Amendment No.3 to Form S-1

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

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, 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, 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, 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(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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 this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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

Since July 2005 and prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . Toys “R” Us, Inc. intends to list the common stock on the New York Stock Exchange under the symbol “TOYS.”

See “Risk Factors” beginning on page 13 of this prospectus to read about factors you should consider before buying shares of the common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

To the extent that the underwriters sell more than shares of common stock, the underwriters have the option to purchase up to an additional shares from us at the initial offering price less the underwriting discount.

The underwriters expect to deliver the shares against payment in New York, New York on or about , 2010.

You should rely only on the information contained in this prospectus or in any free writing prospectus that we authorize be delivered to you. Neither we nor the underwriters have authorized anyone to provide you with additional or different information. If anyone provides you with additional, different or inconsistent information, you should not rely on it. We and the underwriters are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information in this prospectus is accurate only as of the date on the front cover, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, prospects, financial condition and results of operations may have changed since that date.

Through and including , 2010 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

PROSPECTUS SUMMARY

This summary highlights significant aspects of our business and this offering, but it is not complete and does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus, including the information presented under the section entitled “Risk Factors” and the historical financial and other data and related notes, before making an investment decision. Unless otherwise indicated, all information contained in this prospectus concerning the toys and juvenile product industry in general, including information regarding our leading position and market share within our industry, is based on management’s estimates using internal data, data from industry trade groups, consumer record and marketing studies and other externally obtained data. This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements as a result of certain factors, including those set forth in “Risk Factors” and “Forward Looking Statements.” As used herein, references to the “Company,” “we,” “us,” “our,” and, where applicable, “Toys “R” Us” are to Toys “R” Us, Inc., the issuer of the common stock, a Delaware corporation, and its subsidiaries.

We use a 52-53 week fiscal year ending on the Saturday nearest to January 31. Unless otherwise stated, in this prospectus, references to “fiscal 2009” refer to the fiscal year ended January 30, 2010 (consisting of 52 weeks); references to “fiscal 2008” refer to the fiscal year ended January 31, 2009 (consisting of 52 weeks); and references to “fiscal 2007” are to the fiscal year ended February 2, 2008 (consisting of 52 weeks).

We refer to Adjusted EBITDA in this prospectus summary and elsewhere in this prospectus. For the definition of Adjusted EBITDA, an explanation of why we present it and a description of the limitations of this non-GAAP measure, as well as a reconciliation to net earnings, see “—Summary Historical Financial and Other Data.”

Our Company

We are the leading global specialty retailer of toys and juvenile products as measured by net sales. For over 50 years, Toys “R” Us has been recognized as the toy and baby authority. In the U.S., in fiscal 2009, approximately 70% of households with kids under 12 shopped at our Toys “R” Us stores, and 84% of first time mothers shopped at our Babies “R” Us stores according to a survey by Leo J. Shapiro & Associates, LLC. We believe we offer the most comprehensive year-round selection of toys and juvenile products, including a broad assortment of private label and exclusive merchandise unique to our stores.

As of July 31, 2010, we operated 1,363 stores and licensed an additional 211 stores. These stores are located in 34 countries and jurisdictions around the world under the Toys “R” Us, Babies “R” Us and FAO Schwarz banners. In addition to these stores, during the fiscal 2009 holiday season, we opened 91 Toys “R” Us Holiday Express stores (“pop-up stores”), a temporary store format located in high-traffic shopping areas, 28 of which remained open as of July 31, 2010. We expect to open a total of approximately 600 pop-up stores in the upcoming holiday season. As of September 24, 2010, we had opened 418 pop-up stores. We also sell merchandise through our websites at Toysrus.com, Babiesrus.com, eToys.com, FAO.com and babyuniverse.com. For fiscal 2009, we generated net sales of $13.6 billion, net earnings of $312 million and Adjusted EBITDA of $1,130 million.

We operate in an attractive industry that has proven to be resilient due to the demand for toys (including video games and video game systems) and juvenile (including baby) products, driven by the desire of families to spend on their children and by population growth.

Our History

Our Company was founded in 1948 when Charles Lazarus opened a baby furniture store, Children’s Bargain Town, in Washington, D.C. The Toys “R” Us name made its debut in 1957. In 1978, we completed an initial public offering of our common stock. When Charles Lazarus retired as our Chief Executive Officer in 1994, the Company operated or licensed over 1,000 stores in 17 countries and jurisdictions. In 1996, we established the Babies “R” Us brand, further solidifying our reputation as a leading consumer destination for children and their families.

On July 21, 2005, we were acquired by an investment group led by entities advised by or affiliated with Bain Capital Partners, LLC, Kohlberg Kravis Roberts & Co. L.P., and Vornado Realty Trust. We refer to this collective ownership group as our “Sponsors”. Upon the completion of this acquisition, we became a private company.

Progress Since Our 2005 Acquisition

Strengthening our management team was our top priority following the 2005 acquisition. The rebuilding effort began with the hiring of Gerald L. Storch, our Chairman and Chief Executive Officer, who joined the Company in February 2006 from Target Corporation, where he was most recently Vice Chairman. He assembled the Company’s leadership team, recruiting seasoned executives with significant retail experience.

Our new management team has made significant improvements to the business, producing strong results to date and laying the foundation for continued improvement. Over the past five years, we achieved the following:

Streamlined the organizational structure of the Company. We harnessed the collective strength of the Toys “R” Us and Babies “R” Us brands by combining their respective corporate, merchandising and field operation functions. In addition, we established a common global culture for our business and refined our capital management processes.

Developed and launched our juvenile integration strategy. We designed and implemented new integrated store formats that combine the Toys “R” Us and Babies “R” Us brands and merchandise offerings under one roof, providing a “one stop shopping” environment for our guests. These formats are side-by-side stores and “R” Superstores. Side-by-side stores are a combination of Toys “R” Us and Babies “R” Us stores. Our “R” Superstores are conceptually similar to side-by-side stores, except that they are larger in size. Either format may be the result of a conversion or relocation and, in certain cases, may be accompanied by the closure of one or more existing stores. In addition, side-by-side stores and “R” Superstores may also be constructed in a new location and market.

These integrated formats have become powerful vehicles for remodeling and updating our existing store base, generating significant improvements in store-level net sales and profitability. For example, in the first 12 months after conversion, without any increase in square footage, the aggregate store sales for our 53 domestic and 52 of our international side-by-side stores converted during fiscal years 2006, 2007 and 2008, increased, on a weighted average basis (based on net sales) by 20% and 13%, respectively, as compared to the 12 month period prior to commencement of construction for the conversion. The aggregate store sales increases described above are reduced by our estimate of net sales that were transferred from existing stores (generally Babies “R” Us standalone stores) in the vicinity to the new converted stores.

Improved the shopping experience for our guests. In the U.S., from 2005 to 2009, Toys “R” Us and Babies “R” Us guest service scores increased by 9% and 5%, respectively.

Focused on optimizing our store portfolio. As of July 31, 2010, we have opened 107 Company operated stores, closed 113 Company operated stores and converted or relocated 173 Company operated stores to our integrated store format since the end of fiscal 2005. In addition, the number of licensed stores increased from 173 to 211 during the same time period. In fiscal 2009, 98% of our operated stores were store-level EBITDA positive.

Grew our on-line business. In 2006, we began selling through our Toysrus.com and Babiesrus.com websites. Through our business initiatives and acquisitions, we have expanded our on-line business from $486 million in net sales in fiscal 2005 to $602 million in net sales in fiscal 2009.

These initiatives, along with other operating improvements, have delivered strong financial results, with Adjusted EBITDA growing by 55% from fiscal 2005 to fiscal 2009.

Our Competitive Strengths

We believe that the following key competitive strengths differentiate our business:

We are the leading specialty retailer of toys and juvenile products. We have brand names that are highly recognized around the world and strong relationships with our guests and vendors. We also believe our focus on quality of products, service and safety is a competitive strength.

Highly recognized brand names. In the U.S., Toys “R” Us and Babies “R” Us maintain a 98% and 86% brand awareness, respectively, among adults over 18-years-old according to a market study conducted by Marketing Evaluations, Inc. in 2009.

Long-lasting relationships with our guests. Our product assortment allows us to capture new parents as customers during pregnancy, helping them prepare for the arrival of their newborn, and then as new parents and consumers of our toy products. We continue to build on these relationships as these children grow and eventually become parents themselves.

Strong relationships with vendors. Given our market leadership position, we have been able to develop strategic partnerships with many of our vendors and provide them with a year-round platform for their brand and testing of products.

Broad and deep product assortment. Our broad and deep product assortment, which we believe offers our guests the most comprehensive year-round selection of toys and juvenile products, enables us to command a reputation as the shopping destination for toys and juvenile products.

We have a global footprint and multi-channel distribution capabilities. We have a global presence and reach children and their families in 34 countries and jurisdictions around the world.

Global footprint. We are one of the few hardline specialty retailers with a global footprint, based on a review of other hardline specialty retailers, with 39% of our consolidated net sales and 43% of our total operating earnings, excluding unallocated corporate selling, general & administrative expenses, generated outside the U.S. in fiscal 2009. We believe that operating as a global and geographically diverse company enhances our ability to identify trends, test new products and the stability of our business by exposing us to growth opportunities in different markets and across a broad customer base.

Multiple retail store formats. We operate a variety of store formats, which enable us to reach our customers in many different ways. Our big box formats include standalone Toys “R” Us stores, standalone Babies “R” Us stores and integrated formats which combine our Toys “R” Us and Babies “R” Us merchandise offerings under one roof. In addition to these formats, we have recently tested 91 pop-up stores that enabled us to reach more customers during the holiday season.

Differentiated real estate strategy with attractive underlying portfolio. We own stores on land we own and on properties we long-term ground lease located in eight countries, representing approximately 47% of our entire store base as of July 31, 2010. The significant ownership level of our real estate, as well as the ongoing effective management of our leases, provides substantial flexibility to execute our juvenile integration strategy in a capital-efficient manner.

Leading on-line position. We also sell merchandise through our Internet sites Toysrus.com and Babiesrus.com, as well as our newly acquired eToys.com, FAO.com and babyuniverse.com Internet sites.

We have significant experience in managing the seasonal nature of our business. From warehousing and distribution, to hiring and training a seasonal workforce and promotional planning, we have invested in the technology and infrastructure to handle the increased demand during the holiday season in a cost effective manner.

We have an experienced management team with a proven track record. Our senior management team has an average of approximately 20 years of retail experience across a broad range of disciplines in the specialty retail industry, including merchandising, finance and real estate.

Our Growth Strategy

We intend to strengthen our position in the marketplace, increase revenues and grow profits primarily through the following initiatives:

Continue juvenile integration strategy across the existing store base. Converting or relocating our standalone Toys “R” Us stores into our side-by-side and our “R” Superstore formats has generated significant improvements in our comparable store net sales and store-level profitability. With only 11% of our global stores (or 152 stores) having been converted or relocated to an integrated format through the end of fiscal 2009, we believe, based on our review of the markets where our stores are located, we have the potential to convert or relocate another 60% to 70% of our standalone stores globally into our side-by-side and “R” Superstore formats over the next decade. We expect to convert or relocate 82 stores to our side-by-side or “R” Superstore formats in fiscal 2010 (of which 25 have been converted or relocated through July 31, 2010) for an estimated cost of approximately $156 million.

Expand our store base. We have the potential to open new stores in existing and new markets both domestically and internationally, virtually all of which will be in the integrated format, either as side-by-side stores or “R” Superstores. We believe we have the potential to increase our retail square footage, net of closures, globally, in excess of 15% over the next several years, through our new store growth and relocations of existing stores to “R” Superstores. In addition, we expect to open a significant number of pop-up stores in the upcoming holiday season and believe that we have the opportunity to continue this strategy in future years.

Risk Factors

Investing in our common stock involves substantial risk, and our ability to successfully operate our business is subject to numerous competitive risks and challenges, including those that are generally associated with operating in the retail industry. Any of the factors set forth under “Risk Factors” may limit our ability to successfully execute our business strategy or may adversely affect our revenues and overall profitability. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth under “Risk Factors” in deciding whether to invest in our common stock. Among these important risks and challenges are the following:

Competitive risks and challenges related to our business:

our industry is highly competitive and competitive conditions may adversely affect our revenues and overall profitability;

we depend on key vendors and our vendors’ failure to supply quality merchandise in a timely manner may damage our reputation and harm our business;

our revenues may decline due to general economic weakness or a reduction in consumer spending on toys and juvenile products;

we may not successfully gauge trends and changing consumer preferences;

our business is highly seasonal and our financial performance depends on the results of the fourth quarter of each fiscal year;

we may not successfully implement our plans to continue our juvenile integration strategy, expand our store-base, expand our on-line presence, improve our sales productivity and operating profit margin, broaden our product offerings or expand our sales channels;

our results of operations are subject to risks arising from the international scope of our operations including fluctuations in foreign currency exchange rates;

product safety issues, including product recalls, could harm our reputation, divert resources, reduce sales and increase costs;

Risks related to our indebtedness:

our substantial debt makes us especially vulnerable to adverse trends in general economic and industry conditions;

our operations have significant liquidity and capital requirements and depend on the availability of adequate financing on reasonable terms;

our debt agreements contain restrictions that limit our flexibility in operating our business;

Risks related to our common stock:

the Sponsors currently own, and will continue to own after the offering, shares sufficient to control our operations and, as a result, your ability to influence the outcome of key transactions may be limited; and

as a “controlled company” within the meaning of the New York Stock Exchange rules, we will qualify for and intend to rely on exemptions from certain corporate governance requirements and will not have the same protections afforded to shareholders of companies that are subject to such requirements.

Our principal executive offices are located at One Geoffrey Way, Wayne, New Jersey 07470, and our telephone number is (973) 617-3500. Our website address is www.toysrusinc.com. The information on our website is not part of this prospectus.

The Offering

Common stock offered by Toys “R” Us, Inc..

Common stock to be outstanding after this offering

shares ( shares if the underwriters exercise their option in full)

Use of proceeds

We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $ million, assuming the shares are offered at $ per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus

We intend to use the anticipated net proceeds primarily to repay certain of our existing indebtedness and also for general corporate purposes.

Underwriters’ option

We have granted the underwriters a 30-day option to purchase up to additional shares of our common stock at the initial offering price

Dividend policy

We have no current plans to pay dividends on our common stock in the foreseeable future

Advisory Agreement fees

Upon the completion of this offering, pursuant to and in connection with the terms of the advisory agreement, we will pay total fees of approximately $111 million to affiliates of the Sponsors and terminate the agreement (which amount will include a transaction fee equal to 1%, or approximately $8 million, of the estimated gross proceeds from this offering, a termination fee equal to approximately $100 million and certain contingent fees equal to approximately $3 million). See “Certain Relationships and Related Party Transactions—Advisory Agreement”

Risk Factors

You should carefully read and consider the information set forth under “Risk Factors” beginning on page 13 of this prospectus and all other information set forth in this prospectus before investing in our common stock

Proposed NYSE ticker symbol

“TOYS”

Unless we indicate otherwise or the context requires, all information in this prospectus:

assumes (1) no exercise of the underwriters’ option to purchase additional shares of our common stock and (2) an initial public offering price of $ per share, the midpoint of the estimated initial public offering range indicated on the cover of this prospectus.

Summary Historical Financial and Other Data

Set forth below is summary historical consolidated financial and other data of Toys “R” Us, Inc. at the dates and for the periods indicated. We derived the summary historical statement of operations data for the fiscal years ended January 30, 2010, January 31, 2009 and February 2, 2008, and balance sheet data as of January 30, 2010 and January 31, 2009 from our historical audited consolidated financial statements included elsewhere in this prospectus. We derived the summary historical statement of operations data for the fiscal years ended February 3, 2007 and January 28, 2006 and the balance sheet data as of February 2, 2008, February 3, 2007 and January 28, 2006 presented in this table from our consolidated financial statements not included in this prospectus.

We derived the summary condensed consolidated financial data for the twenty-six-week periods ended July 31, 2010 and August 1, 2009 from our unaudited condensed consolidated interim financial statements included elsewhere in this prospectus. Our unaudited condensed consolidated interim financial statements were prepared on a basis consistent with our audited consolidated financial statements. In management’s opinion, the unaudited condensed consolidated interim financial statements include all adjustments, consisting of normal recurring accruals, necessary for the fair presentation of those statements.

Our historical results are not necessarily indicative of future operating results and our interim results for the twenty-six weeks ended July 31, 2010 are not projections for the results to be expected for fiscal year ended January 29, 2011. The information set forth below should be read in conjunction with, and is qualified in its entirety by reference to, “Selected Historical Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements, condensed consolidated financial statements and the related notes included elsewhere in this prospectus.


	Fiscal Years Ended(1)															26 Weeks Ended
(In millions, except number of stores and share data)	January 30, 2010			January 31, 2009			February 2, 2008			February 3, 2007			January 28, 2006			July 31, 2010			August 1, 2009
Statement of Operations Data:
Net sales	$	13,568		$	13,724		$	13,794		$	13,050		$	11,333	(2)	$	5,173		$	5,044
Cost of sales		8,790			8,976			8,987			8,638			7,652			3,270			3,203

Gross margin		4,778			4,748			4,807			4,412			3,681			1,903			1,841

Selling, general and administrative expenses(3)		3,730			3,856			3,801			3,506			2,986			1,713	(4)		1,616
Depreciation and amortization		376			399			394			409			400			192			194
Other (income) expense, net(5)		(112	)(6)		(128	)(7)		(84	)		(152	)		437	(8)		(29	)		(76	)

Total operating expenses		3,994			4,127			4,111			3,763			3,823			1,876			1,734

Operating earnings (loss)		784			621			696			649			(142	)		27			107
Interest expense		(447	)		(419	)		(503	)		(537	)		(394	)		(245	)		(211	)
Interest income		7			16			27			31			31			3			4

Earnings (loss) before income taxes		344			218			220			143			(505	)		(215	)		(100	)
Income tax expense (benefit)		40			7			65			35			(121	)		(145	)		(85	)

Net earnings (loss)		304			211			155			108			(384	)		(70	)		(15	)

Less: Net (loss) earnings attributable to noncontrolling interest		(8	)		(7	)		2			(1	)		—			(1	)		(7	)

Net earnings (loss) attributable to Toys “R” Us, Inc.	$	312		$	218		$	153		$	109		$	(384	)	$	(69	)	$	(8	)

Share Data:
Earnings (loss) per common share attributable to Toys “R” Us, Inc.(9):
Basic	$			$			$			$			$			$			$
Diluted	$			$			$			$			$			$			$
Weighted average shares used in computing per share amounts(9):
Basic earnings per common share
Diluted earnings per common share


	Fiscal Years Ended(1)															26 Weeks Ended
(In millions, except number of stores and share data)	January 30, 2010			January 31, 2009			February 2, 2008			February 3, 2007			January 28, 2006			July 31, 2010			August 1, 2009
Statement of Cash Flow:
Net cash provided by (used in)
Operating activities	$	1,014		$	525		$	527		$	411		$	671		$	(963	)	$	(493	)
Investing activities		(37	)		(259	)		(416	)		(107	)		573			(104	)		17
Financing activities		(626	)		(223	)		(152	)		(566	)		(1,488	)		134			(173	)

Balance Sheet Data (end of period):
Working capital	$	619		$	617		$	685		$	347		$	348		$	660		$	719
Property and equipment, net		4,084			4,187			4,385			4,333			4,175			4,012			4,181
Total assets		8,577			8,411			8,952			8,295			7,863			8,096			8,172
Long-term debt(10)		5,034	(11)		5,447			5,824			5,722			5,540			5,055			5,496
Total stockholders’ equity (deficit)(12)		117			(152	)		(235	)		(540	)		(723	)		39			(105	)

Other Financial and Operating Data:
Number of stores—Domestic (at period end)		849			846			845			837			901			848			848
Number of stores—International—operated (at period end)		514			504			504			488			468			515			510
Total operated stores (at period end)		1,363			1,350			1,349			1,325			1,369			1,363			1,358
Number of stores—International—Licensed (at period end)		203			209			211			190			173			211			195
Adjusted EBITDA(13)	$	1,130		$	990		$	1,095		$	982		$	730		$	261		$	264
Capital expenditures	$	192		$	395		$	326		$	285		$	285		$	117		$	93

(1)	Our fiscal year ends on the Saturday nearest to January 31 of each calendar year. With the exception of fiscal 2006, which included 53 weeks, all other fiscal years presented are based on a 52 week period.

