Edgar Filing: TOYS R US INC

As filed with the Securities and Exchange Commission on May 21, 2002

Registration No. 333-84258
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TOYS "R" US, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware 22-3260693
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)

461 From Road
Paramus, New Jersey 07652
(201) 262-7800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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Louis Lipschitz
Executive Vice President -- Chief Financial Officer
Toys "R" Us, Inc.
461 From Road
Paramus, New Jersey 07652
(201) 262-7800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:

Glenn M. Reiter, Esq. Abigail Arms, Esq.
Simpson Thacher & Bartlett Shearman & Sterling
425 Lexington Avenue 599 Lexington Avenue
New York, New York 10017-3954 New York, New York 10022-6069
(212) 455-2000 (212) 848-4000

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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |_|

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_|

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|

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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

Subject to Completion, dated May 21, 2002

11,500,000 Shares

[TOYS "R" US LOGO]

TOYS "R" US, INC.

Common Stock

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We are offering 11,500,000 shares of our common stock. The underwriters have
the option to purchase up to an additional 1,725,000 shares of our common
stock from us to cover over-allotments, if any, at the price to public less
the underwriting discounts and commissions.

Our common stock is listed on the New York Stock Exchange under the symbol
"TOY." The last reported sale price of our common stock on the New York Stock
Exchange on May 17, 2002 was $17.84 per share.

Concurrently with this offering, we are offering 7,000,000 equity security
units, which will initially consist of a contract to purchase shares of our
common stock and a senior note. The two offerings are not conditioned on each
other.

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Investing in our common stock involves risks. See "Risk Factors" beginning
on page 5 of this prospectus.

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Underwriting
Price to Discounts and Proceeds to
Public Commissions Toys "R" Us
-------- ------------- -----------

Per Share............................................................................ $ $ $
Total................................................................................ $ $ $

The underwriters expect to deliver the shares of our common stock to
purchasers on or about May , 2002.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
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Credit Suisse First Boston Salomon Smith Barney

JPMorgan
Goldman, Sachs & Co.

BNY Capital Markets, Inc. Brean Murray & Co., Inc. Gerard Klauer Mattison
Legg Mason Wood Walker SG Cowen Wells Fargo
Incorporated Securities, LLC

The date of this prospectus is May , 2002.

TABLE OF CONTENTS

Page
----

Prospectus Summary ...................................................... 1
Risk Factors ............................................................ 5
Forward-Looking Statements .............................................. 7
Use of Proceeds ......................................................... 7
Capitalization .......................................................... 8
Selected Consolidated Financial Data .................................... 9
Recent Developments ..................................................... 11
Business ................................................................ 12

Page
----

Description of Common Stock ............................................. 17
Certain U.S. Tax Consequences to Non-United States Holders .............. 19
Underwriting ............................................................ 21
Notice to Canadian Residents ............................................ 24
Legal Opinions .......................................................... 25
Experts ................................................................. 25
Where You Can Find More Information ..................................... 25

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You should rely only on the information in and incorporated by reference in
this prospectus. We have not, and the underwriters have not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and the underwriters are not, making an offer to sell these securities in
any state or jurisdiction where the offer or sale is not permitted. You should
assume that the information appearing in this prospectus and the documents
incorporated by reference is accurate only as of their respective dates. Our
business, financial condition, results of operations and prospects may have
changed since those dates.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
As a result, this summary may not contain all of the information that may be
important to you. You should read the entire prospectus, including the
financial statements and financial data, included or incorporated by reference
in this prospectus, before making an investment decision.

Our fiscal year ends on the Saturday nearest to January 31 of each
calendar year. References to the 2000, 2001 and 2002 fiscal years are for the 53
weeks ended February 3, 2001, the 52 weeks ended February 2, 2002 and the 52
weeks ending February 1, 2003, respectively. Unless otherwise specified, all
references in this prospectus to years are to fiscal years.

Toys "R" Us, Inc.

General

We are one of the world's leading retailers of toys, children's apparel and
baby products, based upon our net sales in 2001. As of February 2, 2002, we
operated 1,599 retail stores, consisting of 1,092 U.S. locations with 701 toy
stores under the name "Toys "R" Us," 184 children's clothing stores under the
name "Kids "R" Us," 165 infant-toddler stores under the name "Babies "R" Us"
and 42 educational specialty stores under the name "Imaginarium."
Internationally, as of February 2, 2002, we operated 507 toy stores, including
licensed and franchised stores, under the name "Toys "R" Us." Toysrus.com sells
merchandise through Internet sites at www.toysrus.com, www.babiesrus.com and
www.imaginarium.com.

Over several decades of operation, Toys "R" Us has built its reputation as a
leading destination for toys and children's products. Based upon our net sales
in 2001, we are a market share leader in most of the largest markets in which
we operate, including the United States, the United Kingdom and Japan. Our toy
stores offer approximately 10,000 distinct items year-round, which we believe
is more than twice the items found in other discount or specialty stores
selling toys. We believe that one of our key competitve advantages, and a
differentiating factor in the eyes of our customers, is our broad and deep
product selection.

In early 2000, in order to further strengthen our market position and
enhance the shopping experience of our customers, we embarked on a three-year
program to reposition our U.S. toy stores. A key part of this repositioning
involves the renovation of the U.S. toy stores to our "Mission Possible"
format. This format allows us to present our merchandise in a more dynamic
selling environment and to create a more enjoyable shopping experience for
both adults and children. In addition, the staff in our Mission Possible
stores adheres to an elevated standard of guest service, based on training
which focuses on deeper product knowledge and more targeted selling skills. At
the end of 2001, we had completed the renovation of 433 of our U.S. toy
stores. We plan to complete the balance of these renovations by year-end 2002.
Although the conversion process is still underway, we believe that Mission
Possible stores offer higher productivity, profitability and return on
investment measures relative to non-renovated locations.

In November 2001, we opened our new Times Square flagship store in New York
City. We believe that our flagship store provides us with increased visibility
for the Toys "R" Us brand and an effective platform for new product launches
and also serves to further strengthen our standing with the vendor community.

Business Strategy

We seek to enhance our business and financial performance through the
following key elements of our strategy:

o Improving the productivity and profitability of our store formats. We
seek to improve the productivity and profitability of our store formats
by:

-- renovating our U.S. toy stores to the Mission Possible format -- the
165 toy stores renovated in 2000, which consisted of a broad range of
locations across operating regions, as a group achieved average
comparable store sales increases during the first 12 months following
their respective renovations that were approximately 7 percentage
points higher than the average comparable store sales of our non-
renovated stores;

-- combining our toy offering with a 5,500 square foot apparel offering
in many of our Toys "R" Us stores to create our Toys "R" Us/Kids "R"
Us "combo" stores; and

-- renovating our stand-alone Kids "R" Us stores to an updated, more
"shopper-friendly" prototype format.

In addition, we continually evaluate our stores and our store formats,
and through this process we have identified 27 U.S. toy stores and 37 Kids
"R" Us stores that we plan to close as part of our restructuring announced
on January 28, 2002. In conjunction with the closing of almost all of these
Kids "R" Us stores, the nearest Toys "R" Us store will be converted to a
combo store.

-- nationally branded products, such as Barbie, G.I. Joe, Lego and Fisher
Price;

-- exclusive branded products -- for example, we have entered into
exclusive branded product agreements with Animal Planet, Home Depot,
Scholastic and OshKosh B'Gosh, and together with Universal Studios
Consumer Products Group and Amblin Entertainment, we announced an
exclusive merchandise program to support Steven Spielberg's E.T., The
Extra-Terrestrial, and Universal's re-release of the film in spring
2002; and

-- our private label merchandise, such as Animal Alley, Fast Lane, Fun
Years and Dream Dazzlers in our Toys "R" Us stores; K.R.U., New
Legends and Miniwear Classics in our Kids "R" Us stores; and
Especially for Baby, Koala Baby and Baby Trend in our Babies "R" Us
stores.

-- the expansion of our Babies "R" Us division by opening approximately
20 stores per year;

-- the selective addition of stores in our International division as
opportunities arise;

-- the testing of our "Toys "R" Us Toybox" in a limited number of grocery
stores; and

-- the opening of selected stores intended to serve secondary and
tertiary markets by combining Toys "R" Us, Kids "R" Us and Babies "R"
Us in a 40,000 to 45,000 square foot format.

o Creating a more enjoyable shopping experience for our guests. We seek to
create an atmosphere in which it is fun and convenient for both adults
and children to shop through such initiatives as the Mission Possible
format. The Mission Possible format:

-- enhances store layout by creating lower display gondolas, widening the
aisles and reorganizing our merchandise in logical categories to
improve shopping patterns; and

-- is service-oriented with designated "World Leaders" in each of the
major product categories -- our World Leaders are senior sales
personnel who assist customers and help to train other sales
associates.

o Reducing and optimizing our operating expense structure. We actively seek
initiatives that can serve to optimize both our store-level and corporate
expenses, such as our planned consolidation of five

separate store support facilities into one new centralized facility in
Wayne, New Jersey in 2003. The Wayne facility will enable us to implement
a shared-services model across a range of finance, human resources,
administration and other support functions, which we believe will improve
the efficiency and cost-effectiveness of our operations. In addition, we
are allocating a higher percentage of store payroll hours to selling and
customer service functions.

o Further strengthening our flexible infrastructure. We believe that our
warehouse/distribution system provides us with efficiency and flexibility
to maintain in-stock inventory positions at our stores. We utilize an
inventory system that enables us to monitor the current activity and
inventory in each region and in each store, which permits us to allocate
merchandise to stores and keep them adequately stocked at all times. In
addition, we have accelerated the implementation of our major initiative
to improve our supply chain management, which is aimed at optimizing our
inventory assortment and presentation, and are expanding our automated
replenishment system to maximize inventory turnover.

