##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended May 2, 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 Way Wayne, New Jersey
    
    07470(Address of principal executive offices)
    
    (Zip code)
 (973) 617-3500
(Registrants telephone number, including area code)
 
 þ o
 o o
  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




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##### 



TOYS R US, INC. AND SUBSIDIARIES
 TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of May 2, 2009, January 31, 2009 and May 3, 2008
    
    
    3Condensed Consolidated Statements of Operations for the thirteen weeks ended May 2, 2009
and May 3, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended May 2, 2009
and May 3, 2008
    
    
    5Condensed Consolidated Statements of Stockholders Deficit for the thirteen weeks ended
May 2, 2009 and May 3, 2008
    
    
    6Notes to the Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    25PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26SIGNATURE
    
    
    27INDEX TO EXHIBITS
    
    
    28EX-10.1EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 TOYS R US, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 May 2,
    
    
    January 31,
    
    
    May 3 ,(In millions)
    
    2009
    
    
    2009
    
    
    2008ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    470
    
    
    $
    783
    
    
    $
    408Short-term investments
    
    
    
    
    
    
    
    
    
    
    20Accounts and other receivables
    
    
    190
    
    
    
    251
    
    
    
    198Merchandise inventories
    
    
    2,098
    
    
    
    1,781
    
    
    
    2,227Current deferred tax assets
    
    
    84
    
    
    
    84
    
    
    
    81Prepaid expenses and other current assets
    
    
    159
    
    
    
    124
    
    
    
    187Total current assets
    
    
    3,001
    
    
    
    3,023
    
    
    
    3,121Property and equipment, net
    
    
    4,131
    
    
    
    4,187
    
    
    
    4,351Goodwill, net
    
    
    377
    
    
    
    380
    
    
    
    366Deferred tax assets
    
    
    194
    
    
    
    180
    
    
    
    196Restricted cash
    
    
    177
    
    
    
    193
    
    
    
    135Other assets
    
    
    423
    
    
    
    448
    
    
    
    472$
    8,303
    
    
    $
    8,411
    
    
    $
    8,641LIABILITIES AND STOCKHOLDERS DEFICITCurrent Liabilities:Short-term borrowings
    
    $
    25
    
    
    $
    
    
    
    $
    48Accounts payable
    
    
    1,290
    
    
    
    1,412
    
    
    
    1,349Accrued expenses and other current liabilities
    
    
    714
    
    
    
    847
    
    
    
    908Income taxes payable
    
    
    19
    
    
    
    49
    
    
    
    19Current portion of long-term debt
    
    
    96
    
    
    
    98
    
    
    
    29Total current liabilities
    
    
    2,144
    
    
    
    2,406
    
    
    
    2,353Long-term debt
    
    
    5,646
    
    
    
    5,447
    
    
    
    5,898Deferred tax liabilities
    
    
    72
    
    
    
    78
    
    
    
    21Deferred rent liabilities
    
    
    265
    
    
    
    260
    
    
    
    262Other non-current liabilities
    
    
    367
    
    
    
    372
    
    
    
    379Toys R Us, Inc. stockholders deficit
    
    
    (297
    )
    
    
    (274
    )
    
    
    (414
    )Noncontrolling interest
    
    
    106
    
    
    
    122
    
    
    
    142Total stockholders deficit
    
    
    (191
    )
    
    
    (152
    )
    
    
    (272
    )$
    8,303
    
    
    $
    8,411
    
    
    $
    8,641
  3




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##### Table of Contents



TOYS R US, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 13 Weeks EndedMay 2,
    
    
    May 3,(In millions)
    
    2009
    
    
    2008Net sales
    
    $
    2,477
    
    
    $
    2,719Cost of sales
    
    
    1,587
    
    
    
    1,742Gross margin
    
    
    890
    
    
    
    977Selling, general and administrative expenses
    
    
    788
    
    
    
    895Depreciation and amortization
    
    
    93
    
    
    
    100Other income, net
    
    
    (12
    )
    
    
    (20
    )Total operating expenses
    
    
    869
    
    
    
    975Operating earnings
    
    
    21
    
    
    
    2Interest expense
    
    
    (94
    )
    
    
    (100
    )Interest income
    
    
    2
    
    
    
    7Loss before income taxes
    
    
    (71
    )
    
    
    (91
    )Income tax benefit
    
    
    31
    
    
    
    44Net loss
    
    
    (40
    )
    
    
    (47
    )Less: Net loss attributable to noncontrolling interest
    
    
    5
    
    
    
    11Net loss
attributable to Toys R Us, Inc.
    