(2)	Toys–Japan was consolidated beginning in fiscal 2006. Toys–Japan Net sales of $1.6 billion for fiscal 2005 were not included in our Net sales.

(3)	Includes the impact of restructuring and other charges. See Note 10 to our consolidated financial statements entitled “Restructuring and Other Charges” for further information.

(4)	Includes a pre-tax reserve of $17 million for certain legal matters and a $16 million pre-tax non-cash cumulative correction of prior period straight-line lease accounting.

(5)

Includes $20 million, $78 million, $17 million and $15 million of pre-tax gift card breakage income in fiscals 2009, 2008, 2007 and 2006, respectively. Also includes $11 million and $12 million of pre-tax gift card dormancy income in fiscals 2006 and 2005, respectively. See Note 1 to our consolidated financial statements entitled “Summary of Significant Accounting Policies” for further details.

Includes $8 million of pre-tax gift card breakage income for the twenty-six weeks ended July 31, 2010 and August 1, 2009, respectively.

Includes the pre-tax impact of net gains on sales of properties of $6 million, $5 million, $33 million, $110 million and a loss of $3 million in fiscals 2009, 2008, 2007, 2006 and 2005, respectively. See Note 5 to our consolidated financial statements entitled “Property and Equipment” for further details.

Includes the pre-tax impact of net gains on sales of properties of $4 million and $1 million for the twenty-six weeks ended July 31, 2010 and August 1, 2009, respectively.

Includes pre-tax impairment losses on long-lived assets of $7 million, $33 million, $13 million, $5 million and $22 million in fiscals 2009, 2008, 2007, 2006 and 2005. See Note 1 to our consolidated financial statements entitled “Summary of Significant Accounting Policies” for further details.

Includes pre-tax impairment losses on long-lived assets of $1 million and $5 million for the twenty-six weeks ended July 31, 2010 and August 1, 2009, respectively.

(6)	Includes a $51 million pre-tax gain related to the litigation settlement with Amazon.com (“Amazon”). See Note 15 to our consolidated financial statements entitled “Litigation and Legal Proceedings” for further details.

(7)	Includes a $39 million pre-tax gain related to the substantial liquidation of the operations of TRU (HK) Limited, our wholly-owned subsidiary. See Note 1 to our consolidated financial statements entitled “Summary of Significant Accounting Policies” for further details.

(8)	Includes $410 million of transaction and related costs and $22 million of contract settlement and other fees related to the 2005 acquisition.

(9)	All share and per share amounts reflect a -for-one stock split of our common stock, which will occur prior to the consummation of this offering.

(10)	Excludes current portion of long-term debt.

(11)

Includes the impact of the issuance of $950 million and $725 million of debt on July 9, 2009 and November 20, 2009, respectively, the proceeds from which were used, together with other funds, to repay the outstanding loan balance of $1,267 million and $800 million plus accrued interest and fees. See Note 2 to our consolidated financial statements entitled “Long-Term Debt” for further details.

(12)

On February 1, 2009, we adopted the amendment to ASC Topic 810, “Consolidation” (“ASC 810”). The amendment requires a company to clearly identify and present ownership interest in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section but separate from the company’s equity. Therefore, we have included our noncontrolling interest in Toys–Japan within the Total stockholders’ equity (deficit) line item.

(13)

Adjusted EBITDA is defined as EBITDA (earnings (loss) before net interest income (expense), income tax expense (benefit), depreciation and amortization), as further adjusted to exclude the effects of certain income and expense items that management believes make it more difficult to assess the Company’s actual operating performance. Although the nature of many of these income and expense items is recurring, we have historically excluded such impact from internal performance assessments. We believe that excluding items such as sponsors’ management and advisory fees, asset impairment charges, restructuring charges, impact of litigation, non-controlling interest, gain (loss) on sale of properties, gift card breakage accounting change and the other charges specified below, helps investors compare our operating performance with our results in prior periods. We believe it is appropriate to exclude these items as they are not related to ongoing operating performance and, therefore, limit comparability between periods and between us and similar companies.

We believe Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Investors of the Company regularly request Adjusted EBITDA as a supplemental analytical measure to, and in conjunction with, the Company’s GAAP financial data. We understand that these investors use Adjusted EBITDA, among other things, to assess our period-to-period operating performance and to gain insight into the manner in which management analyzes operating performance.

In addition, we believe that Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of EBITDA and Adjusted EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions, which items may vary for different companies for reasons unrelated to overall operating performance. We use these non-GAAP financial measures for planning and forecasting and measuring results against the forecast and in certain cases we use similar measures for bonus targets for certain of our employees. Using several measures to evaluate the business allows us and investors to assess our relative performance against our competitors and ultimately monitor our capacity to generate returns for our stockholders.

Although we believe that Adjusted EBITDA can make an evaluation of our operating performance more consistent because it removes items that do not reflect our core operations, other companies, even in the same industry, may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-GAAP measures that other companies may use to compare the performance of those companies to our performance. The Company does not, and investors should not, place undue reliance on EBITDA or Adjusted EBITDA as measures of operating performance.

Reconciliation of Net earnings (loss) attributable to Toys “R” Us, Inc. to EBITDA and Adjusted EBITDA is as follows:


	Fiscal Years Ended															26 Weeks Ended
(In millions)	January 30, 2010			January 31, 2009			February 2, 2008			February 3, 2007			January 28, 2006			July 31, 2010			August 1, 2009
Net earnings (loss) attributable to Toys “R” Us, Inc.	$	312		$	218		$	153		$	109			$ (384	)	$	(69	)	$	(8	)
Add:
Income tax expense (benefit)		40			7			65			35			(121	)		(145	)		(85	)
Interest expense, net		440			403			476			506			363			242			207
Depreciation and amortization		376			399			394			409			400			192			194

EBITDA		1,168			1,027			1,088			1,059			258			220			308
Adjustments:
Legal reserve(a)		—			—			—			—			—			17			—
Prior period lease accounting(b)		—			—			—			—			—			16			—
Sponsors management and advisory fees(c)		15			18			18			20			4			10			8
Impairment on long-lived assets(d)		7			33			13			5			22			1			5
Restructuring(e)		5			8			2			9			11			2			2
Gain on settlement of litigation(f)		(51	)		—			—			—			—			—			(51	)
Net (loss) earnings attributable to Toys– Japan noncontrolling interest(g)		(8	)		(7	)		2			(1	)		—			(1	)		(7)
(Gain) loss on sale of properties(h)		(6	)		(5	)		(33	)		(110	)		3			(4	)		(1	)
Gift card breakage accounting change(i)		—			(59	)		—			—			—			—			—
McDonald’s Japan contract termination(j)		—			14			5			—			—			—			—
Gain on liquidation of TRU (HK) Limited(k)		—			(39	)		—			—			—			—			—
Transaction and related costs(l)		—			—			—			—			410			—			—
Contract settlement fees and other(m)		—			—			—			—			22			—			—

Adjusted EBITDA	$	1,130		$	990		$	1,095		$	982		$	730		$	261		$	264

(a)

Reserve recorded for certain legal matters.

(b)

Represents a non-cash cumulative correction of prior period straight-line lease accounting.

(c)

Represents the fees paid to the Sponsors in accordance with the advisory agreement. The agreement will be terminated in connection with this offering. See “Certain Relationships and Related Party Transactions.”

(d)

These impairments were primarily due to the identification of underperforming stores, the relocation of certain stores and a decrease in real estate market values.

(e)

Restructuring and other charges consist primarily of costs incurred from the Company’s 2003 and 2005 restructuring initiatives. The additional charges are primarily due to changes in management’s estimates for events such as lease terminations, assignments and sublease income adjustments.

(f)

Represents a $51 million gain recorded in Other (income) expense, net related to the litigation settlement with Amazon in fiscal 2009.

(g)

Excludes noncontrolling interest in Toys “R” Us—Japan.

(h)

During fiscal 2009, we sold idle properties which resulted in gains of approximately $6 million. During fiscal 2008, Toys “R” Us Iberia Real Estate S.L., an indirect wholly-owned subsidiary, sold property resulting in a net gain of $14 million. At the time of the sale, Toys “R” Us Iberia S.A., its parent company, leased back a portion of the property. Due to the leaseback, we recognized $4 million of the net gain and deferred the remaining $10 million. During fiscal 2007, we sold our interest in an idle distribution center for gross proceeds of approximately $29 million, resulting in a gain of $18 million and sold 4 properties for gross proceeds of $14 million, resulting in a gain of $5 million as part of the agreement with Vornado Surplus 2006 Realty, LLC. In addition, we consummated a lease termination agreement resulting in a net gain of $10 million.

During fiscal 2006, Toys “R” Us-Delaware, Inc. (“Toys-Delaware”) and MAP 2005 Real Estate, LLC, both wholly-owned direct subsidiaries of the Company, consummated the sale of their interest in 38 properties, primarily to an affiliate of Vornado, for gross proceeds of approximately $178 million, resulting in a gain of $91 million. In addition, during fiscal 2006 we sold our interest in and assets related to a leased property, resulting in a gain of $21 million.

During the twenty-six weeks ended July 31, 2010 and August 1, 2009, we sold idle properties which resulted in gains of approximately $4 million and $1 million, respectively.

(i)

During the fourth quarter of fiscal 2008, the Company changed its method for recording gift card breakage income to recognize breakage income and derecognize the gift card liability for unredeemed gift cards in proportion to actual redemptions of gift cards. As a result, the adjustment recorded in fiscal 2008 resulted in an additional $59 million of gift card breakage income.

(j)

In fiscal 2008, a settlement was reached in which Toys–Japan and McDonald’s Japan agreed to the termination of the service agreement and the payment by Toys–Japan of ¥2.0 billion ($19 million as of May 13, 2008) to McDonald’s Japan. The Company had previously established a reserve of $5 million in fiscal 2007.

(k)

In fiscal 2008, the operations of TRU (HK) Limited, our wholly-owned subsidiary, were substantially liquidated. As a result, we recognized a $39 million gain.

(l)

These costs reflect $148 million of expenses related to the 2005 acquisition, compensation expenses associated with the 2005 acquisition related to stock options and restricted stock of $222 million, as well as severance, bonuses and related payroll taxes of $40 million.

(m)

This amount resulted from the loss on early extinguishment of debt of $7 million related to the purchase of the notes associated with our equity security units and a contract settlement fee of $15 million related to the early termination of our synthetic lease of our headquarters located in Wayne, New Jersey.

An investment in our common stock involves substantial risk. You should carefully consider the following risks as well as the other information included in this prospectus, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes, before investing in our common stock. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. In such a case, the trading price of the common stock could decline and you may lose all or part of your investment in our company.

Our business is highly seasonal, and our financial performance depends on the results of the fourth quarter of each fiscal year and, as a result, our operating results could be materially adversely affected if we achieve less than satisfactory sales prior to or during the holiday season.

Our business is highly seasonal. During fiscals 2009, 2008 and 2007 approximately 43%, 40% and 42%, respectively, of our total Net sales were generated in the fourth quarter. It is typically the case that we incur net losses in each of the first three quarters of the year, with all of our net earnings and cash flows from operations being generated in the fourth quarter. As a result, we depend significantly upon the fourth quarter holiday selling season. If we achieve less than satisfactory sales, operating earnings or cash flows from operating activities during the fourth quarter, we may not be able to compensate sufficiently for the lower sales, operating earnings or cash flows from operating activities during the first three quarters of the fiscal year. Our results in any given period may be affected by dates on which important holidays fall and the shopping patterns relating to those holidays. Additionally, the concentrated nature of our seasonal sales means that the Company’s operating results could be materially adversely affected by natural disasters and labor strikes, work stoppages, terrorist acts or disruptive global political events, prior to or during the holiday season, as described below.

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

The retail industry is highly and increasingly competitive and our results of operations are sensitive to, and may be adversely affected by, competitive pricing, promotional pressures, additional competitor store openings and other factors. As a specialty retailer, that primarily focuses on toys and juvenile products, we compete with discount and mass merchandisers, such as Wal-Mart and Target, electronics retailers, national and regional specialty chains, as well as local retailers in the geographic areas we serve. We also compete with national and local discount stores, department stores, supermarkets and warehouse clubs, as well as Internet and catalog businesses. Competition is principally based on product variety, quality, availability, price, convenience or store location, advertising and promotion, customer support and service. We believe that some of our competitors in the toys market and juvenile products market, as well as in the other markets in which we compete, have a larger market share than our market share. In addition, some of our competitors have greater financial resources, lower merchandise acquisition costs and lower operating expenses than we do.

Much of the merchandise we sell is also available from various retailers at competitive prices. Discount and mass merchandisers use aggressive pricing policies and enlarged toy-selling areas during the holiday season to build traffic for other store departments. Our business is vulnerable to shifts in demand and pricing, as well as consumer preferences. Competition in the video game market has increased in recent years as mass merchandisers have expanded their offerings in this market, and as alternative sales channels (such as the Internet) have grown in importance.

The baby registry market is highly competitive, with competition based on convenience, quality and selection of merchandise offerings and functionality. Our baby registry primarily competes with the baby registries of mass merchandisers and other specialty format and regional retailers. Some of our competitors have been aggressively advertising and marketing their baby registries through national television and magazine campaigns. Within the past few years, the number of multiple registries and on-line registries has steadily increased. These trends present consumers with more choices for their baby registry needs, and as a result, increase competition for our baby registry.

If we fail to compete successfully, we could face lower sales and may decide or be compelled to offer greater discounts to our customers, which could result in decreased profitability.

Our sales may be adversely affected by changes in economic factors and changes in consumer spending patterns.

Many economic and other factors outside our control, including consumer confidence, consumer spending levels, employment levels, consumer debt levels, inflation and deflation, as well as the availability of consumer credit, affect consumer spending habits. A significant deterioration in the global financial markets and economic environment, recessions or an uncertain economic outlook adversely affects consumer spending habits and results in lower levels of economic activity. The domestic and international political situation, including the economic health of various political jurisdictions, also affects economic conditions and consumer confidence. Any of these events and factors could cause consumers to curtail spending and could have a negative impact on our financial performance and position in future fiscal periods.

Since fiscal 2008, there has been a deterioration in the global financial markets and economic environment, which has negatively impacted consumer spending. In response, we have taken steps to drive profitable sales and to curtail capital spending and operating expenses wherever prudent. However, there is a risk that our steps to respond to these economic conditions may be ill-conceived or ineffective. These adverse trends in economic conditions may worsen to the point that even well-conceived responses would not be sufficiently effective to counteract the impacts of these trends. In such cases, there would be a negative impact on our financial performance and position in future fiscal periods.

Our operations have significant liquidity and capital requirements and depend on the availability of adequate financing on reasonable terms. If our lenders are unable to fund borrowings under their credit commitments or we are unable to borrow, it could have a significant negative effect on our business.

We have significant liquidity and capital requirements. Among other things, the seasonality of our businesses requires us to purchase merchandise well in advance of the fourth quarter holiday selling season. We depend on our ability to generate cash flows from operating activities, as well as on borrowings under our revolving credit facilities and our credit lines, to finance the carrying costs of this inventory and to pay for capital expenditures and operating expenses. For fiscal 2009, peak borrowings under our various credit lines were $784 million as we purchased merchandise for the fourth quarter holiday selling season. If our lenders are unable to fund borrowings under their credit commitments or we are unable to borrow, it could have a significant negative effect on our business. In addition, any adverse change to our credit ratings could negatively impact our ability to refinance our debt on satisfactory terms and could have the effect of increasing our financing costs. While we believe we currently have adequate sources of funds to provide for our ongoing operations and capital requirements for the next 12 months, any inability on our part to have future access to financing, when needed, would have a negative effect on our business.

A loss of, or reduction in, trade credit from our vendors could reduce our liquidity, increase our working capital needs and/or limit our ability to purchase products.

We purchase products for resale from our vendors, who may seek credit insurance to protect against non-payment of amounts due to them. However, as a result of deteriorating economic conditions and higher claims costs, credit insurers have curtailed or eliminated coverage to vendors (as it was the case in the recent disruptions to the trade credit market in the U.K.) and may continue to do so in the future. If credit insurance is not available to vendors at reasonable terms or at all, vendors may demand accelerated payment of amounts due to them or require advance payments or letters of credit before goods are shipped to us. Such demands could have a significant adverse impact on our inventory levels and operating cash flow and negatively impact our liquidity. Any such disruptions could increase the costs to us of financing our inventory or negatively impact our ability to deliver products to our customers, which could in turn negatively affect our financial performance.

We may not retain or attract customers if we fail to successfully implement our strategic initiatives, which could result in lower sales and a failure to realize the benefit of the expenditures incurred for these initiatives.

We continue to implement a series of customer-oriented strategic programs designed to differentiate and strengthen our core merchandise content and service levels and to expand and enhance our merchandise offerings. We seek to improve the effectiveness of our marketing and advertising programs for our “R” Us stores. The success of these and other initiatives will depend on various factors, including the implementation of our growth strategy, the appeal of our store formats, our ability to offer new products to customers, our financial condition, our ability to respond to changing consumer preferences and competitive and economic conditions. We continuously endeavor to minimize our operating expenses, without adversely affecting the profitability of the business. If we fail to implement successfully some or all of our strategic initiatives, we may be unable to retain or attract customers, which could result in lower sales and a failure to realize the benefit of the expenditures incurred for these initiatives.

If we cannot implement our juvenile integration strategy or open new stores, our future growth will be adversely affected.

Our growth is dependent on both increases in sales in existing stores and the ability to successfully implement our juvenile integration strategy and open profitable new stores. Increases in sales in existing stores are dependent on factors such as competition, merchandise selection, store operations and other factors discussed in these Risk Factors. Our ability to successfully implement our juvenile integration strategy in a timely and cost effective manner or open new stores and expand into additional market areas depends in part on the following factors, which are in part beyond our control:

Delays or failures in successfully implementing our juvenile integration strategy and opening new stores, or achieving lower than expected sales in integrated or new stores, or drawing a greater than expected proportion of sales in integrated or new stores from existing stores, could materially adversely affect our growth and/or profitability. In addition, we may not be able to anticipate all of the challenges imposed by the expansion of our operations and, as a result, may not meet our targets for integrating, opening new stores or relocating stores or expanding profitably.

Some of our new stores may be located in areas where we have little or no meaningful experience. Those markets may have different market conditions, consumer preferences and discretionary spending patterns than our existing markets, which may cause our new stores to be less successful than stores in our existing markets. Other new stores may be located in areas where we have existing stores. Although we have experience in these markets, increasing the number of locations may result in unanticipated over-saturation of markets and temporarily or permanently divert customers and sales from our existing stores, thereby adversely affecting our overall financial performance.

Our 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 preferences in a timely manner. Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to change. Our business fluctuates according to changes in consumer preferences dictated in part by fashion trends, perceived value and season. These fluctuations affect the merchandise in stock since purchase orders are written well in advance of the holiday season and, at times, before fashion trends and high-demand brands are evidenced by consumer purchases. If we overestimate the market for our products, we may be faced with significant excess inventories, which could result in increased expenses and reduced margins associated with having to liquidate obsolete inventory at lower prices. Conversely, if we underestimate the market for our products, we will miss opportunities for increased sales and profits, which would place us at a competitive disadvantage.

Sales of video games and video game systems tend to be cyclical, which may result in fluctuations in our results of operations, and may be adversely affected if products are sold through alternative channels.

Sales of video games and video game systems, which have tended to account for 10% to 13% of our annual net sales for fiscals 2009, 2008 and 2007, have been cyclical in nature in response to the introduction and maturation of new technology. Following the introduction of new video game systems, sales of these systems and related software and accessories generally increase due to initial demand, while sales of older systems and related products generally decrease. Moreover, competition within the video game market has increased in recent years and, due to the large size of this product category, fluctuations in this market could have a material adverse impact on our sales and profits trends. Additionally, if video game system manufacturers fail to develop new hardware systems, or if new video products are sold in channels other than traditional retail stores, including through direct online distribution to customers, our sales of video game products could decline, which would negatively impact our financial performance.

The success and expansion of our on-line business depends on our ability to provide quality service to our Internet customers and if we are not able to provide such services, our future growth will be adversely affected.

