    
    
    
    
    
    16,012,464
    
    
    
    32.70
    %Toybox Holdings, LLC (3)
    
    
    16,012,464
    
    
    
    
    
    
    
    16,012,464
    
    
    
    32.70
    %Vornado Truck LLC (4)
    
    
    16,012,464
    
    
    
    
    
    
    
    16,012,464
    
    
    
    32.70
    %Claire Babrowski
    
    
    12,500
    
    
    
    
    
    
    
    12,500
    
    
    
    Joshua Bekenstein
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ronald Boire
    
    
    41,121
    
    
    
    45,042
    
    
    
    86,163
    
    
    
    Michael M. Calbert
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    F. Clay Creasey, Jr
    
    
    12,500
    
    
    
    
    
    
    
    12,500
    
    
    
    Michael D. Fascitelli
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Matthew S. Levin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sanjay Morey
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    John Pfeffer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Steven Roth
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Richard Ruppert (5)
    
    
    6,250
    
    
    
    
    
    
    
    6,250
    
    
    
    Wendy Silverstein
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gerald L. Storch
    
    
    74,766
    
    
    
    149,533
    
    
    
    224,299
    
    
    
    Antonio Urcelay
    
    
    
    
    
    
    61,951
    
    
    
    61,951
    
    
    
    Michael Ward
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Directors
and executive officers as a group (18 persons) (6)
    
    
    170,793
    
    
    
    391,947
    
    
    
    562,740
    
    
    
    1.14
    %
 
 *
    
    For purposes of this table, beneficial ownership is determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934 pursuant to which a person or group of persons
is deemed to have beneficial ownership of any shares of Common Stock with respect to which
such person has (or has the right to acquire within 60 days, i.e., by May 30, 2009 in this
case) sole or shared voting power or investment power.(1)
    
    Unless otherwise indicated, the beneficial ownership of any named person does not
exceed, in the aggregate, one percent of our outstanding equity securities on March 31, 2009,
as adjusted as required by applicable rules.(2)
    
    Includes Bain Capital (TRU) VIII, L.P., Bain Capital (TRU) VIII-E, L.P., Bain
Capital (TRU) VIII Coinvestment, L.P., Bain Capital Integral Investors, LLC and BCIP TCV, LLC
(the Bain Capital Funds). The Bain Capital Funds are all affiliates of Bain Capital
Partners, LLC. Bain Capital Partners, LLC disclaims beneficial ownership of such shares. The
Bain Capital Funds each have an address c/o Bain Capital Partners, LLC, 111 Huntington Avenue,
Boston, MA 02199.(3)
    
    Shares owned of record by Toybox Holdings, LLC are also beneficially owned by its
majority member, KKR Millennium Fund, Limited Partnership. KKR Millennium GP LLC is the
general partner of KKR Associates Millennium L.P., which is the general partner of the KKR
Millennium Fund, Limited Partnership. Messrs. Henry R. Kravis, George R. Roberts, James H.
Greene, Jr., Paul E. Raether, Michael W. Michelson, Perry Golkin, Johannes P. Huth, Todd A.
Fisher, Alexander Navab, Marc S. Lipshultz, Reinhard Gorenflos, Jacques Garaialde, Michael M.
Calbert and Scott C. Nuttall, as members of KKR Millennium GP LLC, disclaim such beneficial
ownership. Mr. Calbert is one of our directors. KKR is also an affiliate of Toybox Holdings,
LLC. Mr. Pfeffer is a Member of KKR and one of our directors. They also disclaim beneficial
ownership of any of our shares beneficially owned by KKR Millennium GP LLC. For a description
of material relationships between KKR and us over the last three years, see Certain
Relationships and Related Transactions. The address of KKR Millennium GP LLC and each
individual listed above is c/o Kohlberg Kravis Roberts & Co., L.P., 2800 Sand Hill Road, Menlo
Park, CA 94025.(4)
    