Recent Developments

On May 20, 2002, we reported a net loss of $(4) million, or $(0.02) per
share, for the fiscal quarter ended May 4, 2002. We reported a net loss of $(18)
million, or $(0.09), per share, for the first quarter of 2001. Total net sales
for the first quarter of 2002 increased by 2% compared to the first quarter of
2001. Comparable sales for the first quarter of 2002 were down 2% for our U.S.
toys stores, up 10% for our International toy stores (in local currency), and up
3% for our Babies "R" Us division. Comparable store sales for our Kids "R" Us
division also fell below the level of the first quarter of 2001. See "Recent
Developments".

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We are incorporated under the laws of the State of Delaware. Our principal
executive offices are located at 461 From Road, Paramus, New Jersey 07652, and
our telephone number is (201) 262-7800.
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As used in this prospectus, "Toys "R" Us," "company," "we," "us," and "our"
generally means Toys "R" Us, Inc., together with its consolidated
subsidiaries, unless the context otherwise requires. However, in the
description of the common stock in this prospectus, when we refer to "Toys "R"
Us," "company," "we," "us" or "our," we mean Toys "R" Us, Inc. and not any of
its subsidiaries.

Each share of our common stock includes one common stock purchase right
under our stockholder rights plan. Prior to the occurrence of specified
events, the rights will not be exercisable or evidenced separately from our
common stock. See "Description of Common Stock--Rights Agreement."

Unless otherwise specified, store numbers included in this prospectus do not
give effect to the restructuring that we announced on January 28, 2002.

Toys "R" Us, Kids "R" Us, Babies "R" Us, Imaginarium and certain other brand
names used in this prospectus are our registered trademarks. Certain other
brand names listed in this prospectus are registered trademarks of third
parties.

We are not incorporating by reference in this prospectus any material from
our websites. The references to our websites are inactive textual references
to the uniform resource locators (URLs) and are for your reference only.

The Offering

Common stock offered............................. 11,500,000 shares

Common stock to be outstanding
immediately after this offering................ 208,934,066 shares

Use of proceeds.................................. We intend to use the net proceeds of the offering, together with the estimated
net proceeds from the concurrent offering of equity security units, for the
repayment of short-term borrowings and for other general corporate purposes.
See "Use of Proceeds."

Rights........................................... Each share of our common stock includes one right to purchase our common stock
pursuant to our shareholder rights plan. Prior to the occurrence of specified
events, the rights will not be exercisable or evidenced separately from our
common stock. See "Description of Common Stock--Rights Agreement."

New York Stock Exchange symbol................... TOY

Risk factors..................................... See "Risk Factors" and the other information included in this prospectus for a
discussion of factors you should carefully consider before deciding to invest
in shares of our common stock.

The number of shares of our common stock that will be outstanding after this
offering is based on the number of shares of our common stock outstanding as
of May 4, 2002.

Concurrent Offering

We are offering, in a concurrent offering, 7,000,000 equity security units,
with a stated value of $50 per unit. Each equity security unit will initially
consist of a contract to purchase shares of our common stock and a senior
note. The stock purchase contract requires the holder to purchase from us, and
us to sell to the holder, a number of shares of our common stock on August 16,
2005. The number of shares of common stock that each holder will be required
to purchase, and we will be obligated to sell, will be determined based on the
average of the closing price per share of our common stock on each of the 20
consecutive trading days ending on the third trading day immediately preceding
the stock purchase date. The senior notes, which initially will be pledged to
secure each holder's obligations under the related stock purchase contract,
will pay quarterly interest payments at the annual rate of % of their
principal amount to but excluding the date the interest rate is reset in
connection with a remarketing process, which will be between May 11, 2005 and
August 11, 2005. Thereafter, these interest payments will be paid at the reset
rate. The senior notes will mature on August 16, 2007. This offering of our
common stock and the concurrent offering of equity security units are not
conditioned on each other.

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Except as otherwise specified, all references in this prospectus to the
shares of common stock offered by us or outstanding exclude:

o 1,725,000 shares issuable upon exercise of the underwriters' over-
allotment option;

o 30.6 million shares subject to options outstanding as of February 2,
2002, at a weighted average exercise price of $20.39 per share, and 1.2
million shares subject to warrants outstanding as of February 2, 2002, at
an exercise price of $13.00 per share;

o 2.9 million restricted shares outstanding as of February 2, 2002;

o 15.4 million additional shares available for future issuance under our
stock option and incentive plans as of February 2, 2002;

o shares issuable under the stock purchase contracts, which are a component
of our equity security units being offered in the concurrent offering
and, if applicable, the equity security units issued if the underwriters
exercise their over-allotment option in that offering; and

o shares issuable in connection with the rights outstanding under our
stockholder rights plan. See "Description of Common Stock--Rights
Agreement."

RISK FACTORS

In considering whether to invest in shares of our common stock, you should
carefully consider all of the information included and incorporated by
reference in this prospectus, including, in particular, the risk factors
described below.

Our industry is highly competitive, and competitive conditions may adversely
affect our revenues and overall profitability.

Our industry is highly competitive, and our results of operations are
sensitive to, and may be adversely affected by, competitive pricing,
promotional pressures, additional store openings and other factors. We compete
with discount and mass merchandisers, such as Wal-Mart, Kmart and Target,
national and regional chains and local retailers in the market areas served by
our company. Competition is principally based on price, store location,
advertising and promotion, product selection, quality and service. Some of our
competitors may have greater financial resources, lower merchandise
acquisition costs and lower operating expenses than our company. If we fail to
compete successfully, we could face lower net sales and be required to offer
greater discounts to our customers, which could result in decreased
profitability.

Our business is highly seasonal, and our financial performance depends upon
the results of the fourth quarter of each fiscal year.

Our business is highly seasonal, with net sales and earnings generally
highest in the fourth quarter. During the last three fiscal years, more than
40% of our net sales and the substantial portion of our operating earnings
have been generated in the fourth quarter. Our results of operations depend
significantly upon the holiday selling season in the fourth quarter. If we
achieve less than satisfactory net sales during the key fourth quarter, we may
not be able to compensate sufficiently for lower net sales during the first
three quarters of the year.

We may not retain or attract customers if we fail to implement successfully
our strategy.

We continue to implement a series of customer-oriented strategic
initiatives, including renovations of most of our U.S. toy stores to our
"Mission Possible" format and expansion of programs to differentiate and
strengthen our core merchandise content and service levels. We are also
continuing with initiatives to reduce and optimize our operating expense
structure. The success of these initiatives will depend on various factors,
including the appeal of renovated store formats and new products to customers,
competitive conditions and economic conditions. If we are unsuccessful at
implementing some or all of our strategic initiatives, we may be unable to
retain or attract customers, which could result in lower net sales and a
failure to realize the benefit of the sizeable expenditures incurred for these
strategic initiatives.

Our net sales may be adversely affected if we fail to respond to changes in
consumer preferences in a timely manner.

Our financial performance depends on our ability to identify, originate and
define product trends as well as to anticipate, gauge and react to changing
consumer demands in a timely manner. Our toy and other products must appeal to
a broad range of consumers whose preferences cannot be predicted with
certainty and are subject to change. We cannot assure you that we will be able
to continue to meet changing consumer demands in the future. If we misjudge
the market for our products, we may be faced with significant excess
inventories for some products and missed opportunities for other products. In
addition, because we place orders for products well in advance of purchases by
our customers, we could experience excess inventory if our customers purchase
fewer products than anticipated.

Our net sales may be affected by changes in consumer spending patterns.

Sales of toys and other products may depend upon discretionary consumer
spending, which may be affected by general economic conditions, consumer
confidence and other factors beyond our control. A decline in consumer
spending could, among other things, negatively affect our net sales and could
also result in excess inventories, which could, in turn, lead to increased
inventory financing expenses. As a result, changes in consumer spending
patterns could adversely affect our profitability.

Our operations depend on the availability of adequate financing.

We have significant liquidity and capital requirements, and we depend on our
ability to generate cash flow from operations, borrow funds and issue
securities in the capital markets. Although we currently retain lower-tier
investment grade ratings from each of the rating agencies, future rating
agency actions could affect our ability to obtain financing on satisfactory
terms. We currently have adequate sources of liquidity and capital resources;
however, any inability on our part to have access in the future to financing
when needed would have a negative effect on our results of operations and
financial condition.

International events could delay or prevent the delivery of products to our
stores.

A significant portion of the toys and other products sold by us is
manufactured outside the United States, particularly in Asia. As a result, any
event causing a disruption of imports, including the imposition of import
restrictions or trade restrictions in the form of tariffs or otherwise, could
increase the cost and reduce the supply of products available to us, which
could, in turn, negatively affect our net sales and profitability.

Economic, political and other risks associated with our international
operations could adversely affect our business.

We have operations in 28 countries outside the United States, including,
among others, the United Kingdom, Canada, Germany and France. We intend to
pursue opportunities that may arise in these and other countries. Net sales in
foreign countries (excluding sales by licensees and franchisees) represented
approximately 17% of our net sales in 2001. We are subject to the risks
inherent in conducting business across national boundaries, many of which are
outside our control. These risks include the following:

o economic downturns;

o currency exchange rate and interest rate fluctuations;

o changes in governmental policy, including, among others, those relating
to taxation;

o international military, political and diplomatic incidents;

o government instability;

o nationalization of foreign assets; and

o tariffs and governmental trade policies.

We cannot assure you that one or more of these factors will not negatively
affect our international operations and, as a result, harm our business and
financial performance.

Our business operations could be disrupted if our existing and new management
information systems fail to perform adequately.

We depend upon our management information systems in the conduct of our
operations. We are in the process of upgrading our inventory managment,
distribution and supply chain management systems, our point of sale systems
and our general ledger systems, as well as other essential information
technology. We have spent in excess of $100 million in each of 2000 and 2001
on systems. Implementation of major new systems and enhancements to existing
systems could cause disruptions in our operations. If our major management
information systems fail to perform as anticipated, we could experience
difficulties in replenishing inventories or in delivering toys and other
products to store locations in response to customer demands. Any of these or
other system-related problems could, in turn, adversely affect our net sales
and profitability.