Our Internet operations are subject to a number of risks and uncertainties which are beyond our control, including the following:

If we are not able to provide satisfactory service to our Internet customers, our future growth will be adversely affected.

We depend on key vendors to supply the merchandise that we sell to our customers and our vendors’ failure to supply quality merchandise in a timely manner may damage our reputation and brands and harm our business.

Our performance depends, in part, on our ability to purchase our merchandise in sufficient quantities at competitive prices. We purchase our merchandise from numerous international and domestic manufacturers and importers. We have no contractual assurances of continued supply, pricing or access to new products, and any vendor could change the terms upon which they sell to us or discontinue selling to us at any time. We may not be able to acquire desired merchandise in sufficient quantities on terms acceptable to us in the future. Better than expected sales demand may also lead to customer backorders and lower in-stock positions of our merchandise.

As of fiscal 2009, we had approximately 3,700 active vendor relationships through which we procure the merchandise that we offer to our guests. For fiscal 2009, our top 20 vendors worldwide, based on our purchase volume in U.S. dollars, represented approximately 41% of the total products we purchased. An inability to acquire suitable merchandise on acceptable terms or the loss of one or more key vendors could have a negative effect on our business and operating results and could cause us to miss products that we feel are important to our assortment. We may not be able to develop relationships with new vendors, and products from alternative sources, if any, may be of a lesser quality and/or more expensive than those from existing vendors.

In addition, our vendors are subject to various risks, including raw material costs, inflation, labor disputes, union organizing activities, financial liquidity, product merchantability, inclement weather, natural disasters and general economic and political conditions that could limit our vendors’ ability to provide us with quality merchandise on a timely basis and at prices and payment terms that are commercially acceptable. For these or other reasons, one or more of our vendors might not adhere to our quality control standards, and we might not identify the deficiency before merchandise ships to our stores or customers. In addition, our vendors may have difficulty adjusting to our changing demands and growing business. Our vendors’ failure to manufacture or import quality merchandise in a timely

and effective manner could damage our reputation and brands, and could lead to an increase in customer litigation against us and an attendant increase in our routine and non-routine litigation costs. Further, any merchandise that does not meet our quality standards could become subject to a recall, which could damage our reputation and brands and harm our business.

The decrease of birth rates in countries where we operate could negatively affect our business.

Most of our end-customers are newborns and children and, as a result, our revenues are dependent on the birth rates in countries where we operate. In recent years, many countries have experienced a sharp drop in birth rates as their population ages and education and income levels increase. A continued and significant decline in the number of newborns and children in these countries could have a material adverse effect on our operating results.

If current store locations become unattractive, and attractive new locations are not available for a reasonable price, our ability to implement our growth strategy will be adversely affected.

The success of any store depends in substantial part on its location. There can be no assurance that current locations will continue to be attractive as demographic patterns change. Neighborhood or economic conditions where stores are located could decline in the future, resulting in potentially reduced sales in these locations. If we cannot obtain desirable locations at reasonable prices, our ability to implement our growth strategy will be adversely affected.

If we are unable to renew or replace our current store leases or if we are unable to enter into leases for additional stores on favorable terms, or if one or more of our current leases are terminated prior to expiration of their stated term and we cannot find suitable alternate locations, our growth and profitability could be negatively impacted.

We currently have ground and store leasehold interests in approximately 70% of our domestic and international store locations. Most of our current leases provide for our unilateral option to renew for several additional rental periods at specific rental rates. Our ability to re-negotiate favorable terms on an expiring lease or to negotiate favorable terms for a suitable alternate location, and our ability to negotiate favorable lease terms for additional store locations could depend on conditions in the real estate market, competition for desirable properties and our relationships with current and prospective landlords or may depend on other factors that are not within our control. Any or all of these factors and conditions could negatively impact our growth and profitability.

Our business, financial condition and results of operations are subject to risks arising from the international scope of our operations which could negatively impact our financial condition and results of operations.

We conduct a significant portion of our business in many countries around the world. For the twenty-six weeks ended July 31, 2010 and for the 2009 and 2008 fiscal years, approximately 36.8%, 38.7% and 38.2% of our Net sales were generated outside the U.S., respectively. In addition, as of January 31, 2010, approximately 35.3% of our long-lived assets were located outside of the United States. All of our foreign operations are subject to risks inherent in conducting business abroad, including the challenges of different economic conditions in each of the countries, possible nationalization or expropriation, price and currency exchange controls, fluctuations in the relative values of currencies as described below, political instability and restrictive governmental actions.

Our business is subject to fluctuations in foreign currency exchange and such fluctuations may have a material adverse effect on our business, financial condition and results of operations.

Exchange rate fluctuations may affect the translated value of our earnings and cash flow associated with our international operations, as well as the translation of net asset or liability positions that are denominated in foreign currencies. In countries outside of the United States where we operate stores, we generate revenues and incur operating expenses and selling, general and administrative expenses denominated in local currencies. In many countries where we do not operate stores, our licensees pay royalties in U.S. dollars. However, as the royalties are calculated based on local currency sales, our revenues are still impacted by fluctuations in exchange rates. In fiscal years 2009 and 2008, 38.7% and 38.2% of our Net sales were completed in a currency other than the U.S. dollar, the majority of which were denominated in euros, yen and pounds. In fiscal 2009, our reported operating earnings would have decreased or increased $28 million if all foreign currencies uniformly weakened or strengthened by 10% relative to the U.S. dollar. Since the start of fiscal 2010, the U.S. dollar strengthened significantly against the euro and the pound and weakened against the yen and the Canadian dollar. In addition, our exposure to foreign currency exchange rate fluctuations will grow if the relative contribution of our operations outside the United States increases.

We enter into foreign exchange agreements from time to time with financial institutions to reduce our exposure to fluctuations in currency exchange rates referred to as hedging activities. However, these hedging activities may not eliminate foreign currency risk entirely and involve costs and risks of their own. Although we hedge some exposures to changes in foreign currency exchange rates arising in the ordinary course of business, foreign currency fluctuations may have a material adverse effect on our business, financial condition and results of operations.

Our results may be adversely affected by fluctuations in raw material and energy costs.

Our results may be affected by the prices of the components and raw materials used in the manufacture of our toys and juvenile products. These prices may fluctuate based on a number of factors beyond our control, including: oil prices, changes in supply and demand, general economic conditions, labor costs, competition, import duties, tariffs, currency exchange rates and government regulation. In addition, energy costs have fluctuated dramatically in the past. These fluctuations may result in an increase in our transportation costs for distribution, utility costs for our retail stores and overall costs to purchase products from our vendors.

We may not be able to adjust the prices of our products, especially in the short-term, to recover these cost increases in raw materials and energy. A continual rise in raw material and energy costs could adversely affect consumer spending and demand for our products and increase our operating costs, both of which could have a material adverse effect on our financial condition and results of operations.

A significant disruption to our distribution network or to the timely receipt of inventory could adversely impact sales or increase our transportation costs, which would decrease our profits.

We rely on our ability to replenish depleted inventory in our stores through deliveries to our distribution centers from vendors and then from the distribution centers or direct ship vendors to our stores by various means of transportation, including shipments by sea, rail, air and truck. Unexpected delays in those deliveries or increases in transportation costs (including through increased fuel costs)

could significantly decrease our ability to make sales and earn profits. In addition, labor shortages or labor disagreements in the transportation industry or long-term disruptions to the national and international transportation infrastructure that lead to delays or interruptions of deliveries could negatively affect our business.

Product safety issues, including product recalls, could harm our reputation, divert resources, reduce sales and increase costs.

The products we sell in our stores are subject to regulation by the Consumer Product Safety Commission and similar state and international regulatory authorities. Such products could be subject to recalls and other actions by these authorities. Product safety concerns may require us to voluntarily remove selected products from our stores. Such recalls and voluntary removal of products can result in, among other things, lost sales, diverted resources, potential harm to our reputation and increased customer service costs, which could have a material adverse effect on our financial condition.

Our business exposes us to personal injury and product liability claims which could result in adverse publicity and harm to our brands and our results of operations.

We are from time to time subject to claims due to the injury of an individual in our stores or on our property. In addition, we have in the past been subject to product liability claims for the products that we sell. Subject to certain exceptions, our purchase orders generally require the manufacturer to indemnify us against any product liability claims; however, if the manufacturer does not have insurance or becomes insolvent, there is a risk we would not be indemnified. Any personal injury or product liability claim made against us, whether or not it has merit, could be time consuming and costly to defend, resulting in adverse publicity, or damage to our reputation, and have an adverse effect on our results of operations.

Adverse litigation judgments or settlements resulting from legal proceedings in which we may be involved could expose us to monetary damages or limit our ability to operate our business.

We are involved in private actions, investigations and various other legal proceedings by employees, suppliers, competitors, shareholders, government agencies or others. For instance, on July 15, 2009, the United States District Court for the Eastern District of Pennsylvania granted the class plaintiffs’ motion for class certification in a consumer class action commenced in January 2006, which was consolidated with an action brought by two Internet retailers that was commenced in December 2005. Both actions allege that Babies “R” Us agreed with certain baby product manufacturers to impose, maintain and/or enforce minimum price agreements in violation of antitrust laws. In addition, in December 2009, a third internet retailer filed a similar action and another class action was commenced making similar allegations involving most of the same defendants. Additionally, the Federal Trade Commission (“FTC”) notified us in April 2009 that they had opened an investigation related to the issues in those cases and to confirm our compliance with a 1998 FTC Final Order that prohibits us from, among other things, influencing our suppliers to limit sales of products to other retailers, including price club warehouses.

The results of such litigation, investigations and other legal proceedings are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and divert significant resources. If any of these legal proceedings were to be determined adversely to us, there could be a material adverse effect on our business, financial condition and results of operations.

We are subject to certain regulatory and legal requirements. If we fail to comply with regulatory or legal requirements, our business and financial results may be adversely affected.

We are subject to numerous regulatory and legal requirements. Our policies, procedures and internal controls are designed to comply with all applicable laws and regulations, including those imposed by the Sarbanes-Oxley Act of 2002 and the Securities and Exchange Commission. In addition, our business activities require us to comply with complex regulatory and legal issues on a local, national and worldwide basis (including, in some cases, more stringent local labor law or regulations). Failure to comply with such laws and regulations could adversely affect our operations and financial results, involve significant expense and divert management’s attention and resources from other matters, which in turn could harm our business.

Our business operations could be disrupted if our information technology systems fail to perform adequately or we are unable to protect the integrity and security of our customers’ information.

We depend largely upon our information technology systems in the conduct of all aspects of our operations. If our information technology systems fail to perform as anticipated, we could experience difficulties in virtually any area of our operations, including but not limited to replenishing inventories or in delivering our products to store locations in response to consumer demands. Any of these or other systems-related problems could, in turn, adversely affect our sales and profitability.

Additionally, a compromise of our security systems (or a design flaw in our system environment) could result in unauthorized access to certain personal information about our customers which could adversely affect our reputation with our customers and others, as well as our operations, and could result in litigation against us or the imposition of penalties. In addition, a security breach could require that we expend significant additional resources related to our information security systems.

Natural disasters, inclement weather, pandemic outbreaks, terrorist acts or disruptive global political events could cause permanent or temporary distribution center or store closures, impair our ability to purchase, receive or replenish inventory, or decrease customer traffic, all of which could result in lost sales and otherwise adversely affect our financial performance.

The occurrence of one or more natural disasters, such as hurricanes, fires, floods, earthquakes, tornados and volcano eruptions, or inclement weather such as frequent or unusually heavy snow, ice or rain storms, or extended periods of unseasonable temperatures, or the occurrence of pandemic outbreaks, labor strikes, work stoppages, terrorist acts or disruptive global political events, such as civil unrest in countries in which our suppliers are located, or similar disruptions could adversely affect our operations and financial performance. To the extent these events impact one or more of our key vendors or result in the closure of one or more of our distribution centers or a significant number of stores, our operations and financial performance could be materially adversely affected through an inability to make deliveries to our stores and through lost sales. In addition, these events could result in increases in fuel (or other energy) prices or a fuel shortage, delays in opening new stores, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from some local and overseas vendor, the temporary disruption in the transport of goods from overseas, delay in the delivery of goods to our distribution centers or stores, the temporary reduction in the availability of products in our stores and disruption to our information systems. These events also can have indirect consequences such as increases in the costs of insurance if they result in significant loss of property or other insurable damage.

Our results of operations could suffer if we lose key management or are unable to attract and retain experienced senior management for our business.

Our future success depends to a significant degree on the skills, experience and efforts of our senior management team. The loss of services of any of these individuals, or the inability by us to attract and retain qualified individuals for key management positions, could harm our business and financial performance.

Because of our extensive international operations, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.

The U.S. Foreign Corrupt Practices Act, and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. Despite our training and compliance program, we cannot assure you that our internal control policies and procedures always will protect us from reckless or criminal acts committed by our employees or agents. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.

International events could delay or prevent the delivery of products to our stores, which could negatively affect our sales and profitability.

A significant portion of products we sell are manufactured outside of the United States, primarily in Asia. As a result, any event causing a disruption of imports, including labor strikes, work stoppages, boycotts, safety issues on materials, the imposition of trade restrictions in the form of tariffs, embargoes or export controls, “anti-dumping” duties, port security or other events that could slow port activities, could increase the cost and reduce the supply of products available to us. In addition, port-labor issues, rail congestion and trucking shortages can have an impact on all direct importers. Although we attempt to anticipate and manage such situations, both our sales and profitability could be adversely impacted by any such developments in the future. These and other international events could negatively affect our sales and profitability.

We may experience fluctuations in our tax obligations and effective tax rate, which could materially and adversely affect our results of operations.

We are subject to taxes in the United States and numerous international jurisdictions. We record tax expense based on our estimates of future tax payments, which include reserves for estimates of probable settlements of international and domestic tax audits. At any one time, many tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. As a result, we expect that throughout the year there could be ongoing variability in our quarterly tax rates as taxable events occur and exposures are re-evaluated. Further, our effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings by taxing jurisdiction or by changes to existing accounting rules or regulations. Fluctuations in our tax obligations and effective tax rate could materially and adversely affect our results of operations.

Changes to accounting rules or regulations may adversely affect our results of operations.

Changes to existing accounting rules or regulations may impact our future results of operations or cause the perception that we are more highly leveraged. Other new accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future. For instance, accounting regulatory authorities have indicated that they may begin to require

lessees to capitalize operating leases in their financial statements in the next few years. If adopted, such change would require us to record significant capital lease obligations on our balance sheet and make other changes to our financial statements. This and other future changes to accounting rules or regulations could adversely affect our results of operations and financial position.

Our total assets include goodwill and substantial amounts of property and equipment. Changes to estimates or projections related to such assets, or operating results that are lower than our current estimates at certain store locations, may cause us to incur impairment charges that could adversely affect our results of operations.

Our total assets include substantial amounts of property, equipment and goodwill. We make certain estimates and projections in connection with impairment analyses for these assets, in accordance with “FASB Accounting Standards Codification” (“Codification” or “ASC”) Topic 360, “Property, Plant and Equipment” (“ASC 360”), and ASC Topic 350, “Intangibles—Goodwill and Other” (“ASC 350”). We also review the carrying value of these assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable in accordance with ASC 360 or ASC 350. We will record an impairment loss when the carrying value of the underlying asset, asset group or reporting unit exceeds its fair value. These calculations require us to make a number of estimates and projections of future results. If these estimates or projections change, we may be required to record additional impairment charges on certain of these assets. If these impairment charges are significant, our results of operations would be adversely affected.

Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industries, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our various debt instruments.

We are highly leveraged. As of July 31, 2010, our total indebtedness was $5,353 million, of which $2,561 million was secured indebtedness and $2,120 million of which matures before the end of fiscal 2012. Our substantial indebtedness could have significant consequences, including, among others, the following:

We may be able to incur additional indebtedness in the future, including under our current revolving credit agreements, subject to the restrictions contained in our debt instruments. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.

We may not be able to generate sufficient cash to service all of our indebtedness and may not be able to refinance our indebtedness on favorable terms. If we are unable to do so, we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, our lenders’ financial stability, which are subject to prevailing global economic and market conditions and to certain financial, business and other factors beyond our control. Even if we were able to refinance or obtain additional financing, the costs of new indebtedness could be substantially higher than the costs of our existing indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations or we are unable to refinance our indebtedness, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. If our operating results and available cash are insufficient to meet our debt service obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions, or the proceeds from the dispositions may not be adequate to meet any debt service obligations then due. If we were unable to repay amounts when due, the lenders could proceed against the collateral granted to them to secure that indebtedness.

Our debt agreements contain covenants that limit our flexibility in operating our business.

Toys “R” Us, Inc. is a holding company and conducts its operations through its subsidiaries, certain of which have incurred their own indebtedness. As specified in certain of our subsidiaries’ debt agreements, there are restrictions on our ability to obtain funds from our subsidiaries through dividends, loans or advances. The agreements governing our indebtedness contain various covenants that limit our ability to engage in specified types of transactions, and may adversely affect our ability to operate our business. Among other things, these covenants limit our and our subsidiaries’ ability to:

A breach of any of these covenants could result in default under one or more of our debt agreements, which could prompt the lenders to declare all amounts outstanding under the debt agreements to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. If the lenders under the debt agreements accelerate the repayment of borrowings, we may not have sufficient assets and funds to repay the borrowings under our debt agreements.

After our 2005 acquisition and prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on the New York Stock Exchange or otherwise or how active and liquid that market may become. If an active and liquid trading market does not develop, you may have difficulty selling any of our common stock that you purchase. The initial public offering price for the shares will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price of our common stock may decline below the initial offering price, and you may not be able to sell your shares of our common stock at or above the price you paid in this offering, or at all.

You will incur immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering.

Prior investors have paid substantially less per share of our common stock than the price in this offering. The initial public offering price of our common stock is substantially higher than the net tangible book value per share of outstanding common stock prior to completion of the offering. Based on our net tangible book value as of July 31, 2010 and upon the issuance and sale of shares of common stock by us at an assumed initial public offering price of $ per share (the midpoint of the estimated initial public offering price range indicated on the cover of this prospectus), if you purchase our common stock in this offering, you will pay more for your shares than the amounts paid by our existing shareholders for their shares and you will suffer immediate dilution of approximately $ per share in net tangible book value after giving effect to the sale of shares of our common stock in this offering assuming an initial public offering price of $ per share, less the underwriting discounts and commissions and the estimated offering expenses payable by us, and without taking into account any other changes in such net tangible book value after July 31, 2010. We also have a large number of outstanding stock options to purchase common stock with exercise prices that are below the estimated initial public offering price of our common stock. To the extent that these options are exercised, you will experience further dilution. See “Dilution.”

Our stock price may change significantly following the offering, and you could lose all or part of your investment as a result.

We and the underwriters will negotiate to determine the initial public offering price. You may not be able to resell your shares at or above the initial public offering price due to a number of factors such as those listed in “—Risks Relating to Our Business” and the following, most of which are beyond our control:

Furthermore, the stock market recently has experienced extreme volatility that in some cases has been unrelated or disproportionate to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.

In the past, following periods of market volatility, shareholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

Our operating results may fluctuate in future periods which could cause the market price of our common stock to be volatile or to decline.

Our operating results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year, and sales and profits for any future period may decrease. Our operating results may fall below our expectations or the expectations of investors or industry analysts in one or more future periods. Any such shortfall could results in a significant decline in the price of our common stock.

If we or our existing investors sell additional shares of our common stock after this offering, the market price of our common stock could decline.

The market price of our common stock could decline as a result of sales of a large number of shares of common stock in the market after this offering, or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. After the completion of this offering, we will have shares of common stock outstanding ( if the underwriters exercise their option to purchase additional shares in full). This number includes shares being sold in this offering, which may be resold immediately in the public market.