    An affiliate of Vornado Realty Trust, having an address of 888 Seventh Avenue, New
York, NY 10019.(5)
    
    Mr. Rupperts shares were awarded to him on August 6, 2007 pursuant to the terms of
his employment agreement. The shares of Common Stock vest over time. Fifty percent of the
shares of Common Stock vested on the first anniversary of the grant date. Fifty percent of the
shares of Common Stock would have vested on the second anniversary of the grant date, but
Mr. Ruppert was terminated before the second anniversary of the grant date. Therefore, he
forfeited fifty percent of the shares of Common Stock on his termination date of October 18,
2008.(6)
    
    Total does not include shares held by Mr. Ruppert, as his employment was terminated
on October 18, 2008. 111




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##### Table of Contents



Equity Compensation Plan Information
 ( c )( b )
    
    
    Number of securities( a )
    
    
    Weighted-
    
    
    remaining availableNumber of
    
    
    average
    
    
    for future issuancesecurities to be
    
    
    exercise price
    
    
    under equityissued upon exercise
    
    
    of outstanding
    
    
    compensationof outstanding
    
    
    options,
    
    
    (excluding securitiesoptions, warrants
    
    
    warrants, and
    
    
    reflected in columnPlan Category
    
    and rights
    
    
    rights
    
    
    (a))Equity compensation plans approved by security holders
    
    
    3,705,987
    (1)
    
    $
    26.25
    
    
    
    498,665
    (2)Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,705,987
    
    
    $
    26.25
    
    
    
    498,665
 
 (1)
    
    As of January 31, 2009, represents the shares of our common stock issuable pursuant
to outstanding options under the Amended and Restated Toys R Us, Inc. Management Equity Plan
(the Management Equity Plan).(2)
    
    As of January 31, 2009, represents the shares of our common stock, which may be
issued pursuant to future issuances under the Management Equity Plan. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 Advisory Agreement
    Other Relationships and Transactions
  Management Equity Plan
   112




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##### Table of Contents



Review, Approval or Ratification of Transactions with Related Persons
      Director Independence
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 Appointment of Independent Auditors
 
 113




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##### Table of Contents



Audit Fees
  Fiscal 2008
    
    Fiscal 2007Audit Fees (1)
    
    $
    6,613,000
    
    
    $
    8,662,000Audit-Related Fees (2)
    
    $
    893,000
    
    
    $
    581,000Tax Fees (3)
    
    $
    823,000
    
    
    $
    503,000All Other Fees (4)
    
    $
    11,000
    
    
    $
    32,000
 
 (1)
    
    For fiscals 2008 and 2007, the audit fees consist of fees for professional services
performed in connection with the audit of the Companys annual consolidated financial
statements, review of financial statements included in our 10-Q filings, the Sarbanes-Oxley
Section 404 audit and services that are normally provided in connection with statutory and
regulatory filings or engagements.(2)
    
    For fiscal 2008, audit-related fees consist primarily of fees for the special
purpose audit of Toys R Us Holdings, Inc., our former parent (Former Parent). For fiscal
2007, audit-related fees consist of fees for consultation on various accounting matters such
as FIN 48 implementation and the special purpose audit of Former Parent.(3)
    
    For fiscal 2008, tax fees consist of a variety of tax consultations including
services performed for inventory tax matters. For fiscal 2007, tax fees consist of fees of
$23,000 for tax documentation preparation, and $480,000 for tax consultation regarding various
matters such as FIN 48.(4)
    
    For fiscals 2008 and 2007, other fees were recorded for various domestic and
international accounting matters. Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
 
 114




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Financial Statements and financial statement schedules(1) and (2) The financial statements and financial statement schedules required to be filed as
part of this report are set forth in Item 8 of Part II of this report.(3) Exhibits. See Item 15(b) below.(b)
    
