Deferred income taxes are not provided on unremitted earnings of foreign subsidiaries that are intended to be indefinitely invested. Exclusive of amounts that, if remitted, would result in little or no tax under current U.S. tax laws, unremitted earnings were approximately $506 at February 2, 2002. Net income taxes of approximately $108 would be due if these earnings were remitted.

In 2000, the company elected to treat one of its foreign subsidiaries as a U.S. branch, claimed deductions for its investment in this subsidiary, and reduced its current tax expense. In 1999, the company also elected to treat two of its other foreign subsidiaries as U.S. branches. Income earned by these foreign subsidiaries can be offset by foreign loss carryforwards but will be subject to current U.S. income tax.

STOCK OPTIONS

The company has stock option plans (the “Plans”) which provide for the granting of options to purchase the company’s common stock. The Plans cover substantially all employees and directors of the company and provide for the issuance of non-qualified options, incentive stock options, performance share options, performance units, stock appreciation rights, restricted shares, restricted units and unrestricted shares. The Plans provide for a variety of vesting dates with the majority of the options vesting approximately three years from the date of grant, 50% over the first two years and the remaining 50% over three years. Prior to June 10, 1999, options granted to directors are exercisable 20% each year on a cumulative basis commencing one year from the date of grant. Effective June 10, 1999, the options granted to directors are exercisable one-third on a cumulative basis commencing on the third, fourth and fifth anniversaries from the date of grant.

The exercise price per share of all options granted has been the average of the high and low market price of the company’s common stock on the date of grant. All options must be exercised within ten years from the date of grant.

At February 2, 2002, an aggregate of 48.9 shares of authorized common stock were reserved for all of the Plans noted above, including 5.0 shares reserved for the issuance of restricted shares, restricted units, performance units, and unrestricted shares. Of these amounts, 15.4 were available for future grants. All outstanding options expire at dates ranging from November 2, 2002 to December 31, 2011.

Stock option transactions are summarized as follows:

Options exercisable and the weighted-average exercise prices were 20.7 and $23.94 at January 29, 2000, and 11.3 and $19.60 at February 3, 2001 and 16.1 and $20.74 at February 2, 2002, respectively.

At February 2, 2002 and February 3, 2001, the company’s Toysrus.com internet subsidiary had approximately 11.3 and 15.0 stock options outstanding to both employees and non-employees of the company, representing approximately 12% and 15% of the authorized common stock of Toysrus.com at February 2, 2002 and February 3, 2001, respectively. These outstanding options, with exercise prices ranging between $0.30 and $2.25 per share, entitle each option holder the right to purchase one share of the common stock of Toysrus.com.

The company utilizes a restoration feature to encourage the early exercise of certain options and retention of shares, thereby promoting increased employee ownership. This feature provides for the grant of new options when previously owned shares of company stock are used to exercise existing options. Restoration option grants are non-dilutive as they do not increase the combined number of shares of company stock and options held by an employee prior to exercise. The new options are granted at a price equal to the fair market value on the date of the new grant, and generally expire on the same date as the original options that were exercised.