Anti-takeover provisions could impede or discourage a third-party acquisition
which could cause the market price of our common stock to decline or to be
lower than it otherwise would be.

We are a Delaware corporation and the anti-takeover provisions of Delaware
law impose various impediments to the ability of a third party to acquire
control of our company, even if a change of control would be beneficial to our
existing stockholders. We also have a stockholder rights plan, commonly known
as a "poison pill," that entitles our stockholders to acquire additional
shares of our company, or a potential acquiror of our company, at a
substantial discount from their market value in the event of an attempted
takeover. In addition, some options granted under our stock option plans
automatically vest upon a change in control. The provisions which we have
summarized above may reduce the market value of our common stock.

FORWARD-LOOKING STATEMENTS

This prospectus and the documents incorporated by reference contain certain
statements that are, or may be considered to be, forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. All statements that are not
historical facts, including statements about our beliefs or expectations, are
forward-looking statements. We generally identify these statements by words or
phrases such as "anticipate," "estimate," "plan," "expect," "believe,"
"intend," "foresee," "will," "may" and similar words or phrases. These
statements discuss, among other things, our strategy, store openings and
renovations, future performance and anticipated cost savings and results of
our restructuring. All of these forward-looking statements are subject to
risks, uncertainties and assumptions. Factors that could cause our actual
results to differ materially include the factors described in this prospectus,
including under "Risk Factors," and in the documents incorporated by
reference. Consequently, actual events and results may vary significantly from
those included in or contemplated or implied by our forward-looking
statements. The forward-looking statements included in this prospectus or the
documents incorporated by reference are made only as of the date of this
prospectus or the relevant incorporated document, as the case may be, and,
except as required by law, we undertake no obligation to publicly update these
forward-looking statements to reflect subsequent events or circumstances, new
information or otherwise.

USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately
$ , after deducting the underwriting discount and estimated expenses
payable by us. If the underwriters' over-allotment option is exercised in
full, we estimate that the net proceeds will be approximately $ , after
deducting the underwriting discount and estimated expenses payable by us.

We intend to use the net proceeds from this offering, together with an
estimated $ of net proceeds, after deducting the underwriting discount and
estimated expenses, from the concurrent offering of our equity security units,
or $ of net proceeds, after deducting the underwriting discount and
estimated expenses, if the underwriters' over-allotment option with respect to
the equity security units is exercised in full, for the repayment of short-
term borrowings and other general corporate purposes. As of May 1, 2002, the
short-term borrowings, which were used for seasonal working capital
requirements, bear a weighted average rate of interest of 3.18% per annum,
have an outstanding principal amount of $486 million and mature on various
dates in 2002.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and
consolidated capitalization as of February 2, 2002:

o on an actual basis;

o on an as adjusted basis to reflect our receipt of the estimated net
proceeds from the sale of shares of common stock in this offering and the
application of the estimated net proceeds from that sale as described
under "Use of Proceeds;" and

o on an as further adjusted basis to give effect to the concurrent sale of
equity security units and the application of the estimated net proceeds
from that sale as described under "Use of Proceeds."

As of February 2, 2002
-------------------------------------
As Further
Actual As Adjusted Adjusted
------- ------------- ----------
(in millions)
(unaudited)

Cash and cash equivalents................................................................. $ 283 $ $
======= ====== ======
Current debt
Short-term borrowings(1)................................................................. $ 0 $ 0 $ 0
Current portion of long-term debt........................................................ 39 39 39
------- ------ ------
Total current debt..................................................................... 39 39 39
------- ------ ------
Long-term debt
Bonds and notes, less current portion.................................................... 1,800 1,800 1,800
% senior notes due 2007 (equity security units)(2).................................... -- --
Capital leases........................................................................... 16 16 16
------- ------ ------
Total long-term debt (excluding current portion)....................................... 1,816 1,816
------- ------ ------
Total debt............................................................................ 1,855 1,855
------- ------ ------
Minority interest in Toysrus.com.......................................................... 53 53 53
Stockholders' equity
Common stock (650 million shares authorized; 196.7 million shares issued and outstanding,
actual)................................................................................ 30
Additional paid-in-capital(2)............................................................ 444
Retained earnings........................................................................ 5,228 5,228 5,228
Foreign currency translation adjustment.................................................. (267) (267) (267)
Treasury shares, at cost................................................................. (2,021)
------- ------ ------
Total stockholders' equity............................................................. 3,414
------- ------ ------
Total capitalization.................................................................. $ 5,322 $ $
======= ====== ======

(1) Our short-term borrowings outstanding fluctuate and reflect the seasonal
nature of our business. As of May 1, 2002, we had short-term borrowings
with an outstanding aggregate principal amount of $486 million.

(2) At the closing of the concurrent offering of equity security units, the
net proceeds from the sale of the equity security units will be
allocated between the purchase contracts and the senior notes based on
the underlying fair value of each instrument. At the closing of the
concurrent offering of equity security units, we expect to report the
fair market value of each senior note as $ and the fair market
value of each purchase contract as $ .

You should read the above table in conjunction with the financial statements
and financial data included or incorporated by reference in this prospectus.

SELECTED CONSOLIDATED FINANCIAL DATA

We derived the selected consolidated financial data shown below for the
fiscal years ended January 31, 1998, January 30, 1999, January 29, 2000,
February 3, 2001 and February 2, 2002 from our audited financial statements.
You should read the following financial information in conjunction with our
consolidated financial statements and the financial data included or
incorporated by reference in this prospectus.

Fiscal Year Ended
---------------------------------------------------------------------
January 31, January 30, January 29, February 3, February 2,
1998 1999 2000 2001 2002
----------- ----------- ----------- ----------- -----------
(in millions, except per share and other operating results data)

Consolidated Operating Data(1):
Net sales................................................. $11,038 $11,170 $11,862 $11,332 $11,019
Cost of sales............................................. 7,710 8,191 8,321 7,815 7,604
------- ------- ------- ------- -------
Gross margin............................................. 3,328 2,979 3,541 3,517 3,415
Selling, general and administrative expenses.............. 2,231 2,443 2,743 2,832 2,750
Depreciation and amortization............................. 253 255 278 290 308
Equity in net earnings of Toys--Japan..................... -- -- -- (31) (29)
Restructuring and other charges........................... -- 294 -- -- 186
------- ------- ------- ------- -------
Operating earnings/(loss)................................. 844 (13) 520 426 200
Gain from initial public offering of Toys "R" Us--Japan... -- -- -- (315) --
Interest expense, net..................................... 72 93 80 104 109
------- ------- ------- ------- -------
Earnings/(loss) before income taxes....................... 772 (106) 440 637 91
Income taxes.............................................. 282 26 161 233 24
------- ------- ------- ------- -------
Net earnings/(loss)....................................... $ 490 $ (132) $ 279 $ 404 $ 67
======= ======= ======= ======= =======
Earnings/(loss) per share(2).............................. $ 1.70 $ (0.50) $ 1.14 $ 1.88 $ 0.33
Weighted average shares outstanding(2).................... 288.4 265.4 245.4 215.0 206.0

Consolidated Balance Sheet Data
(at period end)(1):
Property and equipment, net............................... $ 4,212 $ 4,226 $ 4,455 $ 4,257 $ 4,544
Merchandise inventories................................... 2,464 1,902 2,027 2,307 2,041
Total assets.............................................. 7,963 7,899 8,353 8,003 8,076
Accounts payable.......................................... 1,280 1,415 1,617 1,152 878
Total debt................................................ 1,006 1,401 1,529 1,724 1,855
Stockholders' equity...................................... 4,428 3,624 3,680 3,418 3,414

Other Operating Results(1):
Number of Stores by Division
Toys "R" Us--United States............................... 700 704 710 710 701
Toys "R" Us--International(3)............................ 441 452 462 491 507
Babies "R" Us............................................ 98 113 131 145 165
Kids "R" Us.............................................. 215 212 205 198 184
Imaginarium.............................................. -- -- 40 37 42
Percentage increase/(decrease) in comparable store net
sales for
Toys "R" Us--United States(4)............................ 6% (4)% 3% 1% (1)%

---------------

(footnotes on next page)

(1) Results for our fiscal years 2000 and 2001 reflect the deconsolidation of
Toys "R" Us--Japan, which has been accounted for using the "equity method"
since its initial public offering on April 24, 2000. For example, sales
from Toys "R" Us--Japan accounted for $1,208 million and $277 million of
our total net sales in fiscal year 1999 and 2000, respectively.

(2) Earnings per share is calculated based on the diluted weighted average
shares outstanding, and (loss) per share is calculated based on the basic
weighted average shares outstanding. Weighted average shares outstanding
presents diluted shares, except in periods where there was a loss, in which
case basic shares are presented.

(3) Number of stores for Toys "R" Us--International includes operated, licensed
and franchised stores.

(4) Comparable store net sales data is shown for U.S. toy stores only and is
based on the change in net sales of all stores opened for more than one
year. Increases for our fiscal year ended February 1, 2001 have been
adjusted to exclude the effect of the 53rd week in 2000.

RECENT DEVELOPMENTS

General

On May 20, 2002, we reported a net loss of $(4) million, or $(0.02) per
share, for the fiscal quarter ended May 4, 2002. We reported a net loss of
$(18) million, or $(0.09) per share, for the first quarter of 2001.

Total net sales for the first quarter of 2002 increased by 2%, to $2.1
billion, compared to the first quarter of 2001. Comparable sales for the first
quarter of 2002 were down 2% for our U.S. toy stores, up 10% for our
International toy stores (in local currencies), and up 3% for our Babies "R" Us
division. Sales at Toysrus.com increased 57% to $46 million in the first
quarter of 2002 from $29 million in the first quarter of 2001. We attribute
the softness in comparable stores sales of our U.S. toy stores to two
factors--a slowdown in the video business in April, and weakness in our
outdoor seasonal categories. Comparable store sales in the video and seasonal
categories were negative in the first quarter of 2002. However, comparable
store sales of core toy merchandise of our U.S. toy stores increased 5% for
the quarter. Our renovated Mission Possible stores maintained a positive
comparable sales gap over our unrenovated stores in the first quarter of 2002.
Comparable store sales for our Kids "R" Us division fell below the level of
the first quarter of 2001 primarily due to the effect of unfavorable weather
conditions on the sale of spring apparel.