    $
    (35
    )
    
    $
    (36
    )
  4




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##### Table of Contents



TOYS R US, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 13 Weeks EndedMay 2,
    
    
    May 3,(In millions)
    
    2009
    
    
    2008Cash Flows from Operating Activities:Net loss
    
    $
    (40
    )
    
    $
    (47
    )Adjustments to reconcile Net loss to net cash used in operating activities:Depreciation and amortization
    
    
    93
    
    
    
    100Amortization of debt issuance costs
    
    
    8
    
    
    
    8Deferred income taxes
    
    
    (7
    )
    
    
    (7
    )Other
    
    
    6
    
    
    
    (7
    )Changes in operating assets and liabilities:Accounts and other receivables
    
    
    81
    
    
    
    63Merchandise inventories
    
    
    (315
    )
    
    
    (217
    )Prepaid expenses and other operating assets
    
    
    (42
    )
    
    
    (32
    )Accounts payable
    
    
    (103
    )
    
    
    (201
    )Accrued expenses and other liabilities
    
    
    (144
    )
    
    
    (73
    )Income taxes payable and receivable
    
    
    (52
    )
    
    
    (101
    )Net cash used in operating activities
    
    
    (515
    )
    
    
    (514
    )Cash Flows from Investing Activities:Capital expenditures
    
    
    (34
    )
    
    
    (65
    )Decrease (increase) in restricted cash
    
    
    16
    
    
    
    (4
    )Acquisitions
    
    
    (7
    )
    
    
    Sale of short-term investments
    
    
    
    
    
    
    148Net cash (used in) provided by investing activities
    
    
    (25
    )
    
    
    79Cash Flows from Financing Activities:Long-term debt borrowings
    
    
    226
    
    
    
    213Short-term debt borrowings
    
    
    25
    
    
    
    48Long-term debt repayments
    
    
    (27
    )
    
    
    (178
    )Dividend paid to noncontrolling interest
    
    
    
    
    
    
    (2
    )Capitalized debt issuance costs
    
    
    (1
    )
    
    
    (3
    )Net cash provided by financing activities
    
    
    223
    
    
    
    78Effect of exchange rate changes on cash and cash equivalents
    
    
    4
    
    
    
    14Cash and cash equivalents:Net decrease during period
    
    
    (313
    )
    
    
    (343
    )Cash and cash equivalents at beginning of period
    
    
    783
    
    
    
    751Cash and cash equivalents at end of period
    
    $
    470
    
    
    $
    408
  5




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##### Table of Contents



TOYS R US, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
(Unaudited)
 Toys R Us, Inc. StockholdersAccumulated
    
    
    
    
    
    
    TotalCommon Stock (1)
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    Toys R Us, Inc.Issued
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Stockholders
    
    
    Noncontrolling
    
    
    Total(In millions)
    
    Shares
    
    
    Capital
    
    
    (Loss) Income
    
    
    Deficit
    
    
    Deficit
    
    
    Interest
    
    
    DeficitBalance, February 2, 2008
    
    
    
    
    
    $
    10
    
    
    $
    20
    
    
    $
    (419
    )
    
    $
    (389
    )
    
    $
    153
    
    
    $
    (236
    )Cumulative effect of change in accounting
principle, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    1Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    (36
    )
    
    
    (11
    )
    
    
    (47
    )Unrealized gain on hedged
transactions, net of tax
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Foreign currency translation
adjustments, net of tax
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    2
    
    
    
    7Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    (9
    )
    
    
    (36
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Stock compensation expense
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Balance, May 3, 2008
    
    
    
    
    
    $
    12
    
    
    $
    28
    
    
    $
    (454
    )
    
    $
    (414
    )
    
    $
    142
    
    
    $
    (272
    )Balance, January 31, 2009
    
    
    49
    
    
    $
    19
    
    
    $
    (93
    )
    