    Exhibits required by Item 601 of Regulation S-KThe information required by this item is incorporated herein by reference from the Index to
Exhibits beginning on page 118 of this Annual Report on Form 10-K. 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.
Written requests should be sent to Investor Relations, Toys R Us Inc., One Geoffrey Way,
Wayne, New Jersey 07470.
 115




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##### Table of Contents



SIGNATURES
 
 TOYS R US, INC.
(Registrant)/s/ GERALD L. STORCHGerald L. StorchChairman of the Board and
Chief Executive Officer  
 Signature
    
    Title/s/ GERALD L. STORCH

Gerald L. Storch
    
    Chairman of the Board, Chief Executive Officer and Director
(Principal Executive Officer)/s/ F. CLAY CREASEY, JR.

F. Clay Creasey, Jr.
    
    Executive Vice President  Chief Financial Officer
(Principal Financial Officer)/s/ CHARLES D. KNIGHT

Charles D. Knight
    
    Vice President  Corporate Controller (Principal Accounting Officer)*

Joshua Bekenstein
    
    Director*

Michael M. Calbert
    
    Director*

Michael D. Fascitelli
    
    Director*

Matthew S. Levin
    
    Director*

Sanjay Morey
    
    Director*

John Pfeffer
    
    Director*

Steven Roth
    
    Director*

Wendy Silverstein
    
    Director*

Michael Ward
    
    Director
  *By
    
    /s/ GERALD L. STORCH

Gerald L. StorchAttorney-In-Fact
 116




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##### Table of Contents



SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY
REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
 
 117




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##### Table of Contents



INDEX TO EXHIBITS
  Exhibit No.
    
    Document2.1
    
    Reorganization Agreement, dated June 10, 2008, by and between
the Registrant and Toys R Us Holdings, Inc. (filed as
Exhibit 2.1 to the Registrants Quarterly Report on Form 10-Q,
filed on June 10, 2008 and incorporated herein by reference).3.1
    
    Restated Certificate of Incorporation of the Registrant filed
with the Secretary of State of the State of Delaware on July
21, 2005 (filed as Exhibit 3.1 to the Registrants Current
Report on Form 8-K, filed on July 27, 2005 and incorporated
herein by reference).3.2
    
    Amendment No. 1 to the Restated Certificate of Incorporation
of the Registrant filed with the Secretary of State of the
State of Delaware on June 10, 2008 (filed as Exhibit 3.1 to
the Registrants Quarterly Report on Form 10-Q, filed on June
10, 2008 and incorporated herein by reference).3.3
    
    Amended and Restated By-Laws of the Registrant, dated June 10,
2008 (filed as Exhibit 3.3 to the Registrants Quarterly
Report on Form 10-Q, filed on June 10, 2008 and incorporated
herein by reference).4.1
    
    Form of Indenture between the Registrant and Fleet Bank, as
trustee, pursuant to which securities in one or more series up
to $300,000,000 in principal amount may be issued by the
Registrant (filed as Exhibit 4 to the Registrants
Registration Statement on Form S-3, No. 33-42237, filed on
August 31, 1991 and incorporated herein by reference).4.2
    
    Form of the Registrants 8 3/4% Debentures due 2021 (filed as
Exhibit 4 to the Registrants Current Report on Form 8-K,
dated August 29, 1991 and incorporated herein by reference).4.3
    
    First Supplemental Indenture, dated as of January 1, 1996,
among Toys R Us  Delaware, Inc., Toys R Us, Inc. and United
Jersey Bank, as trustee.4.4
    
    Second Supplemental Indenture, dated as of November 15, 2006,
among Toys R Us  Delaware, Inc., Toys R Us, Inc. and The
Bank of New York, as trustee (filed as Exhibit 10.5 to the
Registrants Quarterly Report on Form 10-Q, filed on December
12, 2006 and incorporated herein by reference).4.5
    
    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).4.6
    
    Form of the Registrants 7.65% 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).4.7
    