We ended the first quarter of 2002 with a decrease in total company
inventories of 5% compared to the end of the corresponding quarter in 2001. In
our U.S. toy store division, inventories declined by the same 5% level.

Business Segment Performance

Operating earnings for the U.S. toy store division increased by 56% in the
first quarter of 2002 compared to the corresponding quarter in 2001.

In the International division, operating earnings decreased by 17% in the
first quarter of 2002.

In the Babies "R" Us division, operating earnings increased by 22% in the
first quarter of 2002.

Toysrus.com's operating loss narrowed to $(14) million in the first quarter
of 2002 compared to $(24) million in the first quarter of 2001.

For our other operations, which include the Kids "R" Us division and our
equity in the net earnings of Toys "R" Us---Japan as well as other corporate
related items, the operating loss increased to $(24) million in the first
quarter of 2002 from $(18) million in the first quarter of 2001.

As a result of the above-described business segment performance, our total
operating earnings improved to $22 million in the first quarter of 2002 from $2
million in the corresponding quarter of 2001.

Restructuring

In the fourth quarter of 2001, we recorded restructuring and other charges
relating to our plans, announced on January 28, 2002, to close 37 Kids "R" Us
stores and 27 Toys "R" Us stores, eliminate 1,900 store and headquarters
positions, and consolidate our store support center facilities at our new
Wayne facility. These restructuring and other charges totaled $237 million on
a pre-tax basis. Of this $237 million, $79 million was associated with
facilities consolidation, severance and other actions designed to improve
efficiency in our support functions. The costs associated with store closings
were $73 million for Kids "R" Us stores and $85 million for Toys "R" Us
stores, of which $27 million was recorded in cost of goods sold. We also
reversed $24 million of previously accrued charges that, after final
evaluation, have been deemed no longer needed. Accordingly, based on these
actions, we recorded restructuring and other charges that total $213 million
(pre-tax) and $126 million (after-tax) in the fourth quarter of 2001. These
actions are expected to increase free cash flow in 2002 and beyond and to
yield improvements to pre-tax earnings of approximately $25 million in 2002,
and approximately $45 million annually beginning in 2003. We expect that
payroll savings associated with changes in support functions will account for
$30 million of the $45 million. The expected savings and results of our
restructuring are based on management's assumptions and are inherently subject
to risks and uncertainties. We cannot assure you that these savings and
results will be achieved or that our actual results will not be different.

BUSINESS

Overview

Over several decades of operation, Toys "R" Us has built its reputation as a
leading destination for toys and children's products. Based upon our net sales
in 2001, we are a market share leader in most of the largest markets in which
we operate, including the United States, the United Kingdom and Japan. Our toy
stores offer approximately 10,000 distinct items year-round, which we believe
is more than twice the items found in other discount or specialty stores
selling toys. We believe that one of our key competitive advantages, and a
differentiating factor in the eyes of our customers, is our broad and deep
product selection.

In early 2000, in order to further strengthen our market position and
enhance the shopping experience of our customers, we embarked on a three-year
program to reposition our U.S. toy stores. A key part of this repositioning
involves the renovation of the U.S. toy stores to our "Mission Possible"
format, at a cost of approximately $600,000 per store. This format allows us
to present our merchandise in a more dynamic selling environment and to create
a more enjoyable shopping experience for both adults and children. In
addition, the staff in our Mission Possible stores adheres to an elevated
standard of guest service, based on training which focuses on deeper product
knowledge and more targeted selling skills. At the end of 2001, we had
completed the renovation of 433 of our U.S. toy stores. We plan to complete
the balance of these renovations by year-end 2002. Approximately 130 to 140
stores will receive a full Mission Possible renovation, and approximately 100
stores will receive a partial renovation that includes the addition of an
Imaginarium boutique. Although the conversion process is still underway, we
believe that Mission Possible stores offer higher productivity, profitability
and return on investment measures relative to non-renovated locations.

In November 2001, we opened our new Times Square flagship store in New York
City. This 110,000 square foot, multi-level store offers families a vast array
of toys and dramatic retail attractions including a 60-foot tall, indoor
Ferris Wheel. During its first six weeks of operation, we estimate that more
than two million shoppers visited Toys "R" Us Times Square to see The Center
of the Toy UniverseTM. In addition, we believe our flagship store provides us
with increased visibility for the Toys "R" Us brand and an effective platform
for new product launches and also serves to further strengthen our standing
with the vendor community.

Business Strategy

We seek to enhance our business and financial performance through the
following key elements of our strategy:

o Improving the productivity and profitability of our store formats.Our
renovation of our U.S. toy stores to our Mission Possible format is a key
element of our strategy to improve the productivity and profitability of our
stores. The 165 toy stores renovated in 2000, which consisted of a broad range
of locations across operating regions, as a group achieved average comparable
store sales increases during the first 12 months following their respective
renovations that were approximately 7 percentage points higher than the
average comparable store sales of our non-renovated stores. As part of our
Mission Possible program, we have conducted a detailed assessment of every
store in our U.S. toy store division and remain committed to pursuing
initiatives which concentrate our investments on those stores judged most
likely to produce superior returns. As a result, we have identified 27 toy
stores that, while cash flow positive, were not meeting our financial return
objectives. These stores will be closed as part of the restructuring
initiative announced on January 28, 2002. See "Recent
Developments--Restructuring."

In the last 18 months, we have also renovated eleven stores in our Kids "R"
Us division to an updated, more "shopper-friendly" format. We believe these
stores present our core apparel offering in a fresh, compelling way. In
addition, these stores carry an assortment of non-apparel merchandise, such as
fashion accessories, bath and body products, cosmetics and home decor. As a
result of favorable consumer response and improved productivity in these
renovated stores, we plan to renovate approximately 30 additional Kids "R" Us
stores to the new Kids "R" Us prototype in 2002.

Our Toys "R" Us/Kids "R" Us "combo" stores are also an important part of our
strategy for improving our store formats. A combo store is a toy store that
combines our toy offering with a 5,500 square foot apparel offering. We
believe that the new prototypes and combo stores represent the optimal
strategic choices for the Kids "R" Us Division. Consequently, we have made a
decision to close 37 Kids "R" Us stores. In almost all of these locations, the
nearest Toys "R" Us store will be converted to a combo store in conjunction
with the Kids "R" Us store closing. In addition, we intend to convert other
Toys "R" Us stores to combo stores. We currently operate 273 combo stores. By
the end of 2002, we plan to have approximately 375 combo stores.

o Differentiating and strengthening our core merchandise content. We seek to
differentiate ourselves from our competitors by offering our customers a broad
and deep selection of merchandise, including both nationally branded and
exclusive products. We offer a wide selection of popular national brands, such
as Barbie, G.I. Joe, Lego and Fisher Price, including many SKUs which are
unique to, or launched at, Toys "R" Us. Several exclusive vendor alliances and
a broad selection of private label products further differentiate our unique
merchandise offerings.

Over the past two years, we have announced exclusive branded product
agreements with Animal Planet, Home Depot, Scholastic and OshKosh B'Gosh,
enabling us to offer products that our guests will not find elsewhere. Together
with Universal Studios Consumer Products Group and Amblin Entertainment, we have
announced a merchandise program to support the 20th anniversary of Steven
Spielberg's E.T., The Extra-Terrestrial, and Universal's re-release of the film
in spring 2002. We have developed a broad range of exclusive E.T. products
across all of our divisions, and we recently introduced these products worldwide
in Toys "R" Us, Kids "R" Us and Imaginarium stores, as well as on Toysrus.com.

We offer a broad assortment of private label merchandise under the names of
Animal Alley, Fast Lane, Fun Years and Dream Dazzlers in our Toys "R" Us
stores; K.R.U., New Legends and Miniwear Classics in our Kids "R" Us stores;
and Especially for Baby, Koala Baby and Baby Trend in our Babies "R" Us
stores.

We continually seek to strengthen our "core merchandise content" (our top
1,500 selling items) to allow consistent comparable store for store sales growth
and to lessen the dependence on "hot" merchandise items to drive our sales. By
focusing on the core merchandise, we believe that we can maintain strong
relationships with our vendors by allowing them to better plan production and
meet agreed-upon delivery timetables. We believe that this approach will ensure
us a sufficient supply of core merchandise items and allow us to satisfy our
consumer's demand for these items.

o Pursuing attractive growth initiatives. In addition to anticipated
comparable store sales growth from the repositioning of our U.S. toy stores, our
combo store strategy and our new prototype stores in the Kids "R" Us division,
we intend to pursue a number of other growth opportunities. We plan to continue
to expand our Babies "R" Us division by opening approximately 20 stores per
year. In our International division, we will continue to selectively add stores
as opportunities arise. In mid-2001, we began testing a concept called "Toys "R"
Us Toybox" in a limited number of grocery stores. The Toys "R" Us Toybox
consists of 500 to 1,000 square feet of smaller items with price points
generally below $25. We are currently in the process of evaluating the results
of this initiative. In 2002, we also plan to open selected stores that are
intended to serve secondary and tertiary markets by combining Toys "R" Us, Kids
"R" Us and Babies "R" Us in a 40,000 to 45,000 square foot format. Tests of
other new growth initiatives are also in development.

o Creating a more enjoyable shopping experience for our guests. We seek to
create an atmosphere in which it is fun and convenient for both adults and
children to shop. The Mission Possible format enhances store layout by creating
lower display gondolas, widening the aisles and reorganizing our merchandise in
logical categories to improve shopping patterns. Mission Possible stores are
service-oriented with designated

"World Leaders" in each of the major product categories. Our World Leaders are
senior sales personnel who assist customers and help to train other sales
associates.

o Reducing and optimizing our operating expense structure. We actively seek
initiatives that can serve to optimize both our store-level and corporate
expenses. For example, in January 2002, we announced our intention to
consolidate five separate store support facilities into one new centralized
facility in Wayne, New Jersey in 2003. The Wayne facility will enable us to
implement a shared-services model across a range of finance, human resources,
administration and other support functions, which we believe will improve the
efficiency and cost-effectiveness of our operations. In addition, we are
allocating a higher percentage of store payroll hours to selling and customer
service functions.

o Further strengthening our flexible infrastructure. We believe that our
warehouse/distribution system and our ownership of a majority of the trucks
used by us to distribute our merchandise provide us with efficiency and
flexibility to maintain in-stock inventory positions at our stores. We utilize
an inventory system that enables us to monitor the current activity and
inventory in each region and in each store. This system permits us to allocate
merchandise to stores and keep them adequately stocked at all times. In
addition, we have accelerated the implementation of our major initiative to
improve our supply chain management, which is aimed at optimizing our
inventory assortment and presentation. We are also expanding our automated
replenishment system to maximize inventory turnover.