    $
    (200
    )
    
    $
    (274
    )
    
    $
    122
    
    
    $
    (152
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    (35
    )
    
    
    (5
    )
    
    
    (40
    )Unrealized loss on hedged
transactions, net of tax
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Foreign currency translation
adjustments, net of tax
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    14
    
    
    
    (11
    )
    
    
    3Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    (16
    )
    
    
    (40
    )Stock compensation expense
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Balance, May 2, 2009
    
    
    49
    
    
    $
    20
    
    
    $
    (82
    )
    
    $
    (235
    )
    
    $
    (297
    )
    
    $
    106
    
    
    $
    (191
    )
 
 (1)
    
    $0.01 par value; authorized 3,000 shares, outstanding 1,000 shares. Pursuant to the
reorganization on June 10, 2008, our shares were exchanged for 48,955,808 shares, $0.001 par
value.  6




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##### Table of Contents



TOYS R US, INC. AND SUBSIDIARIES
 
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Basis of presentation
   Reclassifications and Corrections of Previously Issued Financial Statements
  Gift card breakage
  
 7




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##### Table of Contents



2. Short-term borrowings and long-term debt
  May 2,
    
    
    January 31,
    
    
    May 3,(In millions)
    
    2009
    
    
    2009
    
    
    2008Short-term borrowingsToys-Japan short-term bank loans
    
    $
    25
    
    
    $
    
    
    
    $
    48Long-term debtToys-Japan committed credit line due fiscal 2011
    
    $
    202
    
    
    $
    18
    
    
    $
    190Secured real estate loan, due August 9, 2009 (1)
    
    
    800
    
    
    
    800
    
    
    
    800Unsecured credit agreement, due December 8, 2009 (2)
    
    
    1,283
    
    
    
    1,300
    
    
    
    1,300$2.0 billion secured revolving credit facility, expires July 21, 2010
    
    
    
    
    
    
    
    
    
    
    Multi-currency revolving credit facility, expires July 21, 2010
    
    
    
    
    
    
    
    
    
    
    Toys-Japan 1.20%-2.80% loans due fiscals 2010-2014
    
    
    151
    
    
    
    171
    
    
    
    1517.625% notes, due fiscal 2011 (3)
    
    
    511
    
    
    
    512
    
    
    
    516Secured term loan facility, due fiscal 2012
    
    
    798
    
    
    
    797
    
    
    
    797Unsecured credit facility, due fiscal 2012
    
    
    180
    
    
    
    180
    
    
    
    180French real estate credit facility, due fiscal 2012
    
    
    84
    
    
    
    81
    
    
    
    98Spanish real estate credit facility, due fiscal 2012
    
    
    173
    
    
    
    168
    
    
    
    204U.K. real estate senior credit facility, due fiscal 2013
    
    
    526
    
    
    
    514
    
    
    
    698U.K. real estate junior credit facility, due fiscal 2013
    
    
    93
    
    
    
    91
    
    
    
    1247.875% senior notes, due fiscal 2013 (3)
    
    
    394
    
    
    
    393
    
    
    
    3927.375% senior notes, due fiscal 2018 (3)
    
    
    406
    
    
    
    406
    
    
    
    4078.750% debentures, due fiscal 2021 (4)
    
    
    22
    
    
    
    22
    
    
    
    22Other (5)
    
    
    119
    
    
    
    92
    
    
    
    485,742
    
    
    
    5,545
    
    
    
    5,927Less current portion
    
    
    96
    
    
    
    98
    
    
    
    29Total long-term debt
    
    $
    5,646
    
    
    $
    5,447
    
    
    $
    5,898
 
 (1)
    
    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.(2)
    
    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.(3)
    
    Represents obligations of Toys R Us, Inc. legal entity.(4)
    
    Represents obligations of Toys R Us, Inc. and Toys R Us-Delaware, Inc.
(Toys-Delaware).(5)
    
    As of May 2, 2009, the balance consisted of $50 million related to capital lease obligations
and $69 million related to finance obligations associated with capital projects. As of January
31, 2009, the balance consisted of $55 million related to capital lease obligations and $37
million related to finance obligations associated with capital projects. As of May 3, 2008, the
balance consisted of $31 million related to capital lease obligations and $17 million related to
finance obligations associated with capital projects.   8