    Form of the Registrants 7.875% Notes due 2013 (filed as
Exhibit 4.2 to the Registrants Current Report on Form 8-K,
filed on April 8, 2003 and incorporated herein by reference).4.8
    
    Form of the Registrants 7.375% Notes due 2018 (filed as
Exhibit 4.1 to the Registrants Current Report on Form 8-K,
filed on September 22, 2003 and incorporated herein by
reference).4.9
    
    Indenture, dated as of May 28, 2002, between the Registrant
and The Bank of New York, as trustee (filed as Exhibit 4.3 to
the Post-Effective Amendment to the Registrants Registration
Statement on Form S-3, No. 333-84254, filed on May 29, 2002
and incorporated herein by reference).4.10
    
    First Supplemental Indenture, dated as of May 28, 2002,
between the Registrant and The Bank of New York, as trustee
(filed as Exhibit 4.4 to the Post-Effective Amendment to the
Registrants Registration Statement on Form S-3, No.
333-84254, filed on May 29, 2002 and incorporated herein by
reference).4.11
    
    Lease Agreement, dated as of September 26, 2001, between First Union
Development Corporation, as Lessor, and the Registrant, as Lessee
(filed as Exhibit 4(viii) to the Registrants Annual Report on Form
10-K for the fiscal year ended February 2, 2002, filed on May 3, 2002
and incorporated herein by reference).4.12
    
    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, (i) commercial paper, (ii)
industrial revenue bonds issued by industrial development authorities
and guaranteed by the Registrant, (iii) mortgages held by third
parties on real estate owned by the Registrant and (iv) stepped
coupon guaranteed bonds held by a third party and guaranteed by the
Registrant.
 118




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##### Table of Contents



Exhibit No.
    
    Document10.1
    
    Credit Agreement, dated as of July 21, 2005, among
Toys R Us, Inc., as the initial borrower, and the
other borrowers named therein, Bank of America,
N.A., as Administrative Agent, Bank of America, N.A.
as Canadian Agent, Deutsche Bank Trust Company
Americas, as Collateral Agent, the Lenders named
therein, Deutsche Bank Securities Inc. and Citicorp
USA, Inc., as Co-Syndication Agents, and Credit
Suisse, Cayman Islands Branch and General Electric
Capital Corporation, as Co-Documentation Agents
(filed as Exhibit 10.1 to the Registrants Current
Report on Form 8-K, filed on July 27, 2005 and
incorporated herein by reference).10.2
    
    First Amendment, dated as of December 21, 2005, to
the Credit Agreement, entered into as of July 21,
2005, by and among Toys R Us  Delaware, Inc., as
the domestic borrower, and the other borrowers named
therein, Toys R Us (Canada) Ltd. Toys R Us
(Canada) Ltee, as the Canadian borrower, Bank of
America, N.A., as Administrative Agent, Bank of
America, N.A., as Canadian Agent, Deutsche Bank
Trust Company Americas, as Collateral Agent and the
Lenders named therein (filed as Exhibit 10.3 to the
Registrants Quarterly Report on Form 10-Q, filed on
September 12, 2006 and incorporated herein by
reference).10.3
    
    Second Amendment, dated as of July 19, 2006, to the
Credit Agreement, entered into as of July 21, 2005,
by and among Toys R Us  Delaware, Inc., as the
domestic borrower, and the other borrowers named
therein, Toys R Us (Canada) Ltd. Toys R Us
(Canada) Ltee, as the Canadian borrower, Bank of
America, N.A., as Administrative Agent, Bank of
America, N.A., as Canadian Agent, Deutsche Bank
Trust Company Americas, as Collateral Agent and the
Lenders named therein (filed as Exhibit 10.4 to the
Registrants Quarterly Report on Form 10-Q, filed on
September 12, 2006 and incorporated herein by
reference).10.4
    