Operations

Toys "R" Us--United States

In the United States, we operate Toys "R" Us stores in 49 states and Puerto
Rico. We sell toys, plush, games, bicycles, sporting goods, VHS and DVD
movies, video tapes, electronic and video games, small pools, books and
educational and developmental products, infant and juvenile furniture and
electronics, as well as educational and entertainment computer software for
children.

To further enhance the shopping experience of our guests, we utilize a
merchandise "world" concept in our U.S. toy stores. Each world has its own
customer franchise from juvenile to electronics and video products. Each world
establishes its own business plan and has a complete support team to develop
its business from product sourcing to advertising and promotion. The worlds
presently consist of the following:

o R Zone (video game hardware and software, electronics, computer software,
related products and VHS and DVD movies);

o Action Central (vehicles, action figures, and other products);

o Dolls and Dress up (collectibles, accessories and lifestyle products);

o Seasonal (Christmas, Halloween, summer, bikes, sports, playsets, and
other seasonal products);

o Juvenile (baby products and newborn to age four apparel);

o Imaginarium (educational and developmental products, accessories, games
and puzzles); and

o Apparel (shops within 273 combo stores with sizes ranging from newborn to
age ten).

As of February 2, 2002, we operated 701 U.S. toy stores, 438 of which were
owned and 263 of which were leased. These stores conform to the prototypical
designs consisting of approximately 30,000 to 45,000 square feet of space and
are typically freestanding units or located in strip centers. This division
also operates 42 Imaginarium stand-alone stores, all of which are leased. An
Imaginarium boutique has also been incorporated into each of our 433 renovated
Mission Possible stores. We opened one new toy store in Times Square in New
York City while closing ten U.S. toy stores in 2001.

Toys "R" Us--International

We operate, license or franchise toy stores in 28 countries outside the
United States. In 2000, we celebrated our 15th anniversary in the United
Kingdom and our 10th anniversary in France. Our International stores generally
conform to traditional prototypical designs similar to those used in our U.S.
toy stores. We

introduced new proprietary brands and shopping "worlds" that have been
successful in the United States within some International store locations in
2001. These worlds included the Imaginarium boutiques, which are known as
"World of Imagination" in some countries, and a Babies "R" Us boutique in some
stores.

In April 2000, we completed the initial public offering of Toys "R"
Us--Japan. At the completion of the initial public offering, we received net
proceeds of $267 million. As a result of this transaction, our ownership
interest in the common stock of Toys "R" Us--Japan was reduced from 80% to
48%. Toys "R" Us--Japan continues to be a licensee of Toys "R" Us, and we
continue to receive royalties from Toys "R" Us--Japan.

As of February 2, 2002, we operated 282 International stores, 101 of which
were owned and 181 of which were leased. In addition, we license or franchise
225 International stores. We added 24 new toy stores, including licensed or
franchised stores, and closed eight stores in 2001. Utilizing demographic data
to determine which markets to enter, we intend to add approximately 25 new toy
stores in 2002, including approximately 20 licensed or franchised stores.

Babies "R" Us

Babies "R" Us stores target the pre-natal to preschool market by offering up
to 35 room settings of juvenile furniture, such as cribs and dressers, as well
as playyards, bumper seats, high chairs, strollers, car seats, infant, toddler
and preschool toys, infant plush toys, and gifts. As of February 2, 2002, we
operated 165 Babies "R" Us juvenile retail stores, 59 of which were owned and
106 of which were leased. All Babies "R" Us stores devote over 5,000 square
feet to specialty name brand and private label clothing, and offer a wide
range of feeding supplies, health and beauty aids and infant care products. In
addition, we offer a computerized baby registry service, and we believe that
Babies "R" Us registers more expectant parents than any other retailer in the
domestic market. The Babies "R" Us stores are designed with low profile
merchandise displays in the center of the stores providing a sweeping view of
the entire merchandise selection.

As part of our long-range growth plan, we plan to open approximately 20 new
Babies "R" Us stores during 2002.

Kids "R" Us

Kids "R" Us children's clothing stores feature brand name and private label,
children's clothing. These stores conform to prototypical designs consisting
of approximately 15,500 to 21,500 square feet of space and are typically
freestanding units or located in strip centers in the United States. As of
February 2, 2002, we operated 184 Kids "R" Us stand-alone children's clothing
stores, 95 of which were owned and 89 of which were leased. Our Kids "R" Us
team is also responsible for the merchandising of apparel sections in Toys "R"
Us/Kids "R" Us combo stores and in our Babies "R" Us stores.

In November 2000, we completed renovation of our Kids "R" Us store in
Freehold, New Jersey incorporating significant design changes from a
traditional Kids "R" Us apparel store. During 2001, we renovated ten
additional stores in various locations using the Freehold store as a
prototype. We expect to convert approximately 30 additional Kids "R" Us stores
to this new prototype during 2002.

In an effort to improve guest satisfaction, and after market testing, we
have added a "Lifestyle Shop" concept in 104 Kids "R" Us stores. These
sections are filled with an assortment of non-apparel merchandise such as
fashion accessories, bath and body products, cosmetics, home decor, kids'
electronics, Animal Alley plush merchandise and other items. Finally, as
discussed above, we plan to close 37 freestanding Kids "R" Us stores in 2002
as part of the restructuring.

Toysrus.com

Toysrus.com sells merchandise directly to the public via the Internet at
www.toysrus.com, www.babiesrus.com and www.imaginarium.com. We opened our
virtual doors to the public in June 1998. A redesigned toysrus.com website was
launched in May 1999. In July 2000, we launched the babiesrus.com site, which
specializes in baby and infant products. In order to provide better customer
service and order fulfillment in the rapid growth and highly seasonal on-line
toy retail business, we entered into a strategic

alliance with Amazon.com, and a co-branded toysrus.com store was launched in
September 2000. This co-branded online store offers a broad selection of toys,
games, video game software, video game hardware and other products. In 2001, a
redesigned co-branded babiesrus.com site and a new imaginarium.com site were
launched. Our alliance combines Toysrus.com's merchandising expertise and
trusted brand name with Amazon.com's strengths in web site operations, online
customer service and reliable fulfillment. Toysrus.com and Amazon.com continue
to work closely together to realize efficiencies and to reduce costs in this
online business.

Distribution Centers

In our U.S. toy store division, our stores are supported by eleven
distribution centers, seven of which are owned and four of which are leased.
Five of these distribution centers also support our Babies "R" Us stores. The
distribution centers average approximately 716,000 square feet each in size
and are strategically located throughout the United States to support our
stores on an efficient basis.

We operate six International distribution centers that support our
International toy stores, five of which are owned and one of which is leased.

We also operate four Kids "R" Us distribution centers that support our Kids
"R" Us stores, two of which are owned and two of which are leased. Our Toys
"R" Us/Kids "R" Us combo stores and our Babies "R" Us stores also receive
apparel from these Kids "R" Us distribution centers.

DESCRIPTION OF COMMON STOCK

We summarize below the principal provisions of our common stock. This
description contains only a summary of the material terms of our common stock.
You should read our restated certificate of incorporation, our amended and
restated bylaws, as amended, and our amended and restated stockholder rights
agreement, each of which we have filed with the Securities and Exchange
Commission, or SEC, because these documents and applicable Delaware law, and
not this summary, will govern your rights as a holder of common stock.

General

Our certificate of incorporation currently authorizes the issuance of
650,000,000 shares of common stock, par value $0.10 per share.

As of May 4, 2002, we had 197,434,066 shares of common stock issued and
outstanding and 197,434,066 rights to purchase common stock issued and
outstanding. As of that date, we had approximately 30,302 stockholders of
record.

All outstanding shares of our common stock are, and the additional shares of
common stock offered hereby upon issuance will be, fully paid and
nonassessable.

Dividends

Dividends may be paid to the holders of the outstanding shares of our common
stock out of funds legally available for the payment of dividends, when, as
and if declared by our board of directors. We have not historically paid any
cash dividends on our common stock, and we currently do not contemplate paying
any dividends in the future.

Voting Rights

Except in the election of directors, each share of common stock is entitled
to one vote on all matters to be voted on by stockholders. Holders of common
stock have cumulative voting rights in the election of directors. In other
words, each holder of common stock, is entitled to as many votes as shall
equal the number of shares owned of record multiplied by the number of
directors to be elected, and may cast all of such votes for a single director
or may distribute them among the number to be voted for, or for any two or
more of them.

Except as otherwise provided by law, our restated certificate of
incorporation or our by-laws, at any meeting duly called and held at which a
quorum is present, a given question will be decided upon by a majority of the
votes cast at that meeting by the holders of the outstanding shares of stock
of all classes of stock entitled to vote on the question who are present in
person or by proxy. At any meeting of stockholders, the holders of a majority
of the outstanding shares of stock entitled to vote at the meeting and, where
a class vote is required by law or our restated certificate of incorporation,
a majority of the outstanding shares of each class of stock entitled to a
class vote, present or represented by proxy, will constitute a quorum for the
transaction of business, unless otherwise provided by law, our restated
certificate of incorporation or our by-laws.

