In February 2001, the company issued and sold 500 EURO through the public issuance of a EURO bond bearing interest at 6.375% per annum. The obligation was swapped into a $466 fixed rate obligation with an effective rate of 7.43% per annum with interest payments due annually and principal due February 13, 2004. This cross currency swap is designated as a cash flow hedge, as defined by SFAS No. 133, and is effective as a hedge. The portion of the fair value of the swap attributable to changes in the spot rate is matched in earnings against changes in the fair value of debt.

The company entered into a Swiss Franc floating rate loan with a financial institution in January 1999, due January 28, 2004. The company also entered into a contract to swap U.S. dollars to Swiss Francs, within exact terms of the loan. This cross currency swap has been designated as a foreign currency fair value hedge, as defined by SFAS No. 133, and is effective as a hedge.

The company increased the carrying amount of its long-term debt by $172 at February 1, 2003, representing the fair value of debt in excess of the carrying amount on that date. Also at February 1, 2003, the company recorded derivative assets of $158 and derivative liabilities of $10, representing the fair value of these derivatives at that date.

ISSUANCE OF COMMON STOCK
AND EQUITY SECURITY UNITS
On May 28, 2002, the company completed public offerings of Toys"R"Us common stock and equity security units. On that date, the company issued 15.0 shares of its common stock at a price of $17.65 per share and received net proceeds of $253. Also on that date, the company issued 8.0 equity security units with a stated amount of $50 per unit and received net proceeds of $390. Each security unit consists of a contract to purchase, for $50, a specified number of shares of Toys"R"Us common stock in August 2005, and a senior note due in 2007 with a principal amount of $50. The fair value of the contract to purchase shares of Toys"R"Us common stock was estimated at $1.77 per equity security unit. The fair value of the senior note was estimated at $48.23 per equity security unit. Interest on the senior notes is payable quarterly at an initial rate of 6.25%, which commenced in August 2002. The company is obligated to remarket the notes in May 2005 at the then prevailing market interest rate for similar notes. If the remarketing were not to be successful, the company would be entitled to take possession of the senior notes, and the holder's obligation under the contracts to purchase shares of Toys"R"Us common stock would be deemed to have been satisfied. The proceeds allocated to the purchase contracts were recorded in stockholders' equity on the consolidated balance sheet. The fair value of the senior notes is reflected as long-term debt on the consolidated balance sheet. The net proceeds from the public offerings were used to refinance short-term borrowings and for other general corporate purposes. As a result of the interest rate swap agreements, interest on the senior notes will accrue at the rate of LIBOR plus 3.43% per annum. Interest is payable quarterly each year, beginning in August 2002.
STOCKHOLDERS' EQUITY
The common shares of the company, par value $0.10 per share, were as follows:

EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
Options to purchase approximately 32.5, 10.3 and 3.0 shares of common stock were outstanding during 2002, 2001 and 2000, respectively, but were not included in the computation of diluted earnings per share because the option exercise prices were greater than the average market price of the common shares.

STOCK PURCHASE WARRANTS
The company issued 1.2 stock purchase warrants to SOFTBANK Venture Capital and affiliates ("SOFTBANK") for $8.33 per warrant. Each warrant gives the holder thereof the right to purchase one share of Toys"R"Us common stock at an exercise price of $13 per share, until the expiration date of February 24, 2010. In addition, the company granted a warrant on August 9, 2000 entitling Amazon.com to acquire up to 5% (subject to dilution under certain circumstances) of the capital of Toysrus.com at the then market value. As of February 1, 2003, none of these warrants have been exercised.