    Security Agreement, dated as of July 21, 2005, among
Toys R Us, Inc., and the borrowers named therein,
the guarantors named therein, and Bank of America,
N.A., as Administrative Agent (filed as Exhibit 10.2
to the Registrants Current Report on Form 8-K,
filed on July 27, 2005 and incorporated herein by
reference).10.5
    
    Senior Facilities Agreement, dated as of July 21,
2005, among Toys R Us (UK) Limited, as original
borrower and original guarantor, and the other
borrowers named therein, Deutsche Bank AG, London
Branch, Barclays Capital and The Royal Bank of
Scotland plc, as Mandated Lead Arrangers and
Bookrunners, Banc of America Securities Limited, as
Co-Arranger, Deutsche Bank AG, London Branch, as
Facility Agent and as Security Agent and the banks
and other institutions named therein, as Lenders
(filed as Exhibit 10.4 to the Registrants Current
Report on Form 8-K, filed on July 27, 2005 and
incorporated herein by reference).10.6
    
    Loan and Security Agreement, dated as of July 21,
2005, between MPO Properties, LLC, as borrower, and
German American Capital Corporation, on behalf of
the holders of the notes, as lender (filed as
Exhibit 10.5 to the Registrants Quarterly Report on
Form 10-Q, filed on September 14, 2005 and
incorporated herein by reference).10.7
    
    Mezzanine Loan and Security Agreement (First Mezzanine), dated as of
July 21, 2005, between MPO Intermediate, LLC, as borrower, and
German American Capital Corporation, as lender (filed as Exhibit
10.6 to the Registrants Quarterly Report on Form 10-Q, filed on
September 14, 2005 and incorporated herein by reference).10.8
    
    Mezzanine Loan and Security Agreement (Second Mezzanine), dated as
of July 21, 2005, between MPO Intermediate Holdings, LLC, as
borrower, and German American Capital Corporation, as lender (filed
as Exhibit 10.7 to the Registrants Quarterly Report on Form 10-Q,
filed on September 14, 2005 and incorporated herein by reference).10.9
    
    Mezzanine Loan and Security Agreement (Third Mezzanine), dated as of
July 21, 2005, between MPO Junior, LLC, as borrower, and German
American Capital Corporation, as lender (filed as Exhibit 10.8 to
the Registrants Quarterly Report on Form 10-Q, filed on September
14, 2005 and incorporated herein by reference).10.10
    
    Mezzanine Loan and Security Agreement (Fourth Mezzanine), dated as
of July 21, 2005, between MPO Junior Holdings, LLC, as borrower, and
German American Capital Corporation, as lender (filed as Exhibit
10.9 to the Registrants Quarterly Report on Form 10-Q, filed on
September 14, 2005 and incorporated herein by reference).10.11
    
    Loan and Security Agreement, dated as of July 21, 2005, between
Giraffe Properties, LLC, as borrower, and German American Capital
Corporation, on behalf of the holders of the notes, as lender (filed
as Exhibit 10.10 to the Registrants Quarterly Report on Form 10-Q,
filed on September 14, 2005 and incorporated herein by reference).10.12
    
    Mezzanine Loan and Security Agreement (First Mezzanine), dated as of
July 21, 2005, between Giraffe Intermediate, LLC, as borrower, and
German American Capital Corporation, as lender (filed as Exhibit
10.11 to the Registrants Quarterly Report on Form 10-Q, filed on
September 14, 2005 and incorporated herein by reference).
 119




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##### Table of Contents



Exhibit No.
    