Preemptive Rights

Holders of our common stock do not have preemptive rights to purchase
additional shares of common stock or securities convertible into shares of
common stock. The common stock is not subject to any redemption or sinking
fund provisions.

Liquidation Rights

In the event of liquidation, dissolution or winding up of our company, the
assets remaining after provision for payment of creditors are distributable,
on a ratable basis, among the holders of our common stock.

Rights Agreement

Under an amended and restated stockholder rights agreement between us and
American Stock Transfer & Trust Company, as rights agent, each share of our
common stock has associated with it one common stock purchase right, which we
refer to as a "right." Prior to the occurrence of specified change of control
events, the rights will not be exercisable or evidenced or transferable
separately from our common stock. These rights are described in our Form 8-A,
filed on January 16, 1998, as amended by the Current Report on Form 8-K that
we filed on April 16, 1999. In addition, the description and terms of the
rights are set forth in the rights agreement, which is incorporated by
reference as an exhibit to the registration statement of which this prospectus
forms a part. The rights could deter but would not prevent the takeover of our
company; however, the rights would cause substantial dilution to a person or
group that acquires 15% or more of our common stock unless the rights are
first redeemed by our board of directors. Nevertheless, the rights should not
interfere with a transaction that is in the best interests of our company and
our stockholders, because the rights can be redeemed until the distribution
date.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the Delaware General Corporation Law, which
we refer to as "Section 203." In general, Section 203 prevents a person who
owns 15% or more of our outstanding voting stock, an "interested stockholder,"
from engaging in some business combinations, as described below, with us for
three years following the time that that person becomes an interested
stockholder unless one of the following occurs:

o the board of directors either approves the business combination or the
transaction in which the person became an interested stockholder before
that person became an interested stockholder;

o upon consummation of the transaction which resulted in the person
becoming an interested stockholder, the interested stockholder owned at
least 85% of our voting stock outstanding at the time the transaction
commenced, excluding stock held by:

-- directors who are also officers of our company; and

-- employee stock plans that do not provide employees with the right to
determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; or

o at or subsequent to the time that the transaction in which the person
became an interested stockholder, the business combination is:

-- approved by the board of directors; and

-- authorized at a meeting of stockholders by the affirmative vote of
the holders of at least 66 2/3% of our outstanding voting stock
which is not owned by the interested stockholder.

For purposes of Section 203, the term "business combinations" includes
mergers, consolidations, asset sales or other transactions that result in a
financial benefit to the interested stockholder and transactions that would
increase the interested stockholder's proportionate share ownership of our
company.

Under some circumstances, Section 203 makes it more difficult for an
interested stockholder to effect various business combinations with us for a
period of three years after the stockholder becomes an interested stockholder.
Although our stockholders have the right to exclude us from the restrictions
imposed by Section 203, they have not done so. Section 203 may encourage
companies interested in acquiring us to negotiate in advance with the board of
directors, because the requirement stated above regarding stockholder approval
would be avoided if a majority of the directors approves, prior to the time
the party became an interested stockholder, either the business combination or
the transaction which results in the stockholder becoming an interested
stockholder.

Listing

Our common stock is listed on the New York Stock Exchange under the trading
symbol "TOY."

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company, 59 Maiden Lane, New York, New York 10038, telephone
(877) 777-0800.

CERTAIN U.S. TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following summary describes the material U.S. federal income and estate
tax consequences of the ownership and disposition of common stock by a non-
United States holder (as defined below) as of the date of this prospectus.
This discussion does not address all aspects of U.S. federal income and estate
taxes and does not deal with foreign, state and local consequences that may be
relevant to such non-United States holders in light of their personal
circumstances. Special rules may apply to certain non-United States holders,
such as certain United States expatriates, "controlled foreign corporations,"
"passive foreign investment companies," "foreign personal holding companies"
and corporations that accumulate earnings to avoid U.S. federal income tax,
that are subject to special treatment under the U.S. Internal Revenue Code of
1986, as amended (the "Code"). Such entities should consult their own tax
advisors to determine the U.S. federal, state, local and other tax
consequences that may be relevant to them. Furthermore, the discussion below
is based upon the provisions of the Code, Treasury regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may
be repealed, revoked or modified so as to result in U.S. federal income tax
consequences different from those discussed below. Persons considering the
purchase, ownership or disposition of common stock should consult their own
tax advisors concerning the U.S. federal income tax consequences in light of
their particular situations as well as any consequences arising under the laws
of any other taxing jurisdiction.

If a partnership holds common stock, the tax treatment of a partner will
generally depend on the status of the partner and the activities of the
partnership. Persons who are partners of partnerships holding common stock
should consult their tax advisors.

For the purposes of this summary, a "United States holder" means a
beneficial owner of the common stock offered in this prospectus that is:

o a citizen or resident of the United States;

o a corporation or partnership created or organized in or under the laws of
the United States or any political subdivision of the United States;

o an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or

o a trust that (1) is subject to the primary supervision of a court within
the United States and one or more United States persons have the
authority to control all substantial decisions of the trust or (2) has a
valid election in effect under applicable United States Treasury
regulations to be treated as a United States person.

A "non-United States holder" means a beneficial owner of the common stock
that is not a United States holder.

Dividends

Dividends paid to you will be subject to withholding of U.S. federal income
tax at a 30% rate or a lower rate if so specified by an applicable income tax
treaty. However, dividends that are effectively connected with your conduct of a
trade or business within the United States and, where a tax treaty applies, are
attributable to a United States permanent establishment, are not subject to the
withholding tax. Instead, these dividends are subject to U.S. federal income tax
on a net income basis at applicable graduated individual or corporate rates, as
discussed below. You must comply with certification and disclosure requirements
in order for effectively connected income to be exempt from withholding. If you
are a foreign corporation, any effectively connected dividends you receive may
also be subject to an additional branch profits tax at a 30% rate or a lower
rate if so specified by an applicable income tax treaty.

A non-United States holder of common stock who wishes to claim the benefit
of an applicable treaty rate, and avoid backup withholding as discussed
herein, will be required to satisfy the certification and disclosure
requirements of applicable United States Treasury regulations. Special rules
apply to claims for treaty benefits made by non-United States persons that are
entities rather than individuals.

If you are eligible for a reduced rate of U.S. withholding tax pursuant to
an income tax treaty, you may obtain a refund of or credit for any excess
amounts withheld by filing an appropriate claim for refund with the U.S.
Internal Revenue Service.

Gain on Disposition of Common Stock

You will not be subject to U.S. federal income tax with respect to
gain recognized on a sale or other disposition of common stock unless:

o the gain is effectively connected with your conduct of a trade or
business in the United States, and, where a tax treaty applies, is
attributable to a United States permanent establishment;

o you are an individual holding the common stock as a capital asset and are
present in the United States for 183 or more days in the taxable year of
the sale or other disposition and certain other conditions are met; or

o we are or have been a "United States real property holding corporation"
for U.S. federal income tax purposes at any time during the shorter of
the five-year period ending on the date of disposition or the period that
you held our common stock (subject to the discussion below).

If you are an individual non-United States holder described in the first of
the three clauses above, you will be subject to U.S. federal income tax on the
net gain derived from the sale under regular graduated U.S. federal income tax
rates. If you are an individual non-United States holder described in the
second clause above, you will be subject to a flat 30% U.S. federal income tax
on the gain derived from the sale, which may be offset by United States source
capital losses, even though you are not considered a resident of the United
States. If you are a non-United States holder that is a foreign corporation
and you are described in the first clause above, you will be subject to tax on
your gain under regular graduated U.S. federal income tax rates and, in
addition, may be subject to a branch profits tax on your earnings and profits
that are effectively connected with a U.S. trade or business, at a 30% rate or
a lower rate if so specified by an applicable income tax treaty.

We believe that we are not, and do not anticipate becoming, a "United States
real property holding corporation" for U.S. federal income tax purposes. If we
are or become a "United States real property holding corporation," so long as
the common stock continues to be regularly traded on an established securities
market, you will not be subject to U.S. federal income tax on the disposition
of the common stock if you hold or held (at any time during the shorter of the
five year period preceding the date of disposition or your holding period)
less than or equal to 5% of the total outstanding shares of common stock.

U.S. Federal Estate Tax

If you are an individual, common stock held by you at the time of your death
will be included in your gross estate for U.S. federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.

Information Reporting and Backup Withholding

We will be required to report annually to the U.S. Internal Revenue Service
and to you the amount of dividends paid to you and the tax withheld from
dividend payments made to you, regardless of whether withholding was required.
We may make available to the tax authorities in the country in which you
reside under the provisions of an applicable income tax treaty copies of the
information returns reporting the dividends and withholding.

No U.S. backup withholding will be required regarding dividends paid to you
provided that we do not have actual knowledge or reason to know that you are a
United States person and you have satisfied the certification requirements of
applicable United States Treasury regulations.

In addition, no U.S. information reporting or backup withholding will be
required regarding the proceeds of the sale of common stock made within the
United States or conducted through certain U.S.-related financial
intermediaries if (1)(a) you certify under penalties of perjury that you are a
non-United States holder and (b) the payor does not have actual knowledge or
reason to know that you are a United States person or (2) you otherwise
establish an exemption.

Any amounts withheld under the backup withholding rules will be allowed as a
refund or credit against your U.S. federal income tax liability provided the
required information is provided to the U.S. Internal Revenue Service.