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##### Table of Contents



Borrowing Availability
 
 Toys-Japan Unsecured Credit Lines ($202 million and $25 million at May 2, 2009)
    Guarantees
  3. Derivative instruments and hedging activities
  Variable Cash Flow Hedges
  9




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##### Table of Contents



Interest Rate Contracts
    Subsequent Event
  Foreign Exchange Contracts
    13 Weeks Ended(In millions)
    
    May 2, 2009
    
    May 3, 2008Derivatives qualified as variable cash flow hedges under SFAS 133:Interest Rate Contracts
    
    $
    (3
    )
    
    $
    3
  10




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##### Table of Contents



13 Weeks Ended(In millions)
    
    May 2, 2009
    
    
    May 3, 2008Derivatives not qualified for hedge accounting under SFAS 133:Loss on the change in fair value  Interest Rate Contracts
    
    $
    (3
    )
    
    $
    (3
    )(Loss) gain on the change in fair value  Foreign Exchange Contracts
    
    
    (10
    )
    
    
    5(13
    )
    
    
    2Derivatives qualified as variable cash flow hedges under SFAS 133:Loss reclassified from Accumulated other comprehensive
income (effective portion)  Interest Rate Contracts
    
    
    (8
    )
    
    
    (4
    )Loss on variable cash flow hedges (ineffective portion and
amounts excluded from effectiveness testing)  Interest Rate Contracts
    
    
    (1
    )
    
    
    (9
    )
    
    
    (4
    )Total interest expense
    
    $
    (22
    )
    
    $
    (2
    )
  May 2, 2009
    
    
    January 31, 2009
    
    
    May 3, 2008Fair Value
    
    
    
    
    
    
    Fair Value
    
    
    
    
    
    
    Fair ValueNotional
    
    
    Assets/
    
    
    Notional
    
    
    Assets/
    
    
    Notional
    
    
    Assets/(In millions)
    
    Amount
    
    
    (Liabilities)
    
    
    Amount
    
    
    (Liabilities)
    
    
    Amount
    
    
    (Liabilities)Interest Rate Contracts that qualify as cash flow hedges under SFAS 133:Prepaid expenses and other current assets
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,600
    
    
    $
    Other assets
    
    
    1,800
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    Accrued expenses and other current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    (5
    )Other non-current liabilities
    
    
    1,303
    
    
    
    (45
    )
    
    
    1,303
    
    
    
    (44
    )
    
    
    4
    
    
    
    Interest Rate Contracts not qualified for hedge accounting under SFAS 133:Prepaid expenses and other current assets
    
    $
    2,191
    
    
    $
    
    
    
    $
    2,191
    
    
    $
    
    
    
    $
    1,600
    
    
    $
    Other assets
    
    
    1,111
    
    
    
    2
    
    
    
    600
    
    
    
    
    
    
    
    513
    
    
    
    19Other non-current liabilities
    
    
    347
    
    
    
    (9
    )
    
    
    337
    
    
    
    (6
    )
    
    
    16
    
    
    
    (3
    )Foreign Currency Contracts not qualified for hedge accounting under SFAS 133:Prepaid expenses and other current assets
    
    $
    25
    
    
    $
    1
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Accrued expenses and other current liabilities
    
    
    343
    
    
    
    (7
    )
    
    
    74
    
    
    
    (2
    )
    
    
    168
    
    
    
    (3
    )Total derivative contracts outstandingPrepaid expenses and other current assets
    
    $
    2,216
    
    
    $
    1
    
    
    $
    2,191
    
    
    $
    
    
    
    $
    4,200
    
    
    $
    Other assets
    
    
    2,911
    
    
    
    10
    
    
    
    600
    
    
    
    
    
    
    
    1,113
    
    
    
    19Total derivative assets(1)
    
    $
    5,127
    
    
    $
    11
    
    
    $
    2,791
    
    
    $
    
    
    
    $
    5,313
    
    
    $
    19Accrued expenses and other current liabilities
    
    $
    343
    
    
    $
    (7
    )
    
    $
    74
    
    
    $
    (2
    )
    
    $
    768
    
    
    $
    (8
    )Other non-current liabilities
    
    
    1,650
    
    
    