We, our directors and officers and the Sponsors have agreed not to offer, sell, dispose of or hedge, directly or indirectly, any common stock without the prior written consent of the representatives of the Underwriters for a period of 180 days from the date of this prospectus, subject to certain exceptions and automatic extension in certain circumstances. In addition, pursuant to the Registration Rights Agreement, we have granted certain shareholders the right to cause us, in certain instances, at our expense, to file registration statements under the Securities Act of 1933, as amended (the “Securities Act”) covering resales of our common stock held by them or to piggyback on a registration statement in certain circumstances. This right will not be exercisable during the 180 day restricted period described above. These shares will represent approximately % of our common stock after this offering or % if the underwriters exercise their option to purchase additional shares in full. These shares may also be sold pursuant to Rule 144 under the Securities Act, depending on their holding

period and subject to restrictions in the case of shares held by persons deemed to be our affiliates. As restrictions on resale end or if these stockholders exercise their registration rights, the market price of our common stock could decline if the holders of restricted shares sell them or are perceived by the market as intending to sell them. See “Certain Relationships and Related Party Transactions—Registration Rights Agreement” and “Shares Eligible for Future Sales” and “Underwriting.”

As of July 31, 2010, 324,344 of our shares of common stock are held by our employees and are subject to restrictions on transfer, 3,511,031 shares were issuable upon the exercise of outstanding stock options under our Management Equity Plan, and 385,112 shares were reserved for future grant under our Management Equity Plan (which the Company does not intend to grant after the adoption of the 2010 Incentive Plan). Prior to the completion of this offering, our Board of Directors and our shareholders will approve our new 2010 Incentive Plan, which will increase the number of shares authorized for issuance to , effective upon the closing of this offering. Shares and options granted under the Management Equity Plan and the 2010 Incentive Plan may be subject to transfer, exercise or vesting conditions. Subject to any applicable transfer, exercise or vesting restrictions of the shares issued under the Management Equity Plan and the 2010 Incentive Plan, the shares sold in this offering, the shares held by our employees and the shares issued under the Management Equity Plan and the 2010 Incentive Plan will be freely tradable without restriction or further registration under the Securities Act by persons other than our affiliates within the meaning of Rule 144 under the Securities Act. Sales of a substantial number of shares of our common stock could cause the market price of our common stock to decline.

Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

We may retain future earnings, if any, for future operation, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our credit facilities and the indentures governing the notes (each as described in “Description of Indebtedness”). As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.

Some provisions of Delaware law and our governing documents could discourage a takeover that shareholders may consider favorable.

In addition to the Sponsors’ ownership of a controlling percentage of our common stock, Delaware law and provisions contained in our certificate of incorporation and bylaws as we expect them to be in effect upon completion of this offering could make it difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders. For example, our certificate of incorporation authorizes our Board of Directors to determine the rights, preferences, privileges and restrictions of unissued preferred stock, without any vote or action by our shareholders. As a result, our Board of Directors could authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of our common stock or with other terms that could impede the completion of a merger, tender offer or other takeover attempt. In addition, our Board of Directors will be divided into three classes, with approximately one-third of our directors elected each year. In addition, our stockholders will not be entitled to the right to cumulate votes in the election of directors and, from and after the date on which the Sponsors beneficially own less than a majority in

voting power, will not be entitled to act by written consent. Stockholders must also provide timely notice for any stockholder proposals and director nominations. In addition, a vote of % or more of all of our outstanding shares then entitled to vote is required to amend certain sections of our certificate of incorporation and for stockholders to amend our bylaws. In addition, as described under “Description of Capital Stock—Delaware Anti-Takeover Statutes” elsewhere in this prospectus, we are subject to certain provisions of Delaware law that may discourage potential acquisition proposals and may delay, deter or prevent a change of control of our company, including through transactions, and, in particular, unsolicited transactions, that some or all of our shareholders might consider to be desirable. As a result, efforts by our shareholders to change the direction or management of our company may be unsuccessful.

The Sponsors will continue to have significant influence over us after this offering, including control over decisions that require the approval of shareholders, which could limit your ability to influence the outcome of key transactions, including deterring a change of control.

We are controlled, and after this offering is completed will continue to be controlled, by the Sponsors. The Sponsors will have an indirect interest in approximately % of our common stock (or % if the underwriters exercise their option to purchase additional shares in full) after the completion of this offering. In addition, the Sponsors will have the right to designate a majority of the seats on our Board of Directors. As a result, the Sponsors will have control over our decisions to enter into any corporate transaction (and the terms thereof) and the ability to prevent any change in the composition of our Board of Directors and any transaction that requires stockholder approval regardless of whether others believe that such change or transaction is in our best interests. So long as the Sponsors continue to have an indirect interest in a majority of our outstanding common stock, they will have the ability to control the vote in any election of directors, amend our certificate of incorporation or bylaws or take other actions requiring the vote of our stockholders. In addition, pursuant to our Stockholder Agreement with the Sponsors and certain other investors, the Sponsors have a consent right over certain significant corporate actions and have certain rights to appoint directors to our board and its committees. See “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

The Sponsors are also in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. The Sponsors may also pursue acquisition opportunities that are complementary to our business and, as a result, those acquisition opportunities may not be available to us. So long as the Sponsors, or other funds controlled by or associated with the Sponsors, continue to indirectly own a significant amount of our outstanding common stock, even if such amount is less than 50%, the Sponsors will continue to be able to strongly influence or effectively control our decisions. The concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive shareholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to shareholders of companies that are subject to such requirements.

After completion of this offering, the Sponsors will continue to control a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the New York Stock Exchange corporate governance standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another

company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

Following this offering, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors, and our executive committee and compensation committee will not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. In addition, we will not have a separate nominating/corporate governance committee. Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the New York Stock Exchange.

This prospectus may contain “forward looking” statements which reflect our current views with respect to, among other things, our operations and financial performance. All statements herein or therein 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,” “project,” “expect,” “believe,” “intend,” “foresee,” “forecast,” “will,” “may,” “outlook” or the negative version of these words or other similar words or phrases. These statements discuss, among other things, our strategy, store openings, integration and remodeling, future financial or operational performance, projected sales or earnings per share for certain periods, comparable store sales from one period to another, cost savings, results of store closings and restructurings, outcome or impact of pending or threatened litigation, domestic or international developments, nature and allocation of future capital expenditures, growth initiatives, inventory levels, cost of goods, future financings and other goals and targets and statements of the assumptions underlying or relating to any such statements.

These statements are subject to risks, uncertainties, and other factors, including, among others, competition in the retail industry and changes in our product distribution mix and distribution channels, seasonality of our business, changes in consumer preferences and consumer spending patterns, product safety issues including product recalls, general economic conditions in the United States and other countries in which we conduct our business, our ability to implement our strategy, our substantial level of indebtedness and related debt-service obligations, restrictions imposed by covenants in our debt agreements, availability of adequate financing, changes in laws that impact our business, changes in employment legislation, our dependence on key vendors for our merchandise, costs of goods that we sell, labor costs, transportation costs, domestic and international events affecting the delivery of toys and other products to our stores, political and other developments associated with our international operations, existence of adverse litigation and other risks, uncertainties and factors set forth under “Risk Factors” herein. In addition, we typically earn a disproportionate part of our annual operating earnings in the fourth quarter as a result of seasonal buying patterns and these buying patterns are difficult to forecast with certainty. These factors should not be construed as exhaustive, and should be read in conjunction with the other cautionary statements that are included in this report. We believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update these statements in light of subsequent events or developments unless required by SEC rules and regulations. Actual results may differ materially from anticipated results or outcomes discussed in any forward-looking statement.

Information included in this prospectus about the toy and juvenile products industry and ranking and brand awareness, including our general expectations concerning this industry, the size of certain markets and our position and the position of our competitors within these markets, are based on estimates prepared using data from various sources and on assumptions made by us. While we believe our internal estimates and industry data are reliable and generally indicative of the toy and juvenile products industry and market, neither such data nor these estimates have been verified by any independent source. Our estimates, in particular as they relate to our general expectations concerning this industry and market, involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption “Risk Factors” in this prospectus. Due to the lack of information from third party sources that consistently define the markets in which we operate, in providing industry and market information, the Company has made certain assumptions that it believes are reasonable but may not be consistently applied by others in the industry.

We estimate that the net proceeds we will receive from this offering of shares of our common stock after deducting underwriter discounts and commissions and estimated expenses payable by us, will be approximately $ million (or $ million if the underwriters exercise their option to purchase additional shares in full). This estimate assumes an initial public offering price of $ per share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus.

We intend to use the anticipated net proceeds primarily to repay certain of our existing indebtedness and also for general corporate purposes.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us. In the event of any such increase in net proceeds to us, we would apply such additional net proceeds to further reduce our indebtedness and for general corporate purposes.

During fiscal years 2009, 2008 and 2007, no dividends were paid out to shareholders. We do not currently anticipate paying any cash dividends on our common stock for the foreseeable future and instead may retain earnings, if any, for future operations and expansion and debt repayment. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of Directors may deem relevant. In addition, our and our subsidiaries’ ability to pay dividends is limited by covenants in agreements related to our indebtedness. See “Description of Indebtedness” for restrictions on our ability to pay dividends.

You should read this table in conjunction with “Use of Proceeds,” “Selected Historical Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Indebtedness” and our financial statements and notes thereto, included elsewhere in this prospectus.

The table set forth above is based on the number of shares of our common stock outstanding as of July 31, 2010. This table does not reflect:

If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock after this offering. Dilution results from the fact that the initial public offering price per share of common stock is substantially in excess of the net tangible book value per share of our common stock attributable to the existing shareholders for our presently outstanding shares of common stock. We calculate net tangible book value per share of our common stock by dividing the net tangible book value (total consolidated tangible assets less total consolidated liabilities) by the number of outstanding shares of our common stock.

Our net tangible book value as of July 31, 2010 was a deficit of $(352) million, or $ per share of our common stock, based on shares of our common stock outstanding immediately prior to the closing of this offering. Net tangible book value represents the amount of total tangible assets less total liabilities. Dilution is determined by subtracting net tangible book value per share of our common stock from the assumed initial public offering price per share of our common stock.

After giving effect to (1) the sale of shares of our common stock in this offering assuming an initial public offering price of $ per share, less the underwriting discounts and commissions and the estimated offering expenses payable by us, (2) the payment from other cash resources available to us of approximately $111 million in total fees under our advisory agreement with the Sponsors (as described in “Certain Relationships and Related Party Transactions—Advisory Agreement”) and without taking into account any other changes in such net tangible book value after July 31, 2010, our pro forma as adjusted net tangible book value at July 31, 2010 would have been $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share of our common stock to the existing shareholders and an immediate dilution in net tangible book value of $ per share of our common stock, or % of the estimated offering price of $ , to investors purchasing shares of our common stock in this offering. The following table illustrates such per share of our common stock dilution (in millions, except per share data):

If the underwriters exercise their option to purchase additional shares in full, the adjusted net tangible book value per share of our common stock after giving effect to the offering would be $ per share of our common stock. This represents an increase in adjusted net tangible book value of $ per share of our common stock to existing stockholders and dilution in adjusted net tangible book value of $ per share of our common stock to new investors.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share of our common stock would increase (decrease) our net tangible book value after giving to the offering by $ million, or by $ per share of our common stock, assuming no change to the number of shares of our common stock offered by us as set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and estimated expenses payable by us.

The following table summarizes, on a pro forma basis as of July 31, 2010, the total number of shares of our common stock purchased from us, the total cash consideration paid to us and the average price per share of our common stock paid by (i) our existing stockholders, (ii) shares issuable upon exercise of options and (iii) the new investors purchasing shares of our common stock in this offering.

If the underwriters were to fully exercise the underwriters’ option to purchase additional shares of our common stock from us, the percentage of shares of our common stock held by existing shareholders who are directors, officers or affiliated persons would be %, and the percentage of shares of our common stock held by new investors would be %.

To the extent that we grant options or other equity awards to our employees or directors in the future, and those options or other equity awards are exercised or become vested or other issuances of shares of our common stock are made, there will be further dilution to new investors.

The following table sets forth selected consolidated financial and other data of Toys “R” Us, Inc. as of the dates and for the periods indicated. We derived the selected historical statement of operations data for the fiscal years ended January 30, 2010, January 31, 2009 and February 2, 2008, and selected historical balance sheet data as of January 30, 2010 and January 31, 2009, from our historical audited consolidated financial statements included elsewhere in this prospectus. We derived the selected historical statement of operations data for the fiscal years ended February 3, 2007 and January 28, 2006 and selected historical balance sheet data as of February 2, 2008, February 3, 2007 and January 28, 2006 presented in this table from our consolidated financial statements not included in this prospectus.

We derived the selected condensed consolidated financial data for the twenty-six week periods ended July 31, 2010 and August 1, 2009 from our unaudited condensed consolidated interim financial statements included elsewhere in this prospectus. Our unaudited condensed consolidated interim financial statements were prepared on a basis consistent with our audited consolidated financial statements. In management’s opinion, the unaudited condensed consolidated interim financial statements include all adjustments, consisting of normal recurring accruals, necessary for the fair presentation of those statements.

Our historical results are not necessarily indicative of future operating results and our interim results for the twenty-six weeks ended July 31, 2010 are not projections for the results to be expected for fiscal year ended January 29, 2011. The information set forth below should be read in conjunction with, and is qualified in its entirety by reference to, “Prospectus Summary—Summary Historical Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, condensed consolidated financial statements and the related notes included elsewhere in this prospectus.

Includes $8 million of pre-tax gift card breakage income for the twenty-six weeks ended July 31, 2010 and August 1, 2009, respectively.

Includes the pre-tax impact of net gains on sales of properties of $4 million and $1 million for the twenty-six weeks ended July 31, 2010 and August 1, 2009, respectively.

Includes pre-tax impairment losses on long-lived assets of $1 million and $5 million for the twenty-six weeks ended July 31, 2010 and August 1, 2009, respectively.

You should read the following Management’s Discussion and Analysis of our Financial Condition and Results of Operations (“MD&A”) with “Selected Historical Financial and Other Data” and the audited historical financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited, to those described in the “Risk Factors” section of this prospectus. Actual results may differ materially from those contained in any forward-looking statements. You should read “Forward-Looking Statements” and “Risk Factors.”

We are the leading global specialty retailer of toys and juvenile products as measured by net sales. For over 50 years, Toys “R” Us has been recognized as the toy and baby authority. In the U.S., in fiscal 2009, approximately 70% of households with kids under 12 shopped at our Toys “R” Us stores and 84% of first time mothers shopped at our Babies “R” Us stores according to a survey by Leo J. Shapiro & Associates, LLC. We believe we offer the most comprehensive year-round selection of toys and juvenile products, including a broad assortment of private label and exclusive merchandise unique to our stores.

As of July 31, 2010, we operated 1,363 stores and licensed an additional 211 stores. These stores are located in 34 countries and jurisdictions around the world under the Toys “R” Us, Babies “R” Us and FAO Schwarz banners. In addition to these stores, during the fiscal 2009 holiday season, we opened 91 pop-up stores, 28 of which remained open as of July 31, 2010. As of July 31, 2010, 145 Domestic and six International pop-up stores were open. We also sell merchandise through our websites at Toysrus.com, Babiesrus.com, eToys.com, FAO.com and babyuniverse.com. For fiscal 2009, we generated net sales of $13.6 billion, net earnings of $312 million and Adjusted EBITDA of $1,130 million.

As of July 31, 2010, we operated all of the “R” Us branded retail stores in the United States and Puerto Rico. Internationally, we operate 515 of the 726 “R” Us branded retail stores. The balance of

the “R” Us branded retail stores outside the United States are operated by licensees. The fees from these licensees did not have a material impact on our Net sales. During fiscal 2009, the Company acquired certain business assets of FAO Schwarz, and began selling merchandise through our FAO Schwarz retail store in New York City. We also sell merchandise through our Internet sites in the United States at Toysrus.com and Babiesrus.com, as well as through other Internet sites internationally. In addition, commencing in fiscal 2009, we sell merchandise through our newly acquired eToys.com, FAO.com and babyuniverse.com Internet sites.

We developed several new store formats with an integrated “one-stop shopping” environment for our guests by combining the Toys “R” Us and Babies “R” Us merchandise offerings under one roof. We call these formats “side-by-side” or “SBS”, and “‘R’ Superstores” or “SSBS”, depending on the store size. Side-by-side stores are a combination of Toys “R” Us stores and Babies “R” Us stores. Our “R” Superstores are conceptually similar to SBS stores, except that they are larger in size. Either format may be the result of a conversion or relocation and, in certain cases, may be accompanied by the closure of one or more existing stores. In addition, side-by-side stores and “R” Superstores may also be constructed in a new location and market.

The integration of juvenile (including baby) merchandise with toy and entertainment offerings has allowed us to create a “one-stop shopping” experience for our guests, and enabled us to obtain the sales and operating benefits associated with combining product lines under one roof. Our juvenile product assortment allows us to capture new parents as customers during pregnancy, helping them prepare for the arrival of their newborn. We then become a resource for infant products such as formula, diapers and solid foods, as well as baby clothing and learning aids. We believe this opportunity to establish first contact with new parents enables us to develop long-lasting customer relationships with them as their children age and they transition to becoming consumers of our toy products. We continue to build on these relationships as these children grow and eventually become parents themselves. Additionally, juvenile merchandise such as baby formula, diapers and infant clothing provide us with a mitigant to the inherent seasonality in the toy business.

In connection with our juvenile integration strategy, we continue to increase the number of SBS and SSBS stores both domestically and internationally. Through the end of fiscal 2009, we have converted 129 existing stores into SBS store format and two existing stores into SSBS store format. In addition, during the same period, we have opened 36 SBS and SSBS stores (21 of which were relocations of existing stores). We expect that our integrated store formats will continue to be a significant driver of our revenue and profit growth going forward. In fiscal 2010, including stores opened, converted or relocated to date, we plan to open seven new SSBS stores (six of which are relocations of existing stores), open seven new SBS stores and convert or relocate an additional 76 stores to the SBS stores format, all within our existing markets. As a result, we expect capital expenditures incurred in connection with store conversion projects and relocations to increase in fiscal 2010. In addition, we expect Selling, General and Administrative Expenses (“SG&A”) to increase due to additional expenses in connection with our conversions and relocations, expansion of online business, costs associated with additional labor for our Babies “R” Us stores and the opening of a sourcing office in China. See “—Capital Expenditures” below for further details on budgeted capital expenditure for fiscal 2010. Further, in fiscal 2010, SG&A expenses will increase due to the termination of the advisory agreement with the Sponsors and the payment of related fees (as described in “Certain Relationships and Related Party Transactions—Advisory Agreement).

In addition to our SBS and SSBS store formats, we continue to enhance our integrated strategy with our Babies “R” Us Express (“BRU Express”) and Juvenile Expansion formats which devote additional square footage to our juvenile products within our traditional Toys “R” Us stores. Since implementing this integrated store format, as of July 31, 2010 we have augmented 81 existing Toys “R” Us stores with these formats.

Our extensive experience in retail site selection has resulted in a portfolio of stores that include attractive locations in many of our chosen markets. Markets for new stores and formats are selected on the basis of proximity to other “R” Us branded stores, demographic factors, population growth potential, competitive environment, availability of real estate and cost. Once a potential market is identified, we select a suitable location based upon several criteria, including size of the property, access to major commercial thoroughfares, proximity of other strong anchor stores or other destination superstores, visibility and parking capacity.

As of July 31, 2010, we operated 1,363 retail stores and licensed an additional 211 retail stores worldwide in the following formats:

In addition to these stores, during the fiscal 2009 holiday season, we opened 91 Toys “R” Us Holiday Express stores or pop-up stores a temporary store format located in high-traffic shopping areas, 28 of which remained open as of July 31, 2010.

Our business has two reportable segments: Domestic and International. The following is a brief description of our segments:

In order to properly judge our business performance, it is necessary to be aware of the following challenges and risks:

As discussed in more detail in this MD&A, the following financial data presents an overview of our financial performance for the twenty-six weeks ended July 31, 2010 compared to the twenty-six weeks ended August 1, 2009:

Net sales for the twenty-six weeks ended July 31, 2010 increased by $129 million primarily due to net sales from new stores at both of our segments, which include pop-up stores, and increased comparable store net sales at our Domestic segment, partially offset by decreased comparable store net sales at our International segment. Foreign currency translation increased Net sales by approximately $77 million for the twenty-six weeks ended July 31, 2010.

Gross margin, as a percentage of Net sales, for the twenty-six weeks ended July 31, 2010 increased primarily as a result of improvements in sales mix away from lower margin products.