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated May , 2002, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation and Salomon Smith
Barney Inc. are acting as joint bookrunning managers and representatives, the
following respective numbers of shares of our common stock:

Underwriter Number
--------------- of Shares
----------

Credit Suisse First Boston Corporation............................
Salomon Smith Barney Inc..........................................
J.P. Morgan Securities Inc........................................
Goldman, Sachs & Co...............................................
BNY Capital Markets, Inc..........................................
Brean Murray & Co., Inc...........................................
Gerard Klauer Mattison & Co., Inc.................................
Legg Mason Wood Walker, Incorporated..............................
SG Cowen Securities Corporation...................................
Wells Fargo Securities, LLC.......................................
----------
Total............................................................ 11,500,000
==========

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of our common stock in the offering if any are
purchased, other than those shares of our common stock covered by the over-
allotment option described below. The underwriting agreement also provides
that, if an underwriter defaults, the purchase commitments of non-defaulting
underwriters may be increased or the offering of our common stock may be
terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional 1,725,000 shares of our common stock at the public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of our common stock.

The underwriters propose to offer shares of our common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a selling concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering the
representatives may change the public offering price and concession and
discount to broker/dealers.

The following table summarizes the compensation and estimated expenses we
will pay.

Per Share Total
------------------------------- -------------------------------
Without With Without With
Over-Allotment Over-Allotment Over-Allotment Over-Allotment
-------------- -------------- -------------- --------------

Underwriting discounts and
commissions paid by us..................................... $ $ $ $
Expenses payable by us ...................................... 0.03 0.02 300,000 300,000

We have agreed, subject to certain exceptions, that we will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the SEC a registration statement under the Securities Act of 1933
relating to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose our intention to make any offer, sale, pledge, disposition or filing,
without the prior written consent of Credit Suisse First Boston Corporation
and Salomon Smith Barney Inc. for a period of 90 days after the date of this
prospectus.

Our executive officers and directors have agreed, subject to certain
exceptions, that they will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any shares of our common stock,
or securities convertible into or exchangeable or exercisable for any shares
of our common stock, enter into a transaction that would have the same effect,
or enter into any swap, hedge or other arrangement that transfers,

in whole or in part, any of the economic consequences of ownership of our
common stock, whether any of these transactions are to be settled by delivery
of our common stock or such other securities, in cash or otherwise, or
publicly disclose their intention to make any offer, sale, pledge or
disposition or to enter into any transaction, swap, hedge or other
arrangement, without, in each case, the prior written consent of Credit Suisse
First Boston Corporation and Salomon Smith Barney Inc. for a period of 90 days
after the date of this prospectus.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933, or contribute to payments that the underwriters may be
required to make in that respect.

In connection with the offering, the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.

o Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

o Over-allotment involves sales by the underwriters of shares of our common
stock in excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position. The short position
may be either a covered short position or a naked short position. In a
covered short position, the number of shares over-allotted by the
underwriters is not greater than the number of shares that they may
purchase in the over-allotment option. In a naked short position, the
number of shares involved is greater than the number of shares in the
over-allotment option. The underwriters may close out any short position
by either exercising their over-allotment option and/or purchasing shares
in the open market.

o Syndicate covering transactions involve purchases of our common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among other
things, the price of our common stock available for purchase in the open
market as compared to the price at which they may purchase shares of our
common stock through the over-allotment option. If the underwriters sell
more shares than could be covered by the over-allotment option, a naked
short position, that position can only be closed out by buying shares of
our common stock in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there could
be downward pressure on the price of our common stock in the open market
after pricing that could adversely affect investors who purchase in the
offering.

o Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the shares of our common stock originally
sold by the syndicate member are purchased in a stabilizing or a
syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of raising or maintaining the market price of our
common stock or preventing or retarding a decline in the market price of our
common stock. As a result, the price of our common stock may be higher than
the price that might otherwise exist in the open market. These transactions
may be effected on the New York Stock Exchange or otherwise and, if commenced,
may be discontinued at any time.

A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters, or selling group members, if
any, participating in this offering. The representatives may agree to allocate
a number of shares of our common stock to underwriters and selling group
members for sale to their online brokerage account holders. Internet
distributions will be allocated by the underwriters and selling group members
that will make internet distributions on the same basis as other allocations.

Certain of the underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment banking, lending,
financial advisory and other related services to us and our affiliates, for
which they have received and may continue to receive customary fees and
commissions. Concurrently with this offering, we are also offering 7,000,000
equity security units for which some of the underwriters of this offering are
also acting as underwriters under a separate underwriting agreement. The two
offerings are not conditioned on each other.

Credit Suisse First Boston, an affiliate of Credit Suisse First Boston
Corporation, Citibank, N.A., an affiliate of Salomon Smith Barney Inc., and
certain of the other underwriters are lenders under our revolving

credit facilities. We plan to use a portion of the net proceeds from this
offering and the concurrent offering of equity security units to repay pro
rata portions of revolving credit facilities in which certain of the
underwriters and their affiliates are participants, and accordingly affiliates
of the underwriters will receive a portion of the net proceeds of this
offering and the concurrent offering of equity security units in repayment of
amounts outstanding to them under the revolving credit facilities.

Because more than 10% of the proceeds of this offering, not including
underwriting compensation, will be received by entities who are affiliated
with National Association of Securities Dealers, Inc. members who are
participating in this offering, this offering is being conducted in compliance
with the applicable provisions of Rule 2720 of the NASD Conduct Rules.

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of our common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of our common stock are made. Any resale of our common stock in Canada
must be made under applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made under
available statutory exemptions or under a discretionary exemption granted by
the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of our common stock.

Representations of Purchasers

By purchasing our common stock in Canada and accepting a purchase
confirmation, a purchaser is representing to us and the dealer from whom the
purchase confirmation is received that:

o the purchaser is entitled under applicable provincial securities laws to
purchase our common stock without the benefit of a prospectus qualified
under those securities laws;

o where required by law, that the purchaser is purchasing as principal and
not as agent; and

o the purchaser has reviewed the text above under "Resale Restrictions."

Rights of Action--Ontario Purchasers Only

Under Ontario securities legislation, a purchaser who purchases a security
offered by this prospectus during the period of distribution will have a
statutory right of action for damages, or while still the owner of the shares,
for rescission against us in the event that this prospectus contains a
misrepresentation. Such a purchaser will be deemed to have relied on the
misrepresentation. The right of action for damages is exercisable not later
than the earlier of 180 days from the date the purchaser first had knowledge
of the facts giving rise to the cause of action and three years from the date
on which payment is made for the shares. The right of action for rescission is
exercisable not later than 180 days from the date on which payment is made for
the shares. If such a purchaser elects to exercise the right of action for
rescission, the purchaser will have no right of action for damages against us.
In no case will the amount recoverable in any action exceed the price at which
the shares were offered to the purchaser and if the purchaser is shown to have
purchased the securities with knowledge of the misrepresentation, we will have
no liability. In the case of an action for damages, we will not be liable for
all or any portion of the damages that are proven to not represent the
depreciation in value of the shares as a result of the misrepresentation
relied upon. These rights are in addition to, and without derogation from, any
other rights or remedies available at law to an Ontario purchaser. The
foregoing is a summary of the rights available to an Ontario purchaser.
Ontario purchasers should refer to the complete text of the relevant statutory
provisions.

Enforcement of Legal Rights

All of our directors and officers as well as the experts named herein may be
located outside of Canada and, as a result, it may not be possible for
Canadian purchasers to effect service of process within Canada upon us or
those persons. All or a substantial portion of our assets and the assets of
those persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against us or those persons in Canada or to
enforce a judgment obtained in Canadian courts against us or those persons
outside of Canada.

Taxation and Eligibility for Investment

Canadian purchasers of our common stock should consult their own legal and
tax advisors with respect to the tax consequences of an investment in our
common stock in their particular circumstances and about the eligibility of
our common stock for investment by the purchaser under relevant Canadian
legislation.

LEGAL OPINIONS

The validity of our common stock offered hereby will be passed upon for us
by Simpson Thacher & Bartlett, New York, New York, our counsel, and for the
underwriters by Shearman & Sterling, New York, New York.

EXPERTS

Our financial statements as of February 2, 2002 and February 3, 2001 and for
each of the fiscal years in the three-year period ended February 2, 2002,
incorporated by reference in our Annual Report on Form 10-K for the fiscal
year ended February 2, 2002, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report incorporated by reference
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can inspect and copy these reports, proxy
statements and other information at the public reference facilities of the
SEC, at 450 Fifth Street, N.W., Washington, D.C. 20549. You can also obtain
copies of these materials from the public reference section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You may call
the SEC at 1-800-SEC-0330 for further information on its public reference
room. The SEC also maintains a web site that contains reports, proxy
statements and other information regarding registrants, including us, that
file electronically with the SEC (http://www.sec.gov). You can inspect reports
and other information that we file at the office of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.

We filed a registration statement on Form S-3 with the SEC covering the
shares of our common stock offered by this prospectus. For further information
on us and our common stock, you should refer to the registration statement,
including its exhibits. This prospectus summarizes material provisions of the
common stock. Because this prospectus may not contain all the information that
you may find important, you should review the full text of these documents.

The SEC allows us to "incorporate by reference" the information that we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus.

We incorporate by reference in this prospectus the following documents and
any future filings made by us with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934 until the termination of the
offering:

o Annual Report on Form 10-K for the year ended February 2, 2002;

o Current Report on Form 8-K as filed on May 13, 2002;

o Current Report on Form 8-K as filed on May 20, 2002; and

o Form 8-A as filed on January 16, 1998, as amended by Current Report on
Form 8-K as filed on April 16, 1999.

Any statement contained in a document incorporated by reference, or deemed
to be incorporated by reference, in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is incorporated by reference in this prospectus modifies or supersedes
that statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.

You may request a copy of these reports and other filings, other than
exhibits unless those exhibits are specifically incorporated by reference into
those filings, at no cost by writing to Louis Lipschitz, Executive Vice
President--Chief Financial Officer, Toys "R" Us, Inc., 461 From Road, Paramus,
New Jersey 07652, or telephoning us at (201) 262-7800.