    Document10.13
    
    Mezzanine Loan and Security Agreement (Second
Mezzanine), dated as of July 21, 2005, between
Giraffe Intermediate Holdings, LLC, as borrower, and
German American Capital Corporation, as lender
(filed as Exhibit 10.12 to the Registrants
Quarterly Report on Form 10-Q, filed on September
14, 2005 and incorporated herein by reference).10.14
    
    Mezzanine Loan and Security Agreement (Third
Mezzanine), dated as of July 21, 2005, between
Giraffe Junior, LLC, as borrower, and German
American Capital Corporation, as lender (filed as
Exhibit 10.13 to the Registrants Quarterly Report
on Form 10-Q, filed on September 14, 2005 and
incorporated herein by reference).10.15
    
    Mezzanine Loan and Security Agreement (Fourth
Mezzanine), dated as of July 21, 2005, between
Giraffe Junior Holdings, LLC, as borrower, and
German American Capital Corporation, as lender
(filed as Exhibit 10.14 to the Registrants
Quarterly Report on Form 10-Q, filed on September
14, 2005 and incorporated herein by reference).10.16
    
    Credit Agreement, dated as of December 9, 2005,
among TRU 2005 RE Holding Co. I, LLC, as borrower,
MAP Real Estate, LLC, Wayne Real Estate Company,
LLC, TRU 2005 RE I, LLC and TRU 2005 RE II Trust,
the lenders party thereto from time to time and
Deutsche Bank AG, New York Branch, as administrative
agent (filed as Exhibit 10.1 to the Registrants
Current Report on Form 8-K, filed on December 15,
2005 and incorporated herein by reference).10.17
    
    UK Propco Facility Agreement, dated as of February
8, 2006, among Toys R Us Properties (UK) Limited,
as borrower, Vanwall Finance PLC, as senior lender,
The Royal Bank of Scotland plc, as junior lender and
Deutsche Bank AG, London Branch, as facility agent
and security agent (filed as Exhibit 10.16 to the
Registrants Annual Report on Form 10-K for the
fiscal year ended January 28, 2006, filed on April
28, 2006 and incorporated herein by reference).10.18
    
    Credit Agreement, dated as of July 19, 2006 (the
2006 Credit Agreement), by and among Toys R Us -
Delaware, Inc., as the borrower, Banc of America
Bridge LLC, as Administrative Agent, Deutsche Bank
Securities Inc., as Syndication Agent, Citicorp
North America, Inc., as Collateral Agent, the
Lenders named therein, Credit Suisse, as
Documentation Agent, Banc of America Securities LLC
and Deutsche Bank Securities Inc., as Joint Lead
Arrangers and Banc of America Securities LLC,
Deutsche Bank Securities Inc. and Citigroup Global
Markets Inc., as Joint Bookrunning Managers (filed
as Exhibit 10.5 to the Registrants Quarterly Report
on Form 10-Q, filed on September 12, 2006 and
incorporated herein by reference).10.19
    
    Amendment No.1, dated as of July 25, 2006, to the
2006 Credit Agreement (filed as Exhibit 10.6 to the
Registrants Quarterly Report on Form 10-Q, filed on
September 12, 2006 and incorporated herein by
reference).10.20
    
    Security Agreement, dated as of July 19, 2006, among
Toys R Us  Delaware, Inc., and the Guarantors
named therein, and Banc of America Bridge LLC, as
Administrative Agent (filed as Exhibit 10.7 to the
Registrants Quarterly Report on Form 10-Q, filed on
September 12, 2006 and incorporated herein by
reference).10.21
    
    Credit Agreement, dated as of December 1, 2006, by
and among Toys R Us  Delaware, Inc., as the
Borrower, Banc of America Bridge LLC, as
Administrative Agent and as Syndication Agent, the
Lenders Party thereto, and Banc of America
Securities LLC, as Lead Arranger (filed as Exhibit
10.6 to the Registrants Quarterly Report on Form
10-Q, filed on December 12, 2006 and incorporated
herein by reference).10.22
    
    Stockholders Agreement among Toys R Us Holdings,
Inc. (subsequently assumed by the Registrant), Funds
managed by Bain Capital Partners, LLC or its
Affiliates, Toybox Holdings LLC and Vornado Truck
LLC and certain other persons, dated as of July 21,
2005 (filed as Exhibit 10.2 to the Registrants
Quarterly Report on Form 10-Q, filed on June 10,
2008 and incorporated herein by reference).10.23
    