SG&A, as a percentage of Net sales, for the twenty-six weeks ended July 31, 2010 increased primarily due to an increase in store-level payroll expenses, a reserve for certain legal matters, non-cash cumulative correction of prior period straight-line lease accounting and an increase in rent expense. Additionally, for the twenty-six weeks ended July 31, 2010, foreign currency translation increased SG&A by approximately $25 million.

Net loss attributable to Toys “R” Us, Inc. for the twenty-six weeks ended July 31, 2010 increased primarily as a result of an increase in SG&A, a prior year $51 million litigation settlement with Amazon, and an increase in Interest expense, partially offset by an increase in Gross margin, and an increase in Income tax benefit.

We include, in computing comparable store net sales, stores that have been open for at least 56 weeks (1 year and 4 weeks) from their “soft” opening date. A soft opening is typically two weeks prior to the grand opening. Pop-up stores are temporary locations typically open for a duration of less than one year and therefore are excluded from our comparable store net sales computation.

By measuring the year-over-year sales of merchandise in the stores that have been open for a full comparable 56 weeks or more, we can better gauge how the core store base is performing since it excludes the impact of store openings and closings.

Various factors affect comparable store net sales, including the number of and timing of stores we open, close, convert, relocate or expand, the number of transactions, the average transaction amount, the general retail sales environment, current local and global economic conditions, consumer preferences and buying trends, changes in sales mix among distribution channels, our ability to efficiently source and distribute products, changes in our merchandise mix, competition, the timing of the release of new merchandise and our promotional events, the success of marketing programs and the cannibalization of existing store net sales by new stores. Among other things, weather conditions can affect comparable store net sales because inclement weather may discourage travel or require temporary store closures, thereby reducing customer traffic. These factors have caused our comparable store net sales to fluctuate significantly in the past on a monthly, quarterly and annual basis and, as a result, we expect that comparable store net sales will continue to fluctuate in the future.

The following table discloses our comparable store net sales for the twenty-six weeks ended July 31, 2010 and August 1, 2009:

Twenty-Six Weeks Ended July 31, 2010 Compared to Twenty-Six Weeks Ended August 1, 2009

The increase in Net loss attributable to Toys “R” Us, Inc. for the twenty-six weeks ended July 31, 2010 was primarily due to an increase in SG&A of $97 million resulting primarily from an increase in store-level payroll expenses, a reserve for certain legal matters, a non-cash cumulative correction of prior period straight-line lease accounting and an increase in rent expense. Additionally contributing to the increase was a decrease in Other income, net of $47 million resulting from a prior year $51 million litigation settlement with Amazon, and an increase in Interest expense of $34 million due to higher effective interest rates as a result of the prior year refinancings. These increases were partially offset by an increase in Gross margin of $62 million due to higher Net sales and gross margin rate, and an increase in Income tax benefit of $60 million.

For the twenty-six weeks ended July 31, 2010, Net sales increased by $129 million or 2.6%, to $5,173 million from $5,044 million for the same period last year. Net sales for the twenty-six weeks ended July 31, 2010 included the impact of foreign currency translation which increased Net sales by approximately $77 million.

Excluding the impact of foreign currency translation, the increase in Net sales for the twenty-six weeks ended July 31, 2010 was primarily due to net sales from new stores at both of our segments, which include pop-up stores, and increased comparable store net sales at our Domestic segment, largely driven by an increase in net sales from our internet operations, an increase in the number of transactions and stores that were recently converted or relocated to our SBS and SSBS store formats. Partially offsetting these increases were decreased comparable store net sales at our International segment primarily driven by a decrease in the number of transactions and lower average transaction amounts.

Net sales for the Domestic segment increased by $72 million or 2.3%, to $3,271 million for the twenty-six weeks ended July 31, 2010, compared to $3,199 million for the same period last year. The increase in Net sales was primarily a result of an increase in comparable store net sales of 1.3%, as well as an increase in net sales from new locations, which include pop-up stores.

The increase in comparable store net sales resulted primarily from an increase in our juvenile and seasonal categories. The increase in our juvenile category was primarily due to increased sales of commodities. The increase in our seasonal category was primarily due to increased sales of outdoor products. Partially offsetting these increases was a decrease in our entertainment category which was driven by a slowdown in demand for video game systems, as well as fewer new software releases.

Net sales for the International segment increased by $57 million or 3.1%, to $1,902 million for the twenty-six weeks ended July 31, 2010, compared to $1,845 million for the same period last year. Excluding a $77 million increase in Net sales due to foreign currency translation, International Net sales decreased primarily as a result of a decrease in comparable store net sales of 2.4%. Partially offsetting the decrease was an increase in net sales from new locations, which include pop-up stores.

The decrease in comparable store net sales resulted primarily from decreases in our entertainment and seasonal categories. The decrease in our entertainment category was driven by a slowdown in demand for video game systems, as well as fewer new software releases. The decrease in our seasonal category was primarily due to declines in sales of outdoor products. Partially offsetting these decreases were increases in our learning and juvenile categories. The learning category increased primarily as a result of strong sales of educational products, while the increase in the juvenile category was primarily driven by an increase in sales of commodities.

We record the costs associated with operating our distribution networks as a part of SG&A, including those costs that primarily relate to transporting merchandise from distribution centers to stores. Therefore, our consolidated Gross margin may not be comparable to the gross margins of other retailers that include similar costs in their cost of sales.

Gross margin increased by $62 million to $1,903 million for the twenty-six weeks ended July 31, 2010, compared to $1,841 million for the same period last year. Foreign currency translation accounted for approximately $26 million of the increase in Gross margin. Gross margin, as a percentage of Net sales, increased by 0.3 percentage points for the twenty-six weeks ended July 31, 2010 compared to the same period last year. Gross margin, as a percentage of Net sales, was primarily impacted by improvements in sales mix away from lower margin products.

Gross margin increased by $23 million to $1,183 million for the twenty-six weeks ended July 31, 2010, compared to $1,160 million for the same period last year. Gross margin, as a percentage of Net sales, for the twenty-six weeks ended July 31, 2010 decreased by 0.1 percentage points compared to the same period last year.

The decrease in Gross margin, as a percentage of Net sales, was primarily due to increased sales of lower margin promotional products. These decreases were partially offset by the continued improvements in sales mix away from lower margin products such as video game systems, increased sales of higher margin seasonal products and improved levels of profitability on existing products.

Gross margin increased by $39 million to $720 million for the twenty-six weeks ended July 31, 2010, compared to $681 million for the same period last year. Foreign currency translation accounted for approximately $26 million of the increase. Gross margin, as a percentage of Net sales, for the twenty-six weeks ended July 31, 2010 increased by 1.0 percentage point compared to the same period last year.

The increase in Gross margin, as a percentage of Net sales, resulted primarily from improvements in sales mix toward sales of higher margin core toy and seasonal products, as well as decreased sales of lower margin products such as video game systems.

SG&A increased by $97 million to $1,713 million for the twenty-six weeks ended July 31, 2010, compared to $1,616 million for the same period last year. As a percentage of Net sales, SG&A increased by 1.1 percentage points. Foreign currency translation accounted for approximately $25 million of the increase in SG&A.

Excluding the impact of foreign currency translation, the increase in SG&A was primarily due to an increase in store-level payroll expenses of $30 million primarily to support sales at existing and new locations, a reserve for certain legal matters of $17 million and a $16 million non-cash cumulative correction of prior period straight-line lease accounting. Additionally, contributing to the increase was an increase in rent expense of $9 million related to new locations which include the Company’s expanded fiscal 2010 pop-up store presence.

Depreciation and amortization decreased by $2 million to $192 million for the twenty-six weeks ended July 31, 2010, compared to $194 million for the same period last year. Foreign currency translation increased depreciation and amortization by approximately $2 million.

Other income, net decreased by $47 million for the twenty-six weeks ended July 31, 2010, compared to the same period last year. The decrease was primarily the result of a $51 million gain from a litigation settlement with Amazon recognized in the second quarter of fiscal 2009.

Interest expense increased by $34 million to $245 million for the twenty-six weeks ended July 31, 2010, compared to $211 million for the same period last year. The increase was primarily due to a net increase of $59 million related to higher effective interest rates on our debt partially offset by a reduction in average debt balances in each case due to the prior year refinancings. Additionally, the increase was partially offset by a reduction of $21 million in charges related to the changes in the fair value of our derivative instruments which do not qualify for hedge accounting.

Interest expense will increase in the future primarily due to the issuance by Toys-Delaware of $350 million aggregate principal amount of 7.375% senior secured notes due 2016 (“Toys-Delaware Secured Notes”) and the amendment and restatement of Toys-Delaware’s secured term loan facility (as amended and restated, the “New Secured Term Loan”), which provides for an aggregate principal amount of $700 million of term loans, each on August 24, 2010. These increases will be partially offset by a decrease in interest expense as a result of the amendment and restatement of the secured revolving credit facility on August 10, 2010. Refer to Note 2 to the condensed consolidated financial statements entitled “Short-term borrowings and long-term debt” for further details.

Interest income decreased by $1 million for the twenty-six weeks ended July 31, 2010, compared to the same period last year primarily due to lower effective interest rates.

The following table summarizes our income tax benefit and effective tax rates for the twenty-six weeks ended July 31, 2010 and August 1, 2009:

The effective tax rates for the twenty-six weeks ended July 31, 2010 and August 1, 2009 were based on our forecasted annualized effective tax rates, adjusted for discrete items that occurred within the periods presented. Our forecasted annualized effective tax rate is 45.9% for the twenty-six weeks ended July 31, 2010 compared to 45.1% for the same period last year. The difference between our forecasted annualized effective tax rates was primarily due to a decrease in taxable permanent adjustments, a decrease in state tax expense, and a change in the mix of earnings between jurisdictions.

For the twenty-six weeks ended July 31, 2010, our effective tax rate was impacted by tax benefits of $38 million related to the changes to our liability for uncertain tax positions, $4 million related to state income taxes, $3 million related to adjustments to deferred taxes, and $3 million related to adjustments

to current taxes payable. These tax benefits were partially offset by a tax expense of $2 million related to an increase in our valuation allowance. For the twenty-six weeks ended August 1, 2009, our effective tax rate was impacted by a tax benefit of $41 million attributable to the reversal of deferred tax liabilities associated with the undistributed earnings of one of our non-U.S. subsidiaries, as it was management’s intention to reinvest those earnings indefinitely, and a tax benefit of $1 million related to state income taxes and changes to our liability for uncertain tax positions.

As discussed in more detail in this MD&A, the following financial data represents an overview of our financial performance for fiscals 2009, 2008 and 2007:

Net sales for fiscal 2009 decreased by $156 million primarily as a result of decreased comparable store net sales across both of our segments driven by a slowdown in demand for certain video game systems and related accessories, as well as a lower average transaction amount at both of our segments and a decrease in the number of transactions at our International segment. Partially offsetting this decrease was the positive impact of stores that were recently opened or converted to our SBS and SSBS store formats.

Gross margin as a percentage of Net sales for fiscal 2009 increased primarily as a result of improvements in sales mix away from lower margin products. Partially offsetting this increase were increased sales of lower margin commodities within the juvenile category at our Domestic segment.

SG&A as a percentage of Net sales for fiscal 2009 decreased primarily as a result of strong initiatives to reduce overall operating expenses. This includes decreases in advertising and promotional expenses, travel and transportation costs, store labor and other compensation expenses and professional fees. Additionally, SG&A decreased by $14 million at our International segment due to the contract termination fee paid by the Company in fiscal 2008 related to the settlement between Toys–Japan and McDonald’s Holding Company (Japan), Ltd. (“McDonald’s Japan”).

Net earnings attributable to Toys “R” Us, Inc. for fiscal 2009 increased primarily due to a reduction in SG&A and an increase in Gross margin, partially offset by an increase in net interest expense and Income tax expense.

The following table discloses our comparable store net sales for the fiscal years ended January 30, 2010, January 31, 2009 and February 2, 2008 (for a description of how comparable store net sales are measured, see “—Financial Performance for the Twenty-Six Weeks Ended July 31, 2010, Comparable Store Net Sales”):

We generated Net earnings attributable to Toys “R” Us, Inc. of $312 million in fiscal 2009 compared to $218 million in fiscal 2008. The increase in Net earnings attributable to Toys “R” Us, Inc. was primarily due to a reduction in SG&A of $126 million resulting primarily from initiatives to reduce our operating expenses, an increase in Gross margin of $30 million due to improvements in sales mix away from lower margin products and a decrease in Depreciation and amortization of $23 million. This increase in Net earnings attributable to Toys “R” Us, Inc. was partially offset by an increase in net interest expense of $37 million, an increase in Income tax expense of $33 million and a decrease in Other income, net of $16 million. Each of these changes includes the effect of foreign currency translation, which accounted for approximately $28 million of the increase in Net earnings attributable to Toys “R” Us, Inc.

Net sales decreased by $156 million, or 1.1%, to $13,568 million in fiscal 2009, compared with $13,724 million in fiscal 2008. Net sales for fiscal 2009 included the impact of foreign currency translation that increased Net sales by approximately $83 million.

Excluding the impact of foreign currency translation, the decrease in Net sales for fiscal 2009 was primarily due to decreased comparable store net sales across both our segments. Comparable store net sales were primarily impacted by the overall slowdown in the global economy, a lower average transaction amount at both of our segments and a decrease in the number of transactions at our International segment. Partially offsetting this decrease was an increase in comparable store net sales attributable to stores in our SBS and SSBS store formats.

Net sales for the Domestic segment decreased by $163 million, or 1.9%, to $8,317 million in fiscal 2009, compared with $8,480 million in fiscal 2008. The decrease in Net sales was primarily a result of a decrease in comparable store net sales of 3.0%.

The decrease in comparable store net sales resulted primarily from a decrease in our entertainment, juvenile (including baby) and seasonal categories, which were all affected by the overall slowdown in the economy. The decrease in our entertainment category was driven by a slowdown in demand for certain video game systems and related accessories as well as fewer new software releases. The juvenile category decreased primarily as a result of the phasing out of certain size apparel offerings, along with declines in sales of baby gear, furniture and bedding. Sales of seasonal products, such as outdoor play equipment, decreased primarily due to cooler weather. These decreases were partially offset by increases in our learning and core toy categories. The learning category increased as a result of strong sales of construction toys, while increased sales in the core toy category were primarily driven by an increase in sales of collectibles and dolls.

Net sales for the International segment increased by $7 million, or 0.1%, to $5,251 million in fiscal 2009, compared with $5,244 million in fiscal 2008. Excluding an $83 million increase in Net sales due

to foreign currency translation, there was a decrease in Net sales at our International segment which was primarily a result of a decrease in comparable store net sales of 2.8%.

The decrease in comparable store net sales resulted primarily from a decrease in our entertainment and juvenile (including baby) categories, which were both affected by the slowdown in the global economy. The entertainment category decreases were primarily attributable to a slowdown in demand for certain video game systems and related accessories as well as fewer new software releases. The juvenile category decreased primarily from declines in sales of nursery equipment and apparel. These decreases were partially offset by increases in our learning and core toy categories. The increase in the learning category was primarily a result of strong sales of educational products and construction toys. The increase in the core toy category was primarily attributable to increased sales of action figures.

Gross margin increased by $30 million to $4,778 million in fiscal 2009, compared with $4,748 million in fiscal 2008. Gross margin, as a percentage of Net sales, for fiscal 2009 increased by 0.6 percentage points. Foreign currency translation accounted for approximately $15 million of the increase in Gross margin. The increase in Gross margin, as a percentage of Net sales, was primarily the result of improvements in sales mix away from lower margin products.

Gross margin decreased by $17 million to $2,893 million in fiscal 2009, compared with $2,910 million in fiscal 2008. Gross margin, as a percentage of Net sales, for fiscal 2009 increased by 0.5 percentage points.

The increase in Gross margin, as a percentage of Net sales, resulted primarily from improvements in sales mix away from lower margin products such as video game systems, and overall improvements in margin on full price sales and promotional sales in the learning and core toy categories. These increases were partially offset by increased sales of lower margin commodities within the juvenile category.

Gross margin increased by $47 million to $1,885 million in fiscal 2009, compared with $1,838 million in fiscal 2008. Foreign currency translation accounted for approximately $15 million of the increase. Gross margin, as a percentage of Net sales, for fiscal 2009 increased by 0.9 percentage points.

The increase in Gross margin, as a percentage of Net sales, resulted primarily from improvements in sales mix toward sales of higher margin learning and core toy products as well as decreased sales of lower margin video game systems compared to fiscal 2008.

SG&A decreased $126 million to $3,730 million in fiscal 2009 compared to $3,856 million in fiscal 2008. As a percentage of Net sales, SG&A decreased by 0.6 percentage points. Foreign currency translation accounted for approximately $5 million of the decrease.

Excluding the impact of foreign currency translation, the decrease in SG&A was primarily from strong initiatives to reduce overall operating expenses, which includes decreases of $29 million in advertising and promotional expenses, $23 million in travel and transportation costs, $17 million in store labor and other compensation expenses and $17 million in professional fees at our Domestic and International segments.

Additionally, SG&A decreased at our International segment due to the contract termination fee paid by the Company related to the settlement between Toys–Japan and McDonald’s Japan, which increased SG&A by $14 million in fiscal 2008. The remainder of the decrease resulted from a $7 million decrease in signage expense, a $6 million decrease in hiring and retention costs, a $4 million decrease in security costs and nominal reductions in other general operating expenses.

Depreciation and amortization decreased by $23 million to $376 million in fiscal 2009 compared to $399 million in fiscal 2008. The decrease was primarily due to a decrease of $11 million in accelerated depreciation related to store relocations and disposals in fiscal 2008, a decrease of $8 million related to assets which became fully amortized during the first half of fiscal 2009, as well as the addition of fewer new Company operated stores due to the curtailment of capital spending during fiscal 2009. Additionally, foreign currency translation accounted for approximately $1 million of the decrease.

Other income, net decreased by $16 million to $112 million in fiscal 2009 compared to $128 million in fiscal 2008. The decrease was primarily due to the recognition of an additional $59 million of gift card breakage income in fiscal 2008 resulting from the change in estimate effected by a change in accounting principle, and a $39 million gain recognized in fiscal 2008 on the liquidation of our Hong Kong subsidiary representing a cumulative translation adjustment. These decreases were partially offset by a $51 million litigation settlement with Amazon in fiscal 2009, a decrease in impairment losses on long-lived assets of $26 million, and a $4 million decrease in foreign currency translation gains compared to the same period last year.

See Note 1 to our consolidated financial statements included elsewhere in this prospectus entitled “Summary of Significant Accounting Policies” for further details.

Interest expense increased by $28 million for fiscal 2009 compared to fiscal 2008. The increase was largely due to an increase of $20 million primarily as a result of the write-off of fees related to the repayment of our $1.3 billion unsecured credit agreement and our $800 million secured real estate loans. In addition, there was an increase of $5 million related primarily to higher effective interest rates, partially offset by a reduction in average debt balances.

Interest expense will increase in the future due to the issuance of $950 million of 10.75% Senior Notes by Toys “R” Us Property Company I, LLC (“TRU Propco I”) on July 9, 2009 and the issuance of $725 million of 8.50% Senior Secured Notes by Toys “R” Us Property Company II, LLC (“TRU Propco II”) on November 20, 2009. These increases will be partially offset by the repayment of approximately $2.0 billion in real estate loans which had a lower effective interest rate of LIBOR plus margin.

Interest income decreased by $9 million for fiscal 2009 compared to fiscal 2008 primarily due to lower effective interest rates in fiscal 2009.

The net increase in income tax expense of $33 million in fiscal 2009 compared to fiscal 2008 was principally due to the increase in pre-tax earnings. Other increases due to a change in the mix of pre-tax earnings, an increase in permanent items, and a net increase in valuation allowances and liabilities for unrecognized tax benefits, were offset by a benefit for the reversal of deferred tax liabilities associated with the undistributed earnings of two of our subsidiaries as it is management’s intention to permanently reinvest those earnings, as well as benefits associated with a change in the tax classification of certain foreign entities.