[TOYS "R" US LOGO]

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The expenses in connection with the issuance and distribution of the
securities being registered, other than the underwriting discounts and
commissions, are as follows:

Securities and Exchange Commission registration fee ................. $ 21,160
Legal fees and expenses ............................................. $125,000
Accounting fees and expenses ........................................ $ 50,000
Blue sky fees and expenses .......................................... $ 10,000
Transfer agent fees and expenses .................................... $ 10,000
Printing and delivery expenses ...................................... $ 62,500
Miscellaneous expenses .............................................. $ 21,340
--------
Total* ............................................................. $300,000
========

---------------
* All of the above expenses are estimated except for the SEC filing fee.

Item 15. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any present or former director, officer, employee or
agent made a party or threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he was a
director, officer, employee or agent of the corporation or was serving at the
request of the corporation, against liabilities, costs and expenses actually
and reasonably incurred by him in his capacity as a director or officer or
arising out of such action, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action, had no reasonable cause
to believe his conduct was unlawful. No indemnification may be provided where
the director, officer, employee or agent has been adjudged by a court, after
exhaustion of all appeals, to be liable to the corporation, unless a court
determines that the person is entitled to such indemnity.

Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to eliminate or limit its directors' personal liability for
monetary damages to the corporation or its stockholders for breaches of their
fiduciary duty as directors except for (1) a breach of the duty of loyalty,
(2) failure to act in good faith, (3) intentional misconduct or knowing
violation of law, (4) willful or negligent violations of certain provisions of
the Delaware General Corporation Law (Sections 174, 160 and 173) imposing
certain requirements with respect to stock purchases, redemptions and
dividends or (5) any transaction from which the director derived an improper
personal benefit.

The above provisions of the Delaware General Corporation Law are non-
exclusive.

Our restated certificate of incorporation contains a provision eliminating
the personal liability for monetary damages of our directors to the full
extent permitted under the Delaware General Corporation Law.

The Delaware General Corporation Law contains provisions setting forth
conditions under which a corporation may indemnify its directors and officers.
Our restated certificate of incorporation provides that a director or officer
who is a party to any action, suit or proceeding shall be entitled to be
indemnified by us to the extent permitted by the Delaware General Corporation
Law against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement incurred by such director or officer in connection with
such action, suit or proceeding.

We have entered into indemnification agreements with each of our directors
and certain of our senior officers and intend to enter into indemnification
agreements with each of our future directors and certain of our future senior
officers. Pursuant to these indemnification agreements, we have agreed to
indemnify such persons against certain liabilities, including any liabilities
arising out of this Registration Statement.

II-1

We maintain a standard form of officers' and directors' liability insurance
policy, which provides coverage to our officers and directors for certain
liabilities.

The underwriting agreement to be entered into with respect to the common
stock registered hereunder will provide for indemnification of the Registrant
and its officers and directors by the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

Item 16. Exhibits.

See Exhibit Index.

Item 17. Undertakings.

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance on Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Toys "R" Us,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Pre-Effective
Amendment No. 3 to the Registration Statement (this "Pre-Effective Amendment")
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Paramus, State of New Jersey, on this 21st day of May, 2002.

TOYS "R" US, INC.

By: /s/ John H. Eyler, Jr.
-------------------------------------------
John H. Eyler, Jr.
Chairman, Chief Executive Officer and
President

Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated.

Signature Title Date:

/s/ John H. Eyler, Jr. Chairman, Chief Executive Officer and President May 21, 2002
------------------------------ (Principal Executive Officer)
John H. Eyler, Jr.

/s/ Louis Lipschitz Executive Vice President--Chief Financial Officer (Principal May 21, 2002
------------------------------ Financial Officer)
Louis Lipschitz

* Senior Vice President and Corporate Controller May 21, 2002
------------------------------ (Principal Accounting Officer)
Dorvin D. Lively

* Director, Chairman Emeritus May 21, 2002
---------------------------
Charles Lazarus

* Director May 21, 2002
---------------------------
RoAnn Costin

* Director May 21, 2002
---------------------------
Roger Farah

* Director May 21, 2002
---------------------------
Peter A. Georgescu

* Director May 21, 2002
---------------------------
Michael Goldstein

* Director May 21, 2002
---------------------------
Calvin Hill

* Director May 21, 2002
---------------------------
Nancy Karch

* Director May 21, 2002
---------------------------
Norman S. Matthews

* Director May 21, 2002
---------------------------
Arthur B. Newman

* Signed by Louis Lipschitz as attorney-in-fact.

II-3

EXHIBIT INDEX

Exhibit
No. Description
--- -----------

1.1 Underwriting Agreement.

4.1 Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1
of Form 8-B filed on January 3, 1996 and incorporated herein by reference).

4.2 Amended and Restated By-Laws of the Registrant (filed as Exhibit 3.2 to the
Registrant's Form 8-B filed on January 3, 1996 and incorporated herein by
reference). An amendment dated March 11, 1997 to Amended and Restated By-Laws
of the Registrant (filed as Exhibit 3B to the Registrant's Annual Report on
Form 10-K for the year ended February 1, 1997 and incorporated herein by
reference).

4.3 Form of Common Stock Certificate.

4.4 Amended and Restated Rights Agreement, dated as of April 16, 1999, by and
between the Registrant and American Stock Transfer & Trust Company (filed as
Exhibit 1 to the Registrant's Current Report on Form 8-K dated April 16, 1999
and incorporated herein by reference). The Rights Agreement includes the form
of Rights Certificate (as Exhibit A thereto) and the Summary of Rights to
Purchase Common Stock (as Exhibit B thereto).

4.5 Form of Rights (included in Exhibit 4.4).

4.6 Form of Indenture dated as of January 1, 1987 between the Registrant and United
Jersey Bank, as trustee, pursuant to which securities in one or more series in
an unlimited amount may be issued by the Registrant (filed as Exhibit 4(a) to
the Registrant's Registration Statement on Form S-3 No. 33-11461 filed on
January 22, 1987 and incorporated herein by reference).

4.7 Form of Indenture between the Registrant and United Jersey 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).

4.8 Form of 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).

4.9 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).

4.10 Form of Registrant's 6.875% Notes due 2006 and form of Registrant's 7.25% Notes
due 2011 (filed as Exhibit 4.1 to the Registrant's Registration Statement on
Form S-4, No. 333-73800 filed on November 20, 2001 and incorporated herein by
reference).

4.11 Form of Purchase Contract Agreement to be entered into between the Registrant
and The Bank of New York, as purchase contract agent (filed as Exhibit 4.11 to
Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on
Form S-3 No. 333-84254 filed on May 13, 2002 and incorporated herein by
reference).

4.12 Form of Registrant's Equity Security Units (included in Exhibit 4.11).

4.13 Form of Indenture to be entered into between the Registrant and The Bank of New
York, as trustee (filed as Exhibit 4.13 to Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form S-3 No. 333-84254 filed on May 13,
2002 and incorporated herein by reference).

Exhibit
No. Description
-- - -----------

4.14 Form of First Supplemental Indenture relating to the Senior Notes to be issued in
connection with the Registrant's Equity Security Units to be entered into
between the Registrant and The Bank of New York, as trustee (filed as Exhibit
4.14 to Pre-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form S-3 No. 333-84254 filed on May 13, 2002 and incorporated
herein by reference).

4.15 Form of Registrant's Senior Note to be issued in connection with the
Registrant's Equity Security Units (included in Exhibit 4.14).

4.16 Form of Pledge Agreement to be entered into among the Registrant, JPMorgan
Chase Bank, as collateral agent and securities intermediary and The Bank of New
York, as purchase contract agent (filed as Exhibit 4.16 to Pre-Effective
Amendment No. 2 to the Registrant's Registration Statement on Form S-3 No. 333-
84254 filed on May 13, 2002 and incorporated herein by reference).

4.17 Five-Year Credit Agreement, dated as of September 19, 2001, among the
Registrant, the lenders party thereto, The Bank of New York, as Administrative
Agent, Citibank, N.A., and JP Morgan Chase Bank, as Co-Syndication Agents, and
Credit Suisse First Boston, First Union National Bank, The Dai-Ichi Kangyo
Bank, Ltd. and Societe Generale, as Co-Documentation Agents, and BNY Capital
Markets, Inc., as Lead Arranger and Book Manager (filed as Exhibit 4(vi) to the
Registrant's Annual Report on Form 10-K for the year ended February 2, 2002 and
incorporated herein by reference).

4.18 364-Day Credit Agreement, dated as of September 19, 2001, among the Registrant,
the lenders party thereto, The Bank of New York, as Administrative Agent,
Citibank, N.A., and JP Morgan Chase Bank, as Co-Syndication Agents, and Credit
Suisse First Boston, First Union National Bank, The Dai-Ichi Kangyo Bank, Ltd.
and Societe Generale, as Co-Documentation Agents, and BNY Capital Markets,
Inc., as Lead Arranger and Book Manager (filed as Exhibit 4(vii) to the
Registrant's Annual Report on Form 10-K for the year ended February 2, 2002 and
incorporated herein by reference).

4.19 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 year ended February 2,
2002 and incorporated herein by reference).

4.20 Participation Agreement dated as of September 26, 2001 among the Registrant, as
the Construction Agent and as the Lessee, First Union Development Corporation,
as the Borrower and as the Lessor, the various financial institutions and other
institutional investors which are parties thereto from time to time, as the
Tranche A Note Purchasers, the various banks and other lending institutions
which are parties thereto from time to time, as the Tranche B Lenders, the
various banks and other lending institutions which are parties thereto from
time to time, as the Cash Collateral Lenders, and First Union National Bank, as
the Agent for the Primary Financing Parties and, respecting the Security
Documents, as agent for the Secured Parties and First Union National Bank as
Escrow Agent Lessee (filed as Exhibit 4(ix) to the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2002 and incorporated herein by
reference).

5.1+ Opinion and consent of Simpson Thacher & Bartlett.

23.1+ Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1).

23.2+ Consent of Ernst & Young LLP.

24.1 Powers of attorney (previously filed).

---------------
+ Filed herewith.