    (54
    )
    
    
    1,640
    
    
    
    (50
    )
    
    
    20
    
    
    
    (3
    )Total derivative liabilities(1)
    
    $
    1,993
    
    
    $
    (61
    )
    
    $
    1,714
    
    
    $
    (52
    )
    
    $
    788
    
    
    $
    (11
    )
 
 (1)
    
    Refer to Note 4 entitled Fair value measurements for the fair value of our
derivative instruments classified within the fair value hierarchy. 4. Fair value measurements
  11




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##### Table of Contents



Derivative Financial Instruments
    Cash Equivalents
   Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Assets and
    
    
    Observable Inputs
    
    
    Inputs(In millions)
    
    Liabilities (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalCash Equivalents
    
    $
    41
    
    
    $
    
    
    
    $
    
    
    
    $
    41Derivative financial instruments
    
    
    
    
    
    
    (46
    )
    
    
    (4
    )
    
    
    (50
    )Balance at May 2, 2009
    
    $
    41
    
    
    $
    (46
    )
    
    $
    (4
    )
    
    $
    (9
    )Derivative financial instruments
    
    $
    
    
    
    $
    8
    
    
    $
    
    
    
    $
    8Short-term investments
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    20Balance at May 3, 2008
    
    $
    
    
    
    $
    8
    
    
    $
    20
    
    
    $
    28
  (In millions)
    
    Level 3Balance, January 31, 2009
    
    $
    (6
    )Total loss
    
    
    (3
    )Transfers in to Level 3
    
    
    5Balance, May 2, 2009
    
    $
    (4
    )
 12




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##### Table of Contents



5. Income taxes
  13 Weeks EndedMay 2,
    
    May 3,($ in millions)
    
    2009
    
    2008Loss before income taxes
    
    $
    (71
    )
    
    $
    (91
    )Income tax benefit
    
    
    31
    
    
    
    44Effective tax rate
    
    
    (43.7
    )%
    
    
    (48.4
    )%
    6. Segments
   13 Weeks EndedMay 2,
    
    
    May 3,2009
    
    
    2008Juvenile
    
    
    42.3
    %
    
    
    40.7
    %Learning
    
    
    15.7
    %
    
    
    15.3
    %Entertainment
    
    
    13.0
    %
    
    
    15.9
    %Core Toy
    
    
    12.0
    %
    
    
    11.8
    %Seasonal
    
    
    15.8
    %
    
    
    15.1
    %Other
    
    
    1.2
    %
    
    
    1.2
    %Total
    
    
    100
    %
    
    
    100
    %
 13




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##### Table of Contents



13 Weeks EndedMay 2,
    
    
    May 3,(In millions)
    
    2009
    
    
    2008Net salesDomestic
    
    $
    1,623
    
    
    $
    1,711International
    
    
    854
    
    
    
    1,008Total Net sales
    
    $
    2,477
    
    
    $
    2,719Operating earnings (loss)Domestic
    
    $
    106
    
    
    $
    102International
    
    
    (21
    )
    
    
    (38
    )Corporate and other charges
    
    
    (64
    )
    
    
    (62
    )Operating earnings
    
    
    21
    
    
    
    2Interest expense
    
    
    (94
    )
    
    
    (100
    )Interest income
    
    
    2
    
    
    
    7Loss before income taxes
    
    $
    (71
    )
    
    $
    (91
    )
 May 2,
    
    
    January 31,
    
    
    May 3,(In millions)
    
    2009
    
    
    2009
    
    
    2008Merchandise inventoriesDomestic
    
    $
    1,277
    
    
    $
    1,165
    
    
    $
    1,220International
    
    
    821
    
    
    
    616
    
    
    
    1,007Total Merchandise inventories
    
    $
    2,098
    
    
    $
    1,781
    
    
    $
    2,227
 7. Litigation and legal proceedings
   8. Related party transactions
 Transactions with the Sponsors 
 14




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##### Table of Contents



9. Reorganization
    10. Acquisitions
   11. Recent accounting pronouncements
   15




---



##### Table of Contents



12. Subsequent events
    16




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Our Business
 .
 Financial Performance
  13 Weeks Ended($ In millions)
    
    May 2, 2009
    
    May 3, 2008Net sales (decline) growth (versus prior year)
    
    
    (8.9
    )%
    
    
    5.3
    %Gross margin as a percentage of Net sales
    
    
    35.9
    %
    
    
    35.9
    %Selling, general and administrative expenses as a percentage of Net sales
    
    
    31.8
    %
    
    
    32.9
    %Net loss attributable to Toys R Us, Inc.
    