The U.S. Federal statutory tax rate is 35%. Our income tax expense in fiscal 2009 materially benefited from certain non-recurring items, including items related to our Foreign operations. For fiscal 2010, we estimate that our effective tax rate will be 25% as a result of benefits from certain non-recurring items, including items related to our Foreign operations and unrecognized tax benefits. As these non-recurring items may not provide a benefit in future periods, we estimate that our effective tax rate will be approximately 38% in these future periods. There are many factors beyond our control that affect our tax rate, including changes in tax laws, and therefore the actual tax rates may vary from these estimates and such variations may be material (see also “Risk Factors”—“We may experience fluctuations in our tax obligations and effective tax rate, which could materially and adversely affect our results of operations”). See Note 11 to our consolidated financial statements included elsewhere in this prospectus entitled “Income Taxes” for further details.

We generated Net earnings attributable to Toys “R” Us, Inc. of $218 million in fiscal 2008 compared to $153 million in fiscal 2007. Net earnings attributable to Toys “R” Us, Inc. increased primarily as a result of a decrease in Interest expense of $84 million, a decrease in Income tax expense of $58 million and an increase in Other income, net of $44 million (primarily due to $59 million of additional gift card breakage income—see Note 1 to our consolidated financial statements included elsewhere in this prospectus entitled “Summary of Significant Accounting Policies”), partially offset by a decrease in Gross margin of $59 million and an increase in SG&A of $55 million. Each of these changes includes the effect of foreign currency translation, which accounted for an approximate $17 million decrease in Net earnings attributable to Toys “R” Us, Inc.

Net sales decreased by $70 million, or 0.5%, to $13,724 million in fiscal 2008 from $13,794 million in fiscal 2007. Net sales for fiscal 2008 included the impact of foreign currency translation that increased Net sales by approximately $47 million.

Excluding the impact of foreign currency translation, the decrease in Net sales for fiscal 2008 was primarily due to decreased comparable store net sales across both of our segments, resulting primarily from the slowdown in the global economy which contributed to a decrease in the number of transactions in both of our segments and a lower average transaction amount at our International segment. Partially offsetting this decrease was Net sales from new Company operated stores and a higher average transaction amount at our Domestic segment.

Net sales for the Domestic segment increased by $30 million, or 0.4%, to $8,480 million in fiscal 2008 from $8,450 million for fiscal 2007. The increase in Net sales was primarily a result of new wholly-owned stores, partially offset by a decrease in comparable store net sales of 0.1%.

The comparable store net sales decrease in fiscal 2008 was primarily a result of lower sales in our core toy, learning and seasonal categories, which were all affected by the overall slowdown in the economy. Core toys and learning also experienced declines in sales of mature product lines as well as poor performance of certain new product releases. These decreases were partially offset by increases in our entertainment category as a result of strong demand for video game systems, new video game software releases and related accessories. Our juvenile category was positively impacted by the conversion of certain stores to our SBS and SSBS store formats along with increased square footage devoted to juvenile products in our traditional toy stores, partially offset by decreases in baby gear and furniture sales.

Net sales for the International segment decreased by $100 million, or 1.9%, to $5,244 million for fiscal 2008, compared to $5,344 million for fiscal 2007. Excluding a $47 million increase in Net sales due to foreign currency translation, Net sales of our International segment decreased primarily due to a decrease in comparable store net sales of 3.4%, partially offset by increased Net sales from the addition of new Company operated stores.

The comparable store net sales decrease in fiscal 2008 was primarily impacted by decreases in our entertainment, core toy and seasonal categories, which we believe were affected by the slowdown in the global economy. Entertainment decreased primarily due to strong prior year sales of video game systems. Core toys decreased primarily due to strong prior year sales of licensed products. Sales of seasonal products decreased primarily due to a decrease in sales of outdoor products. Partially offsetting these decreases were increased sales in our juvenile category from the conversion of certain stores to our SBS store format along with increased square footage devoted to juvenile products in our traditional toy stores.

Gross margin, as a percentage of Net sales, decreased by 0.2 percentage points and decreased $59 million in fiscal 2008 compared to fiscal 2007. The decrease in Gross margin, as a percentage of Net sales, was primarily due to price reductions taken in light of the slowdown in the global economy. Partially offsetting these decreases was a change in accounting method for valuing merchandise inventory at our Domestic segment, which contributed an approximate $30 million increase to our Gross margin. Additionally, Gross margin in fiscal 2008 included the impact of foreign currency translation that increased Gross margin by approximately $11 million.

Gross margin increased by $8 million to $2,910 million in fiscal 2008 compared to $2,902 million in fiscal 2007. Gross margin, as a percentage of Net sales, in fiscal 2008 remained unchanged compared to fiscal 2007.

Gross margin, as a percentage of Net sales, was impacted by increases in allowances from vendors, and the change in accounting method for valuing merchandise inventory which contributed an approximate $30 million increase to our Gross margin, offset by increased sales of lower margin products, such as electronics and commodities.

Gross margin decreased by $67 million to $1,838 million in fiscal 2008 compared to $1,905 million in fiscal 2007. Gross margin in fiscal 2008 included the impact of foreign currency translation that increased Gross margin by approximately $11 million. Gross margin, as a percentage of Net sales, in fiscal 2008 decreased by 0.6 percentage points compared to fiscal 2007.

The decrease in Gross margin, as a percentage of Net sales, was primarily due to price reductions in light of the slowdown in the global economy, reduced discounts and allowances from vendors resulting from a reduction in inventory purchases. Partially offsetting these decreases were improvements in our sales mix toward higher margin products.

SG&A increased $55 million to $3,856 million in fiscal 2008 compared to $3,801 million in fiscal 2007. As a percentage of Net sales, SG&A increased by 0.5 percentage points. Foreign currency translation accounted for approximately $31 million of the increase.

In addition to the impact of foreign currency translation, the increase in SG&A was primarily due to increases in advertising and store occupancy expenses at our Domestic and International segments. Advertising expenses increased due to increases in print advertising and promotional activities to drive customer traffic to our stores, with a focus on the holiday shopping season. Store occupancy expenses increased primarily due to increased costs to support our new integrated strategy of constructing and converting existing stores to our SBS and SSBS store formats. Additionally, SG&A increased at our International segment due to a contract termination payment to McDonald’s Japan, which increased SG&A by $14 million. Partially offsetting these increases were decreases in Domestic store payroll, company-wide bonuses and corporate professional fees, as a result of cost-saving initiatives.

Depreciation and amortization increased by $5 million to $399 million in fiscal 2008 compared to $394 million in fiscal 2007, primarily due to foreign currency translation.

Other income increased by $44 million to $128 million in fiscal 2008 compared to $84 million in fiscal 2007. The increase was primarily due to the recognition of an additional $59 million of gift card breakage income as a result of the change in estimate effected by a change in accounting principle. In addition, the operations of TRU (HK) Limited, our wholly-owned subsidiary, were substantially liquidated in fiscal 2008. As a result, we recognized a $39 million gain representing a cumulative translation adjustment. Partially offsetting these increases was a decrease of $28 million in net gains on sales of properties, primarily due to a gain of $18 million on the sale of an idle distribution center and a $10 million gain on the consummation of a lease termination agreement during fiscal 2007. In addition, we recognized $20 million of additional impairment losses on long-lived assets as compared to the same period in the prior year.

See Note 1 to our consolidated financial statements included elsewhere in this prospectus entitled “Summary of Significant Accounting Policies” for further details.

Interest expense decreased by $84 million for fiscal 2008 compared to fiscal 2007. The decrease in Interest expense was primarily due to lower average interest rates on our debt and a reduction of charges related to the changes in the fair values of our derivatives which are not designated for hedge accounting. See Note 2 to the consolidated financial statements included elsewhere in this prospectus entitled “Long-Term Debt” and Note 3 to our consolidated financial statements entitled “Derivative Instruments and Hedging Activities.”

Interest income decreased by $11 million for fiscal 2008 compared to fiscal 2007 primarily due to lower average interest rates in fiscal 2008.

The decrease in income tax expense of $58 million in fiscal 2008 compared to fiscal 2007 was due to a change in the mix of pre-tax earnings, a reduction in permanent items and net reductions in valuation allowances and liabilities for unrecognized tax benefits. See Note 11 to our consolidated financial statements included elsewhere in this prospectus entitled “Income Taxes” for further details.

As of July 31, 2010, we were in compliance with all of our covenants related to our outstanding debt. At July 31, 2010, under our secured revolving credit facility, we had $53 million of outstanding borrowings, a total of $89 million of outstanding letters of credit and excess availability of $1,070 million. This amount is also subject to a minimum availability covenant, which was $152 million at July 31, 2010, with remaining availability of $918 million in excess of the covenant.

On August 10, 2010, Toys-Delaware, a direct wholly-owned subsidiary, and certain of its subsidiaries amended and restated the credit agreement for its secured revolving credit facility (“ABL Facility”) in order to extend the maturity date of the facility and amend certain other provisions. The ABL Facility (which, prior to the amendment and restatement, provided for $1,631 million in commitments maturing on May 21, 2012) as amended provides for $1,850 million of revolving commitments maturing on August 10, 2015 which could increase by $650 million, subject to certain conditions. Borrowings under this credit facility are secured by tangible and intangible assets of Toys-Delaware and certain of its subsidiaries, subject to specific exclusions stated in the credit agreement.

Availability is determined pursuant to a borrowing base, consisting of specified percentages of eligible inventory and eligible credit card receivables and certain real estate less any applicable availability reserves. See Note 2 to our condensed consolidated financial statements entitled “Short-term borrowings and long-term debt” included elsewhere in this prospectus for further details regarding the borrowing base calculation.

As of , Toys–Delaware had $ million of outstanding borrowings under its ABL Facility to fund seasonal working capital.

Toys–Japan has credit agreements with a syndicate of financial institutions, which established two unsecured loan commitment lines of credit (“Tranche 1” and “Tranche 2”, respectively). Under the agreement, Tranche 1 is available in amounts of up to ¥20.0 billion ($232 million at July 31, 2010), and expires on March 30, 2011. At July 31, 2010, we had outstanding borrowings of $128 million under Tranche 1, which are included in Current portion of long-term debt on our condensed consolidated balance sheets, with $104 million of remaining availability. On March 30, 2009, Toys–Japan refinanced Tranche 2 resulting in amounts of up to ¥12.6 billion ($140 million at January 30, 2010), expiring in fiscal 2010.

On February 26, 2010, Toys–Japan entered into an agreement with a syndicate of financial institutions to refinance Tranche 2. Additionally, on March 29, 2010, Toys–Japan modified Tranche 2 to include an additional lender. As a result, Tranche 2 is now available in amounts of up to ¥14.0 billion ($162 million at July 31, 2010), expiring on March 28, 2011. At July 31, 2010, we had no outstanding Short-term debt under Tranche 2 with $162 million of availability.

The Toys–Japan agreements contain covenants, including, among other things, covenants that require Toys–Japan to maintain a certain minimum level of net assets and profitability during the agreement terms. The agreement also restricts us from reducing our ownership percentage in Toys–Japan.

Additionally, certain of our foreign subsidiaries entered into a European and Australian secured revolving credit facility (“European ABL”), which provides for a three-year £124 million ($195 million at July 31, 2010) senior secured asset-based revolving credit facility and which expires on October 15, 2012. Borrowings under the European ABL are secured by and subject to, among other things, the terms of a borrowing base derived from the value of eligible inventory and eligible accounts receivable of certain of Toys “R” Us Europe, LLC’s (“Toys Europe”) and Toys “R” Us Australia Holdings, LLC’s (“Toys Australia”) subsidiaries. The European ABL contains covenants that, among other things, restrict the ability of Toys Europe and Toys Australia and their respective subsidiaries to incur certain additional indebtedness, create or permit liens on assets, repurchase or pay dividends or make certain other restricted payments on capital stock, make acquisitions and investments or engage in mergers or consolidations. At July 31, 2010, we had no outstanding borrowings and $136 million of availability under the European ABL. See Note 2 to our consolidated financial statements entitled “Long-Term Debt” included elsewhere in this prospectus for further details regarding the borrowing base calculation.

Due to the deterioration in the credit markets, some financial institutions have reduced and, in certain cases, ceased to provide funding to borrowers. We are dependent on the borrowings provided by the lenders to support our working capital needs and capital expenditures. Currently we have funds available to finance our operations under our ABL Facility through 2015, our European ABL through October 2012 and our Toys–Japan unsecured credit lines through March 30, 2011. Our lenders may be unable to fund borrowings under their credit commitments to us if a lender faces bankruptcy, failure, collapse or sale. If our cash flow and capital resources do not provide the necessary liquidity, such an event could have a significant negative effect on our results of operations.

In general (other than borrowings under our revolving credit facilities), our primary source of cash is cash flow from operations. The primary source of cash flows is from sales to customers, substantially

all of which are made with credit and debit cards (which convert to cash within a few days) or cash. As described above, changes in consumer confidence, consumer spending levels, employment levels, consumer debt level and inflation, as well as the availability of consumer credit could affect our cash flow from operations. Since 2008, adverse trends in these factors have affected spending at our stores. If adverse trends continue or worsen, our cash flow from operations could be adversely affected. See “Risk Factors” entitled “Our sales may be adversely affected by changes in economic factors and changes in consumer spending patterns” and “Our operations have significant liquidity and capital requirements and depend on the availability of adequate financing on reasonable terms.”

In general, our primary uses of cash are providing for working capital purposes, which principally represent the purchase of inventory, servicing debt, financing construction of new stores, remodeling existing stores (including conversions), and paying expenses, such as payroll costs, to operate our stores. Our working capital needs follow a seasonal pattern, peaking in the third quarter of the year when inventory is purchased for the fourth quarter holiday selling season. Peak borrowings during fiscal 2009 under our revolving credit facilities and credit lines amounted to $784 million and have been repaid as of January 30, 2010. As of July 31, 2010, outstanding borrowings under our revolving credit facilities and credit lines amounted to $181 million. Our largest source of operating cash flows is cash collections from our customers. We have been able to meet our cash needs principally by using cash on hand, cash flows from operations and borrowings under our revolving credit facilities and credit lines.

Although we believe that cash generated from operations, along with existing cash, revolving credit facilities and credit lines will be sufficient to fund expected cash flow requirements and planned capital expenditures for at least the next 12 months, any world-wide financial market disruption could have a negative impact on our available resources in the future. We believe that we have the ability to repay or refinance our current outstanding borrowings maturing within the next 12 months. Our minimum projected obligations for fiscal 2010 and beyond are set forth below under “—Contractual Obligations.”

Twenty-Six Weeks Ended July 31, 2010 and Twenty-Six Weeks Ended August 1, 2009

A component of our long-term strategy is our capital expenditure program. Our capital expenditures are primarily for financing construction of new stores, remodeling existing stores, as well as improving and enhancing our information technology systems and are funded primarily through cash provided by operating activities, as well as available cash. Throughout 2009 we curtailed our capital spending due to the prevailing economic environment. For fiscal 2010, we plan to increase our capital spending to grow our business through a continued focus on our integrated strategy, recognizing the synergies between our toy and juvenile (including baby) categories.

During fiscal 2009 we invested $192 million in property and equipment, including opening 16 new stores, expanding and remodeling existing stores, and upgrading our information technology systems and capabilities. Capital expenditures are funded primarily through cash provided by operating activities, as well as available cash.

The following table presents our capital expenditures for each of the past three fiscal years:

In addition, in fiscal 2010, we have budgeted approximately $396 million for capital expenditures. We expect to spend approximately $135 million on SBS conversion projects and other remodeling efforts and approximately $88 million on other store-related projects and $68 million on opening new stores including relocations to SSBS. The SBS conversion projects in fiscal 2010 for our side-by-side stores in the U.S. are budgeted on average at $2.1 million; our conversion projects in fiscal 2010 for our side-by-side stores internationally are budgeted on average at approximately $1.2 million; and new stores are budgeted on average at approximately $2.8 million, approximately $2.2 million, and approximately $4.2 million for domestic SBS stores, international SBS stores and “R” Superstores, respectively.

Cash Flows for the Twenty-Six Weeks Ended July 31, 2010 and the Twenty-Six Weeks Ended August 1, 2009

During the twenty-six weeks ended July 31, 2010, net cash used in operating activities was $963 million compared to $493 million during the twenty-six weeks ended August 1, 2009. The $470 million

increase in cash used in operating activities was primarily the result of increased purchases of merchandise inventories primarily related to the addition of new locations which include the Company’s expanded fiscal 2010 pop-up store presence, increased payments on accounts payable due to the timing of vendor payments, an increase in interest payments as compared to the prior year period and a cash settlement received as a result of a prior year litigation settlement.

During the twenty-six weeks ended July 31, 2010, net cash used in investing activities was $104 million compared to net cash provided by investing activities of $17 million for the twenty-six weeks ended August 1, 2009. The increase in net cash used in investing activities was primarily the result of a decrease of $105 million attributed to the change in restricted cash and an increase in capital expenditures of $24 million. These increases were primarily offset by $11 million paid to acquire e-commerce websites and other business assets in the prior year period.

During the twenty-six weeks ended July 31, 2010, net cash provided by financing activities was $134 million compared to net cash used in financing activities of $173 million for the twenty-six weeks ended August 1, 2009. The increase in net cash provided by financing activities was primarily due to the prior period repayment of $1.3 billion of our unsecured credit agreement on July 9, 2009 and a decrease of $69 million in debt issuance costs. These increases were partially offset by the proceeds received in the prior year period of $925 million from the offering of senior unsecured 10.75% notes on July 9, 2009 and a reduction in borrowings of $109 million on our Toys-Japan credit lines and Toys-Japan short-term bank loans as compared to the prior year period.

Net cash provided by operating activities for fiscal 2009 was $1,014 million, an increase of $489 million compared to fiscal 2008. The increase in net cash provided by operating activities was primarily the result of decreased payments on accounts payable due to the timing of vendor payments at year-end, a reduction in SG&A primarily attributable to initiatives to reduce overall operating expenses and decreased payments for income taxes.

Net cash provided by operating activities for fiscal 2008 was $525 million, a decrease of $2 million compared to fiscal 2007. The decrease in cash provided by operating activities was primarily the result of increased payments on accounts payable due to the timing of vendor payments, increased payments for income taxes and decreased gross margins from operations. The decrease was partially offset by decreased purchases of merchandise inventories due to the slowdown in the global economy and lower interest payments due to lower average interest rates.

Net cash used in investing activities for fiscal 2009 was $37 million, a decrease of $222 million compared to fiscal 2008. The decrease in net cash used in investing activities was primarily due to a decrease of $214 million in restricted cash primarily as a result of the repayment of our $1,267 million unsecured credit agreement and our $800 million secured real estate loans, and a reduction in capital expenditures of $203 million due to the curtailment of capital spending as a result of the slowdown in the economy. These changes were partially offset by a decrease of $167 million from the sale of short-term investments in fiscal 2008.

Net cash used in investing activities for fiscal 2008 was $259 million, a decrease of $157 million compared to fiscal 2007. The decrease in net cash used in investing activities was primarily related to the purchase of $168 million of short-term investments in fiscal 2007 and subsequent sale in fiscal 2008 of $167 million of those investments resulting in a net decrease of $335 million. The decrease was partially offset by an $81 million increase in the change in restricted cash and increases in capital expenditures of $69 million.

Net cash used in financing activities was $626 million for fiscal 2009, an increase of $403 million compared to fiscal 2008. The increase in net cash used in financing activities was primarily due to the repayment of our $1,267 million unsecured credit agreement, the repayment of $800 million of our secured real estate loans, an increase of $104 million in debt issuance costs and an increase of $32 million related to purchases of Toys–Japan common stock. These increases were partially offset by the proceeds of $925 million received from the offering of senior unsecured 10.75% notes due 2017, the proceeds of $715 million received from the offering of senior secured 8.50% notes due 2017 and the reduced repayments on our Toys–Japan credit lines of $147 million as compared to the prior year.

See the description of changes to our debt structure below, as well as Note 2 to our consolidated financial statements included elsewhere in this prospectus entitled “Long-Term Debt” for more information.

Net cash used in financing activities was $223 million for fiscal 2008, an increase of $71 million from fiscal 2007. The increase in net cash used in financing activities was primarily due to increased repayments of our Toys–Japan unsecured credit lines of $119 million, due to the timing of merchandise payments and purchase of $34 million of additional shares of Toys–Japan. These increases were partially offset by a repayment of $44 million of our $200 million asset sale facility in fiscal 2007 and increased finance obligations of $33 million associated with capital project financing.