    Amendment No. 1, dated June 10, 2008, to the
Stockholders Agreement among Toys R Us Holdings,
Inc. (subsequently assumed by the Registrant), Funds
managed by Bain Capital Partners, LLC or its
Affiliates, Toybox Holdings LLC and Vornado Truck
LLC and certain other persons, dated as of July 21,
2005 (filed as Exhibit 10.3 to the Registrants
Quarterly Report on Form 10-Q, filed on June 10,
2008 and incorporated herein by reference).10.24
    
    Advisory Agreement, dated as of July 21, 2005, among
the Registrant, Toys R Us Holdings, Inc.
(subsequently assumed by the Registrant), Bain
Capital Partners, LLC, Bain Capital, Ltd., Kohlberg
Kravis Roberts & Co., L.P. and Vornado Truck LLC
(filed as Exhibit 10.20 to the Registrants
Quarterly Report on Form 10-Q, filed on September
14, 2005 and incorporated herein by reference).10.25
    
    Amendment No. 1, dated June 10, 2008, to the
Advisory Agreement among the Registrant, Toys R Us
Holdings, Inc. (subsequently assumed by the
Registrant), Bain Capital Partners, LLC, Bain
Capital, Ltd., Kohlberg Kravis Roberts & Co., L.P.
and Vornado Truck LLC, dated as of July 21, 2005
(filed as Exhibit 10.4 to the Registrants Quarterly
Report on Form 10-Q, filed on June 10, 2008 and
incorporated herein by reference).
 120




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##### Table of Contents



Exhibit No.
    
    Document10.26
    
    Amendment No. 2, dated February 1, 2009, to the Advisory Agreement among the Registrant, Bain
Capital Partners, LLC, Bain Capital, Ltd., Kohlberg Kravis Roberts & Co., L.P. and Vornado Truck
LLC, dated as of July 21, 2005.10.27*
    
    Amended and Restated Toys R Us Holdings, Inc. 2005 Management Equity Plan, (subsequently assumed
by the Registrant), adopted on August 3, 2007 (filed as Exhibit 10.1 to the Registrants Quarterly
Report on Form 10-Q, filed on December 18, 2007 and incorporated herein by reference).10.28*
    
    Amendment No. 1, dated June 10, 2008, to the Amended and Restated Toys R Us Holdings, Inc. 2005
Management Equity Plan, (subsequently assumed by the Registrant), adopted on August 3, 2007 (filed
as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q, filed on June 10, 2008 and
incorporated herein by reference).10.29*
    
    Amended and Restated Toys R Us, Inc. Management Incentive Compensation Plan, effective as of
February 2, 2003 (filed as Exhibit F to the Registrants Proxy Statement on Form DEF 14A, filed on
April 30, 2003 and incorporated herein by reference).10.30*
    
    Amended and Restated Toys R Us, Inc. Grantor Trust Agreement, dated as of January 31, 2003,
between Registrant and Wachovia Bank, N.A. (filed as Exhibit 10.24 to the Registrants Annual
Report on Form 10-K for the fiscal year ended January 31, 2004, filed on April 14, 2004 and
incorporated herein by reference).10.31*
    
    Toys R Us, Inc. Supplemental Executive Retirement Plan, effective as of February 1, 2006 (filed
as Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed on December 22, 2006 and
incorporated herein by reference).10.32*
    
    Amendment No. 1, effective as of February 1, 2008, to the Toys R Us, Inc. Supplemental Executive
Retirement Plan, effective as of February 1, 2006.10.33*
    
    Toys R Us, Inc. Split Dollar Plan, effective February 1, 1996 and Amendment to Toys R Us, Inc.
Split Dollar Plan, effective November 5, 2003 (filed as Exhibit 10.36 to the Registrants Annual
Report on Form 10-K for the fiscal year ended January 31, 2004, filed on April 14, 2004 and
incorporated herein by reference).10.34*
    