    $
    (35
    )
    
    $
    (36
    )
     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 about the same time as the old store closes;
and
    
    stores that have expanded within their current locations.
   17




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##### Table of Contents



13 Weeks EndedMay 2, 2009 vs.
    
    May 3, 2008 vs.2008
    
    2007Domestic
    
    
    (5.4
    )%
    
    
    1.4
    %International
    
    
    (5.4
    )%
    
    
    (4.7
    )%
 Store Count by Segment
 Segment Store CountMay 2,
    
    
    May 3,2009
    
    
    2008
    
    
    ChangeDomestic (1)
    
    
    847
    
    
    
    845
    
    
    
    2International  Wholly-Owned (2)
    
    
    506
    
    
    
    504
    
    
    
    2International  Licensed and Franchised
    
    
    193
    
    
    
    181
    
    
    
    12Total
    
    
    1,546
    
    
    
    1,530
    
    
    
    16
 
 (1)
    
    Store count as of May 2, 2009 includes 53 side-by-side stores, 20 R
Superstores, 12 BRU Express stores and 63 Juvenile Expansions. As of May 3, 2008, there were
28 side-by-side stores, 5 R Superstores and 4 BRU Express stores.(2)
    
    Store count includes 70 and 35 side-by-side stores as of May 2, 2009 and May
3, 2008, respectively. As of May 2, 2009 there were 2 BRU Express stores. Net Loss Attributable to Toys R Us, Inc.
 13 Weeks EndedMay 2,
    
    May 3,(In millions)
    
    2009
    
    2008
    
    ChangeNet loss attributable to Toys R Us, Inc.
    
    $
    (35
    )
    
    $
    (36
    )
    
    $
    1
  Net Sales
 13 Weeks EndedPercentage of Net SalesMay 2,
    
    
    May 3,
    
    
    
    
    
    
    
    
    
    
    May 2,
    
    
    May 3,($ In millions)
    
    2009
    
    
    2008
    
    
    $ Change
    
    
    % Change
    
    
    2009
    
    
    2008Domestic
    
    $
    1,623
    
    
    $
    1,711
    
    
    $
    (88
    )
    
    
    (5.1
    )%
    
    
    65.5
    %
    
    
    62.9
    %International
    
    
    854
    
    
    
    1,008
    
    
    
    (154
    )
    
    
    (15.3
    )%
    
    
    34.5
    %
    
    
    37.1
    %Total Net sales
    
    $
    2,477
    
    
    $
    2,719
    
    
    $
    (242
    )
    
    
    (8.9
    )%
    
    
    100.0
    %
    
    
    100.0
    %
   18




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##### Table of Contents



Domestic
   International
   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.
 13 Weeks EndedPercentage of Net SalesMay 2,
    
    
    May 3,
    
    
    
    
    
    
    May 2,
    
    
    May 3,
    
    
    Percentage of Net($ In millions)
    
    2009
    
    
    2008
    
    
    $ Change
    
    
    2009
    
    
    2008
    
    
    Sales ChangeDomestic
    
    $
    582
    
    
    $
    614
    
    
    $
    (32
    )
    
    
    35.9
    %
    
    
    35.9
    %
    
    
    International
    
    
    308
    
    
    
    363
    
    
    
    (55
    )
    
    
    36.1
    %
    
    
    36.0
    %
    
    
    0.1
    %Total Gross margin
    
    $
    890
    
    
    $
    977
    
    
    $
    (87
    )
    
    
    35.9
    %
    
    
    35.9
    %
    
    
    0.0
    %
  19




---



##### Table of Contents



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.
 13 Weeks EndedPercentage of Net SalesMay 2,
    
    May 3,
    
    
    
    
    
    May 2,
    
    May 3,
    
    Percentage of Net Sales($ In millions)
    