Our credit facilities, loan agreements and indentures contain customary covenants, including, among other things, covenants that restrict our ability to incur certain additional indebtedness, create or permit liens on assets, engage in mergers or consolidations, and place restrictions on the ability of certain of our subsidiaries to provide funds to us through dividends, loans or advances. The amount of net assets that were subject to these restrictions was approximately $705 million as of July 31, 2010. For example, the agreements governing the secured revolving credit facility (which was amended and restated on August 10, 2010 and described below in “Description of Indebtedness—$1.85 billion senior secured revolving credit facility”), the Secured Credit Facilities (which were amended and restated on August 24, 2010 by the New Secured Term Loan described below in “Description of Indebtedness—New Secured Term Loan, due fiscal 2016, effective August 24, 2010”), the Unsecured Credit Facility (which was repaid on August 24, 2010 described below in “Description of Indebtedness—Unsecured credit facility”) and the indenture governing the 7.375% senior secured notes due 2016, each contain covenants restricting the ability of Toys-Delaware and its subsidiaries to pay dividends or make other distributions subject to specified exceptions including payment of dividends to Toys “R” Us, Inc. for purposes of paying certain taxes, interest payments and operating expenses incurred in the ordinary course of business. In addition, the TRU Propco I Notes and TRU Propco II Secured Notes each contain restrictions on the

ability of TRU Propco I and TRU Propco II, respectively, to pay dividends or make any distributions subject to specified exceptions including distributions of free cash flow to us after an offer to purchase notes for cash is made and declined by noteholders.

Certain of our agreements also contain various and customary events of default with respect to the loans, including, without limitation, the failure to pay interest or principal when the same is due under the agreements, cross default provisions, the failure of representations and warranties contained in the agreements to be true and certain insolvency events. If an event of default occurs and is continuing, the principal amounts outstanding thereunder, together with all accrued unpaid interest and other amounts owed thereunder, may be declared immediately due and payable by the lenders. Were such an event to occur, we would be forced to seek new financing that may not be on as favorable terms as our current facilities or be available at all. As of July 31, 2010, our total indebtedness of $5,353 million, of which $2,561 million was secured indebtedness, and included three facilities: our secured revolving credit facility, our European ABL and our Toys–Japan unsecured credit lines. We had outstanding borrowings of $181 million under our secured revolving credit facility and Tranche 1 of Toys–Japan unsecured credit lines out of the three facilities as of July 31, 2010. Our ability to refinance our indebtedness on favorable terms, or at all, is directly affected by the current global economic and financial conditions and other economic factors that may be outside our control. In addition, our ability to incur secured indebtedness (which may enable us to achieve better pricing than the incurrence of unsecured indebtedness) depends in part on the covenants in our credit facilities and indentures and the value of our assets, which depends, in turn, on the strength of our cash flows, results of operations, economic and market conditions and other factors. We are currently in compliance with our financial covenants relating to our debt. See Note 2 to our consolidated financial statements entitled “Long-Term Debt” and Note 2 to our condensed consolidated financial statements entitled “Short-term borrowings and long-term debt” included elsewhere in this prospectus for more information regarding our debt covenants.

During the twenty-six weeks ended July 31, 2010, we made the following significant changes to our debt structure:

During fiscal 2009, we made the following significant changes to our debt structure:

We and our subsidiaries, as well as the Sponsors or their affiliates, may from time to time acquire debt or debt securities issued by us or our subsidiaries in open market transactions, tender offers, privately negotiated transactions or otherwise. Any such transactions, and the amounts involved, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. See Note 17 to our consolidated financial statements and Note 8 to our condensed consolidated financial statements included elsewhere in this prospectus entitled “Related Party Transactions.”

Our contractual obligations consist mainly of payments related to Long-term debt and related interest, operating leases related to real estate used in the operation of our business and product purchase obligations. The following table summarizes our contractual obligations associated with our Long-term debt and other obligations as of January 30, 2010:

Subsequent to the second quarter of fiscal 2010, there was a significant change in our contractual obligations and commitments related to Long-term debt and related interest as a result of the amendment and restatement of the ABL Facility on August 10, 2010, the offering of the Toys-Delaware Secured Notes and the amendment and restatement of the Secured Credit Facilities on August 24, 2010 referred to above. See “—Subsequent Events” above and Note 2 to the condensed consolidated financial statements entitled “Short-term borrowings and long-term debt” for further details.

Obligations under our operating leases and capital leases in the above table do not include contingent rent payments, payments for maintenance and insurance, or real estate taxes. The following table presents these amounts which were recorded in SG&A in our consolidated statement of operations for fiscals 2009, 2008 and 2007:

We have an off-balance sheet arrangement as a result of the February 2006 credit agreement between Toys “R” Us Properties (UK) Limited (“Toys U.K. Properties”) and Vanwall Finance PLC (“Vanwall”), a special purpose entity established with the limited purpose of issuing notes, and entering into the credit agreement with Toys Properties. On February 9, 2006, Vanwall issued $620 million of multiple classes of commercial mortgage backed floating rate notes to third party investors, which are publicly traded on the Irish Stock Exchange Limited. The proceeds from the floating rate notes issued by Vanwall were used to fund the Senior Loan to Toys U.K. Properties. Pursuant to the credit agreement, Vanwall is required to maintain an interest rate swap which effectively fixes the variable LIBOR rate at 4.56%, the same as the fixed interest less the applicable credit spread paid by Toys U.K. Properties to Vanwall. The fair value of this interest rate swap at January 30, 2010 and January 31, 2009 was a liability of approximately $40 million and $39 million, respectively. Management performed an analysis in accordance with ASC Topic 810, “Consolidation”, and concluded that Vanwall should not be consolidated. The Company has not identified any subsequent changes to Vanwall’s governing documents or contractual arrangements that would change the characteristics or adequacy of the entity’s equity investment at risk in accordance with reconsideration guidance of ASC 810. See Note 2 to our consolidated financial statement included elsewhere in this prospectus entitled “Long-Term Debt” for further details.

Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial.

Our consolidated financial statements and condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Financial Accounting Standards Board (“FASB”) finalized the “FASB Accounting Standards Codification” (“Codification” or “ASC”), which is effective for periods ending on or after September 15, 2009. The ASC does not change how we account for our transactions or the nature of the related disclosures made. Any references to guidance issued by the FASB in this prospectus are to the ASC.

The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and during the applicable periods. We base these estimates on historical experience and on other factors that we believe are reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions and could have a material impact on our consolidated financial statements and condensed consolidated financial statements.

We believe the following are our most critical accounting policies that include significant judgments and estimates used in the preparation of our consolidated financial statements. We consider

an accounting policy to be critical if it requires assumptions to be made that were uncertain at the time they were made, and if changes in these assumptions could have a material impact on our consolidated financial condition or results of operations.

We value our merchandise inventories at the lower of cost or market, as determined by the weighted average cost method. Cost of sales under the weighted average cost method represents the weighted average cost of the individual items sold. Cost of sales under the weighted average cost method is also affected by adjustments to reflect current market conditions, merchandise allowances from vendors, expected inventory shortages and estimated losses from obsolete and slow-moving inventory.

Merchandise inventories and related reserves are reviewed on an interim basis and adjusted, as appropriate, to reflect management’s current estimates. These estimates are derived using available data, our historical experience, estimated inventory turnover and current purchase forecasts. Various types of negotiated allowances received from our vendors are generally treated as adjustments to the purchase price of our Merchandise inventories. We adjust our estimates for vendor allowances and our provision for expected inventory shortage to actual amounts at the completion of our physical inventory counts and finalization of all vendor allowance agreements. In addition, we perform an inventory-aging analysis for identifying obsolete and slow-moving inventory. We establish a reserve to reduce the cost of our inventory to its estimated net realizable value based on certain loss indicators which include aged inventory and excess supply on hand, as well as specific identification methods.

Our estimates may be impacted by changes in certain underlying assumptions and may not be indicative of future activity. For example, factors such as slower inventory turnover due to changes in competitors’ tactics, consumer preferences, consumer spending and inclement weather could cause excess inventory requiring greater than estimated markdowns to entice consumer purchases. Such factors could also cause sales shortfalls resulting in reduced purchases from vendors and an associated reduction in vendor allowances. Based on our inventory aging analysis for identifying obsolete and slow-moving inventory, a 10% change in our reserve would have impacted pre-tax earnings by approximately $4 million for fiscal 2009.

Based on an overall analysis of store performance and expected trends, management periodically evaluates the need to close underperforming stores. Reserves are established at the time of closing for the present value of any remaining operating lease obligations, net of estimated sublease income, and at the communication date for severance, as prescribed by ASC Topic 420, “Exit or Disposal Cost Obligations.” A key assumption in calculating the reserves is the estimation of sublease income. If actual experience differs from our estimates, the resulting reserves could vary from recorded amounts. Reserves are reviewed periodically and adjusted when necessary.

We also evaluate the carrying value of all long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, in accordance with ASC Topic 360, “Property, Plant and Equipment.” We will record an impairment loss when the carrying value of the underlying asset group exceeds its estimated fair value.

In determining whether long-lived assets are recoverable, our estimate of undiscounted future cash flows over the estimated life or lease term of a store is based upon our experience, historical operations of the store, an estimate of future store profitability and economic conditions. The future estimates of store profitability and economic conditions require estimating such factors as sales growth, inflation and the overall economics of the retail industry. Since we forecast our future

undiscounted cash flows for up to 25 years, our estimates are subject to variability as future results can be difficult to predict. If a long-lived asset is found to be non-recoverable, we record an impairment charge equal to the difference between the asset’s carrying value and fair value. We estimate the fair value of a reporting unit or asset using a valuation method such as discounted cash flow or a relative, market-based approach.

In fiscal 2009, we recorded $7 million of impairment charges related to non-recoverable long-lived assets. These impairments were primarily due to the identification of underperforming stores, the relocation of certain stores and a decrease in real estate market values. In the future, we plan to relocate additional stores which may result in additional asset impairments.

Goodwill is evaluated for impairment annually or whenever we identify certain triggering events or circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, economic factors, unanticipated competitive activities, loss of key personnel and acts by governments and courts.

In accordance with ASC Topic 350, “Intangibles—Goodwill and Other,” we test for goodwill impairment by comparing the fair values and carrying values of our reporting units as of the first day of the fourth quarter of each fiscal year, or November 1, 2009 for fiscal 2009. Our Domestic reporting unit had $361 million of goodwill at January 30, 2010. Our Toys–Japan reporting unit (included in our International segment) had $21 million of goodwill at January 30, 2010.

We estimate the fair values of our reporting units by blending results from the market multiples approach and the income approach. These valuation approaches consider a number of factors that include, but are not limited to, expected future cash flows, growth rates, discount rates, and comparable multiples from publicly traded companies in our industry, and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of our business. It is our policy to conduct impairment testing based on our most current business plans, projected future revenues and cash flows, which reflect changes we anticipate in the economy and the industry. The cash flows are based on five-year financial forecasts developed internally by management and are discounted to a present value using discount rates that properly account for the risk and nature of the respective reporting unit’s cash flows and the rates of return market participants would require to invest their capital in our reporting units. If the carrying value exceeds the fair value, we would then calculate the implied fair value of our reporting unit goodwill as compared to its carrying value to determine the appropriate impairment charge. Although we believe our assumptions are reasonable, actual results may vary significantly and may expose us to material impairment charges in the future. Our methodology for determining fair values remained consistent for the periods presented.

At November 1, 2009, we determined that none of the goodwill associated with our reporting units were impaired. The estimated fair value of our Domestic reporting unit substantially exceeded its carrying value at the date of testing. The estimated fair value of our Toys–Japan reporting unit exceeded the carrying value. We believe it is unlikely that we are at risk for material impairment charges if further decreases in Toys–Japan’s fair value occur in the foreseeable future. In addition, we applied a hypothetical 10% decrease to the fair values of each reporting unit, which at November 1, 2009, would not have triggered additional impairment testing and analysis.

We self-insure a substantial portion of our workers’ compensation, general liability, auto liability, property, medical, prescription drug and dental insurance risks, in addition to maintaining third party

insurance coverage. We estimate our provisions for losses related to self-insured risks using actuarial techniques and estimates for incurred but not reported claims. We record the liability for workers’ compensation on a discounted basis. We also maintain insurance coverage to limit the exposure related to certain risks. The assumptions underlying the ultimate costs of existing claim losses can vary, which can affect the liability recorded for such claims.

Although we feel our reserves are adequate to cover our estimated liabilities, changes in the underlying assumptions and future economic conditions could have a considerable effect upon future claim costs, which could have a material impact on our consolidated financial statements. Our reserve for self-insurance was $93 million as of January 30, 2010. A 10% change in the value of our self-insured liabilities would have impacted pre-tax earnings by approximately $10 million for the fiscal year ended January 30, 2010.

We recognize revenue in accordance with ASC Topic 605, “Revenue Recognition.” Revenue related to merchandise sales, which is approximately 99.4% of total revenues, is generally recognized for retail sales at the point of sale in the store and when the customer receives the merchandise shipped from our websites. Discounts provided to customers are accounted for as a reduction of sales. We record a reserve for estimated product returns in each reporting period based on historical return experience and changes in customer demand. Actual returns may differ from historical product return patterns, which could impact our financial results in future periods.

We sell gift cards to customers in our retail stores, through our websites and through third parties and, in certain cases, provide gift cards for returned merchandise and in connection with promotions. We recognize income from gift card sales when the customer redeems the gift card, as well as an estimated amount of unredeemed liabilities (“breakage”). Gift card breakage is recognized proportionately, based on management estimates and assumptions of redemption patterns, the useful life of the gift card and an estimated breakage rate of unredeemed liabilities. Our estimated gift card breakage represents the remaining unused portion of the gift card liability for which the likelihood of redemption is remote and for which we have determined that we do not have a legal obligation to remit the value to the relevant jurisdictions. Income related to customer gift card redemption is included in Net sales, whereas income related to gift card breakage is recorded in Other income, net in the consolidated statements of operations.

During fiscal 2009, we recognized $20 million of net gift card breakage income. A change of 10% in the estimated gift card breakage rate would have impacted our pre-tax earnings by approximately $2 million for the fiscal year ended January 30, 2010.

We account for income taxes in accordance with ASC Topic 740, “Income Taxes” (“ASC 740”). Our provision for income taxes and effective tax rates are calculated by legal entity and jurisdiction and are based on a number of factors, including our income tax planning strategies, differences between tax laws and accounting rules, statutory tax rates and credits, uncertain tax positions, and valuation allowances. We use significant judgment and estimates in evaluating our tax positions.

Tax law and accounting rules often differ as to the timing and treatment of certain items of income and expense. As a result, the tax rate reflected in our tax return (our current or cash tax rate) is different from the tax rate reflected in our consolidated financial statements. Some of the differences

are permanent, while other differences are temporary as they reverse over time. We record deferred tax assets and liabilities for any temporary differences between the assets and liabilities in our consolidated financial statements and their respective tax bases. We establish valuation allowances when we believe it is more likely than not that our deferred tax assets will not be realized. For example, we would establish a valuation allowance for the tax benefit associated with a loss carryforward in a tax jurisdiction if we did not expect to generate sufficient taxable income to utilize the loss carryforward. Changes in future taxable income, tax liabilities and our tax planning strategies may impact our effective tax rate, valuation allowances and the associated carrying value of our deferred tax assets and liabilities.

At any one time our tax returns for various tax years are subject to examination by U.S. Federal, foreign, and state taxing jurisdictions. We establish tax liabilities in accordance with ASC 740. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attributes for income tax positions taken or expected to be taken on a tax return. Under ASC 740, the impact of an uncertain tax position taken or expected to be taken on an income tax return must be recognized in the financial statements at the largest amount that is more-likely-than-not to be sustained. An uncertain income tax position will not be recognized in the financial statements unless it is more-likely-than-not to be sustained. We adjust these tax liabilities, as well as the related interest and penalties, based on the latest facts and circumstances, including recently published rulings, court cases, and outcomes of tax audits. To the extent our actual tax liability differs from our established tax liabilities for unrecognized tax benefits, our effective tax rate may be materially impacted. While it is often difficult to predict the final outcome of, the timing of, or the tax treatment of any particular tax position or deduction, we believe that our tax balances reflect the more-likely-than-not outcome of known tax contingencies.

The fair value of the common stock shares utilized in valuing stock-based payment awards was determined by the Executive Committee based on management’s recommendations. We engage an independent valuation specialist to assist management and the Executive Committee in determining the fair value of our common stock for these purposes. Management and the Executive Committee rely on the valuations provided by the independent valuation specialist as well as their review of the Company’s historical financial results, business milestones, financial forecast and business outlook as of each award date.

The fair value of common stock shares is based on total enterprise value ranges and the total equity value ranges estimated on a non-marketable and minority basis utilizing both the income approach and the market approach guidelines. A range of the two methods was utilized to determine the fair value of the ordinary shares. The income approach is a valuation technique that provides an estimation of the fair value of a business based upon the cash flows that it can be expected to generate over time. The market approach is a valuation technique that provides an estimation of fair value based on market prices of publicly traded companies and the relationship to financial results. The income and market approaches are given equal weight when developing our fair value range.

The income approach utilized begins with an estimation of the annual cash flows that a business is expected to generate over a discrete projection period. The estimated cash flows for each of the years in the period are then converted to their present value equivalent using a discount rate considered appropriate given the risk of achieving the projected cash flows. The present value of the estimated cash flows are then added to the present value equivalent of the terminal value of the business at the end of the projection period to arrive at an estimate of fair value. Such an approach necessarily relies on estimations of future cash flows that are inherently uncertain, as well as a determination of an appropriate discount rate in order to derive present value equivalents of both the

projected cash flows and the terminal value of the business at the end of the period. The use of different estimations of future cash flows or a different discount rate could result in a different indication of fair value.

The market approach utilizes in part a comparison to publicly traded companies deemed to be in similar lines of business. Such companies were then analyzed to determine which were most comparable based on various factors, including industry similarity, financial risk, company size, geographic diversification, growth opportunities, similarity of reaction to macroeconomic factors, profitability, financial data availability and active trading volume. Seven companies were included as comparable companies in the market comparable approach. Alternate determinations of which publicly traded entities constituted comparable companies could result in a different indication of fair value.

We believe the equity value for the Company has increased significantly from October 2009, the latest value of common stock used in connection with the issuance of stock-based awards for the reasons described below.

In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). This ASU

provides amendments that will require more robust disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2 and 3. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. The adoption of ASU 2010-06 did not have a material impact on the condensed consolidated financial statements.

In December 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-17, “Consolidations (Topic 810)—Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” (“ASU 2009-17”). Effective February 1, 2010, the Company adopted ASU 2009-17, which requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity (“VIE”). This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has (1) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. In addition, the required changes provide guidance on shared power and joint venture relationships, remove the scope exemption for qualified special purpose entities, revise the definition of a variable interest entity, and require additional disclosures. In accordance with ASU 2009-17, we reassessed our lending vehicles, including our loan from Vanwall Finance PLC and concluded that we were not the primary beneficiary of that VIE. Accordingly, the adoption of this standard did not have an impact to the condensed consolidated financial statements.

On August 2, 2009, we adopted ASC Topic 105, “Generally Accepted Accounting Principles” (“ASC 105”). ASC 105 establishes the FASB Accounting Standards Codification, which officially launched July 1, 2009, as the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The subsequent issuances of new standards will be in the form of ASU that will be included in the Codification. The Codification does not change how we account for our transactions or the nature of the related disclosures made. Any references to guidance issued by the FASB in this prospectus are to the Codification.

On May 3, 2009, we adopted ASC Topic 855 “Subsequent Events” (“ASC 855”). ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This pronouncement is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The adoption of ASC 855 did not have a material impact on the consolidated financial statements.

On February 1, 2009, we adopted the new disclosure requirements for derivative instruments and for hedging activities with the intent to provide financial statement users with an enhanced understanding of the entity’s use of derivative instruments, the accounting of derivative instruments and related hedged items under the previous guidance and its related interpretations, and the effects of these instruments on the entity’s financial position, financial performance, and cash flows. Other than the enhanced disclosures, the adoption of the amendment to ASC Topic 815, “Derivatives and Hedging,” had no impact on the consolidated financial statements. See Note 3 of our consolidated financial statements included elsewhere in this prospectus entitled “Derivative Instruments and Hedging Activities” for further details.