    Summary of 2006 Corporate Incentive Program (filed as Exhibit 10.3 to the Registrants Quarterly
Report on Form 10-Q, filed on June 13, 2006 and incorporated herein by reference).10.35*
    
    Form of Toys R Us, Inc. Non-Qualified Stock Option For Executive Officers.10.36*
    
    Form of Toys R Us, Inc. Restricted Stock Agreement (With Consideration) for Executive Officers.10.37*
    
    Form of Toys R Us, Inc. Restricted Stock Agreement (Without Consideration) for Executive Officers.10.38*
    
    Employment Agreement among Toys R Us Holdings, Inc., Toys R Us, Inc. and Gerald Storch, dated
as of February 6, 2006 (filed as Exhibit 10.26 to the Registrants Annual Report on Form 10-K for
the fiscal year ended January 28, 2006, filed on April 28, 2006 and incorporated herein by
reference).10.39*
    
    Amendment No. 1, dated October 27, 2008, to the Employment Agreement, dated as of February 6, 2006,
with Gerald Storch.10.40*
    
    Employment Agreement among Toys R Us Holdings, Inc., Toys R Us, Inc. and F. Clay Creasey, Jr.,
dated as of April 5, 2006 (filed as Exhibit 10.46 to the Registrants Annual Report on Form 10-K
for the fiscal year ended January 28, 2006, filed on April 28, 2006 and incorporated herein by
reference).10.41*
    
    Amendment No. 1, dated October 16, 2008, to the Employment
Agreement, dated as of April 5, 2006, with F. Clay Creasey, Jr.10.42*
    
    Employment Agreement among Toys R Us Holdings, Inc., Toys R
Us, Inc. and Ronald D. Boire, dated as of June 28, 2006 (filed
as Exhibit 10.1 to the Registrants Current Report on Form 8-K,
filed on June 29, 2006 and incorporated herein by reference).10.43*
    
    Amendment No. 1, dated December 22, 2008, to the Employment
Agreement, dated as of June 28, 2006, with Ronald D. Boire.10.44*
    
    Employment Agreement among Toys R Us Holdings, Inc., Toys R
Us, Inc. and Richard Ruppert, dated as of October 31, 2006
(filed as Exhibit 10.3 to the Registrants Quarterly Report on
Form 10-Q, filed on December 12, 2006 and incorporated herein
by reference).10.45*
    
    Amendment No. 1, dated October 24, 2008, to the Employment
Agreement, dated as of October 31, 2006, with Richard Ruppert.
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Exhibit No.
    
    Document10.46*
    
    Employment Agreement among Toys R Us Holdings, Inc., Toys R
Us, Inc. and Claire Babrowski, dated as of May 29, 2007 (filed
as Exhibit 10.55 to the Registrants Annual Report on Form 10-K
for the fiscal year ended February 2, 2008, filed on May 2,
2008 and incorporated herein by reference).10.47*
    
    Amendment No. 1, dated October 16, 2008, to the Employment
Agreement, dated as of May 29, 2007, with Claire Babrowski.10.48*
    
    Letter Agreement, dated October 20, 2004, between Toys R Us,
Inc. and Antonio Urcelay (filed as Exhibit 10.44 to the
Registrants Annual Report on Form 10-K for the fiscal year
ended January 28, 2006, filed on April 28, 2006 and
incorporated herein by reference).12
    
    Statement re: computation of ratio of earnings to fixed charges.18
    
    Letter re:  change in
accounting principle.21
    
    Subsidiaries of the Registrant as of January 31, 2009.24
    
    Power of Attorney, dated March 31, 2009.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a 
14(a) and Rule 15d  14(a) of the Securities and Exchange Act
of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a 
14(a) and Rule 15d  14(a) of the Securities and Exchange Act
of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Management contract or compensatory plan, contract or arrangement. 122