    2009
    
    2008
    
    $ Change
    
    2009
    
    2008
    
    ChangeToys R Us  Consolidated
    
    $
    788
    
    
    $
    895
    
    
    $
    (107
    )
    
    
    31.8
    %
    
    
    32.9
    %
    
    
    (1.1
    )%
   Depreciation and Amortization
 13 Weeks EndedMay 2,
    
    May 3,(In millions)
    
    2009
    
    2008
    
    ChangeToys R Us  Consolidated
    
    $
    93
    
    
    $
    100
    
    
    $
    (7
    )
  Other Income, Net
  20




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##### Table of Contents




    
    gift card breakage and dormancy income;
    
    credit card program income;
    
    impairment losses on long-lived assets;
    
    foreign exchange gains and losses; and
    
    other operating income and expenses.
 13 Weeks EndedMay 2,
    
    May 3,(In millions)
    
    2009
    
    2008
    
    ChangeToys R Us  Consolidated
    
    $
    12
    
    
    $
    20
    
    
    $
    (8
    )
  Interest Expense
 13 Weeks EndedMay 2,
    
    May 3,(In millions)
    
    2009
    
    2008
    
    ChangeToys R Us  Consolidated
    
    $
    94
    
    
    $
    100
    
    
    $
    (6
    )
  Interest Income
 13 Weeks EndedMay 2,
    
    May 3,(In millions)
    
    2009
    
    2008
    
    ChangeToys R Us  Consolidated
    
    $
    2
    
    
    $
    7
    
    
    $
    (5
    )
  Income Tax Benefit
  13 Weeks EndedMay 2,
    
    May 3,($ in millions)
    
    2009
    
    2008Loss before income taxes
    
    $
    (71
    )
    
    $
    (91
    )Income tax benefit
    
    
    31
    
    
    
    44Effective tax rate
    
    
    (43.7
    )%
    
    
    (48.4
    )%
  21




---



##### Table of Contents



Liquidity and Capital Resources
 Overview
 
      22




---



##### Table of Contents



13 Weeks EndedMay 2,
    
    
    May 3,($ In millions)
    
    2009
    
    
    2008
    
    
    $ Change
    
    
    % ChangeNet cash used in operating activities
    
    $
    (515
    )
    
    $
    (514
    )
    
    $
    (1
    )
    
    
    (0.2
    )%Net cash (used in) provided by investing activities
    
    
    (25
    )
    
    
    79
    
    
    
    (104
    )
    
    
    (131.6
    )%Net cash provided by financing activities
    
    
    223
    
    
    
    78
    
    
    
    145
    
    
    
    185.9
    %Effect of exchange rate changes on cash and cash equivalents
    
    
    4
    
    
    
    14
    
    
    
    (10
    )
    
    
    (71.4
    )%Net decrease during period in cash and cash equivalents
    
    $
    (313
    )
    
    $
    (343
    )
    
    $
    30
    
    
    
    8.7
    %
 Cash Flows Used in Operating Activities
  Cash Flows (Used in) Provided by Investing Activities
   Cash Flows Provided by Financing Activities
  Debt
   Contractual Obligations and Commitments
  23




---



##### Table of Contents



Credit Ratings
  Moodys
    
    Standard and PoorsLong-term debt
    
    B2
    
    BOutlook
    
    Stable
    
    Negative
    Critical Accounting Policies
  Fair Value Measurements
   Recent Accounting Pronouncements
  Forward-Looking Statements
   24




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Exchange Exposure
 Foreign Exchange Exposure
   
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  25




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  26




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##### Table of Contents



SIGNATURE
  TOYS R US, INC.
(Registrant)Date: June 9, 2009
    /s/ F. CLAY CREASEY, JR.F. Clay Creasey, Jr.Executive Vice President  Chief Financial Officer 27




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##### Table of Contents



INDEX TO EXHIBITS
  Exhibit No.
    
    Description3.1
    
    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).3.2
    
    Amended and 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 3.2 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).10.1
    
    Amendment No. 2, effective
as of June 8, 2009, to the Amended and Restated Toys R US,
Inc. 2005 Management Equity Plan, adopted on August 3, 2007.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a
 14(a) and Rule 15d  14(a) of the Securities 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 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.
 28