On February 1, 2009, we adopted the amendment to ASC 810. The amendment requires a company to clearly identify and present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section but separate from the company’s equity. This guidance also requires the amount of consolidated net earnings attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income; changes in ownership interest be accounted for similarly, as equity transactions; and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary be measured at fair value. The presentation and disclosure requirements of the amendment were applied retrospectively.

In February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements” (“ASU 2010-09”). The amendments remove the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. ASU 2010-09 was effective upon issuance. Its adoption did not have a material impact on the consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-02, “Consolidation (Topic 810)—Accounting and Reporting for Decreases in Ownership of a Subsidiary—A Scope Clarification” (“ASU 2010-02”). This ASU provides amendments to ASC 810 to clarify the scope of the decrease in ownership provisions of the Subtopic and related guidance as it applies to a subsidiary or group of assets that is a business, a subsidiary that is a business and is transferred to an equity method investee or joint venture, and an exchange of a group of assets that constitutes a business for a noncontrolling interest in an entity. The amendments in this update also clarify that the decrease in ownership guidance does not apply to certain transactions, such as sales of in substance real estate, even if they involve businesses. ASU 2010-02 is effective beginning in the period that an entity adopts ASC 810 and should be applied retrospectively to the first period that an entity adopts ASC 810. Its adoption did not have a material impact on the consolidated financial statements.

On November 1, 2009, we adopted ASU No. 2009-05, “Fair Value Measurements and Disclosures (Topic 820)—Measuring Liabilities at Fair Value” (“ASU 2009-05”), which represents an update to ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1) a valuation technique that uses either the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as an asset; or 2) another valuation technique that is consistent with the principles in ASC 820 such as the income and market approach to valuation. The amendments in this update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. This update further clarifies that if the fair value of a liability is determined by reference to a quoted price in an active market for an identical liability, that price would be considered a Level 1 measurement in the fair value hierarchy. Similarly, if the identical liability has a quoted price when traded as an asset in an active market, it is also a Level 1 fair value measurement if no adjustments to the quoted price of the asset are required. This update is effective for the first reporting period (including interim periods) beginning after issuance. The adoption of ASU 2009-05 did not have an impact on the consolidated financial statements.

In August 2009, the FASB issued ASU No. 2009-04, “Accounting for Redeemable Equity Instruments” (“ASU 2009-04”), which represents an update to ASC Topic 480, “Distinguishing Liabilities from Equity,” and provides guidance on what type of instruments should be classified as temporary versus permanent equity, as well as guidance regarding measurement. ASU 2009-04 is effective for the first reporting period, including interim periods, beginning after issuance. The adoption of ASU 2009-04 did not have an impact on the consolidated financial statements.

In April 2009, ASC Topic 825, “Financial Instruments” (“ASC 825”), and ASC Topic 270, “Interim Reporting” (“ASC 270”), were amended to enhance the consistency in financial reporting by increasing the frequency of fair value disclosures. We adopted the disclosure requirements for fair value of financial instruments, as prescribed by ASC 825 and ASC 270 on May 3, 2009. The adoption did not have a material impact on the consolidated financial statements.

On February 1, 2009, we adopted ASC Topic 805, “Business Combinations” (“ASC 805”), and the related amendment. ASC 805 states that all business combinations (whether full, partial or step acquisitions) will result in all assets and liabilities of an acquired business being recorded at their fair values. Certain forms of contingent consideration and certain acquired contingencies will be recorded at fair value at the acquisition date. ASC 805 also states acquisition costs will generally be expensed as incurred and restructuring costs will be expensed in periods after the acquisition date. The amendment addresses application issues, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. Its adoption did not have a material impact on the consolidated financial statements.

On February 1, 2009, we adopted the amendment to ASC 350. This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under ASC 350. The adoption did not have a material impact on the consolidated financial statements.

On February 1, 2009, we adopted the fair value guidance related to nonfinancial assets and liabilities, as prescribed by ASC 820 and its related amendments. Assumptions made regarding the adoption of ASC 820 and its related amendments will impact any accounting standards that include fair value measurements. See Note 4 to our consolidated financial statements included elsewhere in this prospectus entitled “Fair Value Measurements” for the impact to the consolidated financial statements and further details.

In December 2008, ASC Topic 715, “Compensation—Retirement Benefits,” was amended. This amendment provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan and is effective for financial statements issued for fiscal years ending after December 15, 2009. See Note 13 to our consolidated financial statements included elsewhere in this prospectus entitled “Defined Benefit Pension Plans” for the impact to our consolidated financial statements and further details.

See Note 21 to our consolidated financial statements and Note 11 to our condensed consolidated financial statements included elsewhere in this prospectus entitled “Recent Accounting Pronouncements” for a discussion of accounting standards which we have not yet been required to implement and may be applicable to our future operations, and their impact on our consolidated financial statements and condensed consolidated financial statements.

We are exposed to market risk from potential changes in interest rates and foreign currency exchange rates. We regularly evaluate our exposure to these risks and take measures to mitigate these risks on our consolidated financial results. We enter into derivative financial instruments to economically manage our market risks related to interest rate and foreign currency exchange. We do not participate in speculative derivative trading. The analysis below presents our sensitivity to selected hypothetical, instantaneous changes in market interest rates and foreign currency exchange rates as of January 30, 2010.

Our foreign currency exposure is primarily concentrated in the United Kingdom, Continental Europe, Canada, Australia and Japan. We believe the countries in which we own assets and operate stores are politically stable. We face currency translation exposures related to translating the results of our worldwide operations into U.S. dollars because of exchange rate fluctuations during the reporting period.

We face foreign currency exchange transaction exposures related to short-term, cross-currency intercompany loans and merchandise purchases:

The above sensitivity analysis on our foreign currency exchange transaction exposures related to our short-term, cross-currency intercompany loans assumes our mix of foreign currency-denominated debt instruments and derivatives and all other variables will remain constant in future periods. These assumptions are made in order to facilitate the analysis and are not necessarily indicative of our future intentions.

Changes in foreign exchange rates affect interest expense recorded in relation to our foreign currency-denominated derivative instruments and debt instruments. As of January 30, 2010 and January 31, 2009, we estimate that a 10% hypothetical change in foreign exchange rates would impact our pre-tax earnings due to the effect of foreign currency translation on interest expense related to our foreign currency-denominated derivative instruments and debt instruments by $9 million.

See “Risk Factors—Our business is subject to fluctuations in foreign currency exchange.”

We have a variety of fixed and variable rate debt instruments and are exposed to market risks resulting from interest rate fluctuations. In an effort to manage interest rate exposures, we periodically enter into interest rate swaps and interest rate caps. A change in interest rates on variable rate debt impacts our pre-tax earnings and cash flows, whereas a change in interest rates on fixed rate debt impacts the fair value of debt. A portion of our interest rate contracts are designated for hedge accounting as cash flow hedges. Therefore, for designated cash flow hedges, the effective portion of the changes in the fair value of derivatives are recorded in other comprehensive (loss) income and subsequently recorded in the consolidated statements of operations at the time the hedged item affects earnings.

The following table illustrates the estimated sensitivity of a 1% change in interest rates to our future pre-tax earnings and cash flows on our derivative instruments and variable rate debt instruments at January 30, 2010:

The above sensitivity analysis assumes our mix of financial instruments and all other variables will remain constant in future periods. These assumptions are made in order to facilitate the analysis and are not necessarily indicative of our future intentions. As of January 31, 2009, we estimated that a 1% hypothetical increase or decrease in interest rates could potentially have caused either a $10 million increase or a $10 million decrease on our pre-tax earnings, respectively. The difference in our exposure to interest rate risk in fiscal 2009 from fiscal 2008 is primarily due to the reduction in market exposure as a result of the repayment of approximately $2.1 billion of variable rate debt and subsequent issuance of approximately $1.7 billion of fixed rate debt. See our consolidated financial statements for further discussion of our debt in Note 2 to our consolidated financial statements included elsewhere in this prospectus entitled “Long-Term Debt” and our derivative instruments in Note 3 to our consolidated financial statements included elsewhere in this prospectus entitled “Derivative Instruments and Hedging Activities.” At this time, we do not anticipate material changes to our interest rate risk exposure or to our risk management policies. We believe that we could mitigate potential losses on pre-tax earnings through our risk management objectives, if material changes occur in future periods.

As of July 31, 2010, we operated 1,363 stores and licensed an additional 211 stores. These stores are located in 34 countries and jurisdictions around the world under the Toys “R” Us, Babies “R” Us and FAO Schwarz banners. In addition to these stores, during the fiscal 2009 holiday season, we opened 91 pop-up stores, 28 of which remained open as of July 31, 2010. We expect to open a total of approximately 600 pop-up stores in the upcoming holiday season. As of September 24, 2010, we had opened 418 pop-up stores. We also sell merchandise through our websites at Toysrus.com, Babiesrus.com, eToys.com, FAO.com and babyuniverse.com. For fiscal 2009, we generated net sales of $13.6 billion, net earnings of $312 million and Adjusted EBITDA of $1,130 million.

On July 21, 2005, we were acquired by an investment group led by entities advised by or affiliated with Bain Capital Partners, LLC, Kohlberg Kravis Roberts & Co., L.P., and Vornado Realty Trust. We refer to this collective ownership group as our “Sponsors.” Upon the completion of this acquisition, we became a private company.


Large accelerated filer ¨				Accelerated filer ¨
Non-accelerated filer x (Do not check if a smaller reporting company)				Smaller reporting company ¨



Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)	Amount of Registration Fee(3)
Common Stock, par value $0.001 per share	$800,000,000	$57,040


	Per Share	Total
Initial public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to us	$	$


Goldman, Sachs & Co.		J.P. Morgan		BofA Merrill Lynch		Credit Suisse


Needham & Company, LLC				Mizuho Securities USA Inc.

BMO Capital Markets				Daiwa Capital Markets


Deutsche Bank Securities		Citi		Wells Fargo Securities


		Page
Prospectus Summary		1
Risk Factors		13
Forward-Looking Statements		30
Industry, Ranking and Market Data		30
Use of Proceeds		31
Dividend Policy		32
Capitalization		33
Dilution		35
Selected Historical Financial and Other Data		37
Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
Business		79
Management		95
Principal Shareholders		128
Certain Relationships and Related Party Transactions		130
Description of Indebtedness		135
Description of Capital Stock		145
Shares Eligible for Future Sale		151
Material United States Federal Income and Estate Tax Consequences to Non-U.S. Holders		154
Underwriting		158
Legal Matters		164
Experts		164
Where You Can Find More Information		164
Index to Consolidated Financial Statements		F-1


	July 31, 2010
(amounts in millions, except share-amounts)	Actual			As Adjusted
Cash and cash equivalents	$	176

Long-term debt:
Revolving credit facilities(1)	$	181
Notes and credit facilities		5,019
Finance obligations associated with capital projects and capital lease obligations		153

Total long-term debt(2)		5,353


Stockholders’ Equity:
Common stock; $0.001 par value, shares authorized 55,000,000, shares issued and outstanding 48,922,484 actual and as adjusted		—
Treasury stock		(10	)
Additional paid-in capital		29
Retained earnings		43
Accumulated other comprehensive loss		(23	)

Toys “R” Us, Inc. stockholders’ equity(3)		39
Noncontrolling interest		—

Total equity		39

Total capitalization	$	5,392		$


Assumed initial public offering price per share	$

Actual net tangible book value (deficit) per share as of July 31, 2010		(352	)
Decrease in pro forma net tangible book value per share attributable to the advisory agreement fees discussed above

Pro forma net tangible book value (deficit) per share before the change attributable to new investors

Increase in pro forma net tangible book value per share attributable to new investors

Pro forma as adjusted net tangible book value (deficit) per share after this offering

Dilution per share to new investors	$


	Shares of our Common Stock purchased		Total Consideration Amount (in millions)	Average Price Percent	Per Share of our Common Stock
	Number (in millions)	Percent	Total Consideration Amount (in millions)	Average Price Percent	Per Share of our Common Stock
Existing Stockholders		%	$	%	$
Shares issuable upon exercise of options		%	$	%	$
New investors		%	$	%	$
Total		%	$	%	$


	Fiscal Years Ended(1)															26 Weeks Ended
(In millions, except number of stores and share data)	January 30, 2010			January 31, 2009			February 2, 2008			February 3, 2007			January 28, 2006			July 31, 2010			August 1, 2009
Statement of Operations Data:
Net sales	$	13,568		$	13,724		$	13,794		$	13,050		$	11,333	(2)	$	5,173		$	5,044
Cost of sales		8,790			8,976			8,987			8,638			7,652			3,270			3,203

Gross margin		4,778			4,748			4,807			4,412			3,681			1,903			1,841

Selling, general and administrative expenses(3)		3,730			3,856			3,801			3,506			2,986			1,713	(4)		1,616
Depreciation and amortization		376			399			394			409			400			192			194
Other (income) expense, net(5)		(112	)(6)		(128	)(7)		(84	)		(152	)		437	(8)		(29	)		(76	)

Total operating expenses		3,994			4,127			4,111			3,763			3,823			1,876			1,734

Operating earnings (loss)		784			621			696			649			(142	)		27			107
Interest expense		(447	)		(419	)		(503	)		(537	)		(394	)		(245	)		(211	)
Interest income		7			16			27			31			31			3			4

Earnings (loss) before income taxes		344			218			220			143			(505	)		(215	)		(100	)
Income tax expense (benefit)		40			7			65			35			(121	)		(145	)		(85	)

Net earnings (loss)		304			211			155			108			(384	)		(70	)		(15	)

Less: Net (loss) earnings attributable to noncontrolling interest		(8	)		(7	)		2			(1	)		0			(1	)		(7	)

Net earnings (loss) attributable to Toys “R” Us, Inc.	$	312		$	218		$	153		$	109		$	(384	)	$	(69	)	$	(8	)

Share Data:
Earnings (loss) per common share attributable to Toys “R” Us, Inc.(9):
Basic	$			$			$			$			$			$			$
Diluted	$			$			$			$			$			$			$
Weighted average shares used in computing per share amounts(9):
Basic earnings per common share
Diluted earnings per common share


Format	Description	Number of Stores	Approximate Store Size (sq. ft.)
	Operated Stores
Traditional Toys “R” Us stores	The majority of square footage is devoted to traditional toy categories, with approximately 5,500 square feet devoted to boutique areas for juvenile products (BRU Express and Juvenile Expansion formats devote approximately an additional 4,500 square feet and 1,000 square feet, respectively, for juvenile - including baby - products).	888	30,000 to 50,000

Traditional Babies “R” Us stores	Predominantly juvenile (including baby) products, with approximately 2,000 to 5,000 square feet devoted to specialty name brand and private label clothing.	279	30,000 to 45,000

Side-by-Side (SBS) stores	Devote approximately 20,000 to 30,000 square feet to traditional toy products and 9,000 to 15,000 square feet to juvenile (including baby) products.	167	30,000 to 50,000

“R” Superstores (SSBS)	Combine domestically a traditional toy store of approximately 34,000 square feet with a juvenile (including baby) store of approximately 30,000 square feet.	26	55,000 to 70,000

Flagship stores (all in New York City)	The Toys “R” Us store in Times Square, the FAO Schwarz store on 5^th Avenue near Central Park, and the Babies “R” Us store in Union Square.	3	55,000 to 100,000

		1,363

Total operated stores	Licensed Stores

Traditional Toys “R” Us stores	The majority of square footage is devoted to traditional toy categories, with approximately 5,500 square feet devoted to boutique areas for juvenile (including baby) products.	211	30,000 to 50,000

Total operated and licensed stores		1,574


	26 Weeks Ended
($ In millions)	July 31, 2010			August 1, 2009
Net sales	$	5,173		$	5,044
Gross margin as a percentage of Net sales		36.8	%		36.5	%
Selling, general and administrative expenses as a percentage of Net sales		33.1	%		32.0	%
Net loss attributable to Toys “R” Us, Inc.	$	(69	)	$	(8	)


	26 Weeks Ended
	July 31, 2010 vs. 2009		August 1, 2009 vs. 2008
Domestic	1.3	%	(6.3	)%
International	(2.4	)%	(4.6	)%


	Segment Store Count
	July 31, 2010	August 1, 2009	Change
Domestic(1)	848	848	—
International—Wholly-Owned(2)	515	510	5
International—Licensed	211	195	16

Total(3)	1,574	1,553	21


	26 Weeks Ended
									Percentage of Total Net Sales
($ In millions)	July 31, 2010		August 1, 2009		$ Change		% Change		July 31, 2010		August 1, 2009
Domestic	$	3,271	$	3,199	$	72	2.3	%	63.2	%	63.4	%
International		1,902		1,845		57	3.1	%	36.8	%	36.6	%

Total Net sales	$	5,173	$	5,044	$	129	2.6	%	100.0	%	100.0	%


	26 Weeks Ended
							Percentage of Net Sales
($ In millions)	July 31, 2010		August 1, 2009		$ Change		July 31, 2010		August 1, 2009		Change
Domestic	$	1,183	$	1,160	$	23	36.2	%	36.3	%	(0.1	)%
International		720		681		39	37.9	%	36.9	%	1.0	%

Total Gross margin	$	1,903	$	1,841	$	62	36.8	%	36.5	%	0.3	%


	Fiscal Years Ended
($ In millions)	2009			2008			2007
Net sales	$	13,568		$	13,724		$	13,794
Gross margin as a percentage of Net sales		35.2	%		34.6	%		34.8	%
Selling, general and administrative expenses as a percentage of Net sales		27.5	%		28.1	%		27.6	%
Net earnings attributable to Toys “R” Us, Inc.	$	312		$	218		$	153


	January 30, 2010	Fiscal 2009				January 31, 2009	Fiscal 2008				February 2, 2008
	January 30, 2010	Opened		Closed		January 31, 2009	Opened		Closed		February 2, 2008
Domestic(1)	849	6		(3	)	846	6		(5	)	845
International—Wholly-Owned(2)	514	10		—		504	5		(5	)	504
International—Licensed	203	16	(3)	(22	)(3)	209	36	(3)	(38	)(3)	211

Total(4)	1,566	32		(25	)	1,559	47		(48	)	1,560


(In millions)	Fiscal 2009		Fiscal 2008		Change
Net earnings attributable to Toys “R” Us, Inc.	$	312	$	218	$	94


	Fiscal 2009		Fiscal 2008		$ Change			Percentage of Net sales
($ In millions)	Fiscal 2009		Fiscal 2008		$ Change			Fiscal 2009		Fiscal 2008		% Change
Toys “R” Us—Consolidated	$	3,730	$	3,856	$	(126	)	27.5	%	28.1	%	(0.6	)%


(In millions)	Fiscal 2009		Fiscal 2008		Change
Toys “R” Us—Consolidated	$	447	$	419	$	28


(In millions)	Fiscal 2008		Fiscal 2007		Change
Net earnings attributable to Toys “R” Us, Inc.	$	218	$	153	$	65


(In millions)	Fiscal 2008		Fiscal 2007		Change
Toys “R” Us—Consolidated	$	128	$	84	$	44


	26 Weeks Ended
(In millions)	July 31 2010		August 1 2009
New stores (1)	$	10	$	15
Conversion projects (2)		53		21
Other store-related projects (3)		16		25
Information technology		26		19
Distributions centers		12		13

Total capital expenditures	$	117	$	93


	Payments Due By Period
(In millions)	Fiscal 2010		Fiscals 2011 & 2012		Fiscals 2013 & 2014		Fiscals 2015 and thereafter		Total
Operating leases	$	556	$	1,010	$	806	$	1,683	$	4,055
Less: sub-leases to third parties		18		27		17		15		77

Net operating lease obligations		538		983		789		1,668		3,978
Capital lease obligations		33		46		32		95		206
Long-term debt(1)		145		1,780		1,053		2,070		5,048
Interest payments(2)		413		683		415		571		2,082
Purchase obligations(3)		1,280		—		—		—		1,280
Other(4)		137		149		73		57		416

Total contractual obligations(5)	$	2,546	$	3,641	$	2,362	$	4,461	$	13,010


(In millions)	Impact of 1% Increase			Impact of 1% Decrease
Interest rate swaps/caps(1)	$	34		$	(30	)
Variable rate debt		(14	)		14

Total pre-tax income exposure to interest rate risk	$	20		$	(16	)