EXHIBIT 99.1
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF TENNESSEE
In re: Case No.: 399-02649 THROUGH 399-02680
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SERVICE MERCHANDISE COMPANY, INC. Judge: PAINE
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Chapter 11
Debtor(s)
MONTHLY OPERATING REPORT FOR PERIOD ENDING December 30, 2001
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COMES NOW, SERVICE MERCHANDISE COMPANY, INC.
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Debtor-In-Possession, and hereby submits its Preliminary Monthly Operating Report for the period commencing November 26, 2001
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and ending December 30, 2001 as shown by the report and exhibits consisting of 6 pages and
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containing the following as indicated:
Monthly Reporting Questionnaire (Attachment 1)
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X Comparative Balance Sheets (Forms OPR-1 & OPR-2)
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N/A Summary of Accounts Receivable (Form OPR-3)
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X Schedule of Postpetition Liabilities (Form OPR-4)
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X Statement of Income (Loss) (Form OPR-5)
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I declare under penalty of perjury that this report and all the attachments are true and correct to the best of my knowledge
and belief.
On January 18, 2002, the United States Bankruptcy Court for the Middle District of Tennessee, Nashville Division (the
"Bankruptcy Court") approved the request of Service Merchandise Company, Inc. and its Subsidiaries (the "Company") to
immediately begin liquidating the inventory at all of its stores and to conduct store closing sales on a final basis and to
discontinue operations at the stores.
The financial statements and schedules related to the Company included herein have not been prepared on a liquidation basis
in accordance with generally accepted accounting principles ("GAAP"). The information needed to prepare the financial
statements and schedules on a liquidation basis is not currently available to management. Attempting to obtain such
information necessary to prepare the financial statements and schedules on a liquidation basis would cause undue hardship
and expense to the Company. Preparation of the financial statements and schedules on a liquidation basis of accounting would
result in material adjustments to the financial statements and schedules. Consequently, no representation is made regarding
the sufficiency of the financial statements and schedules. The Company cautions readers not to place undue reliance on
the financial statements and schedules contained herein.
The Debtor has filed with the U.S. Trustee on January 21, 2002, the preliminary December 30, 2001 Monthly Operating Report,
which included certain schedules, including payroll, insurance, receipts and disbursements, payment to professionals and
bank accounts, etc. This report includes those reports agreed upon as appropriate at this time between the Debtor and the
U.S. Trustee. I also hereby certify that the original Monthly Operating Report was filed with the Bankruptcy Court Clerk and
a copy delivered to the U.S. Trustee.
Date: 2-19-01 DEBTOR - IN - POSSESSION
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By: /s/ Michael E. Hogrefe
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Name and Title: MICHAEL E. HOGREFE, SR. VP AND CHIEF FINANCIAL OFFICER
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Address: 7100 SERVICE MERCHANDISE DRIVE
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BRENTWOOD, TENNESSEE 37027
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Telephone No: (615) 660-3340
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Note: Report subject to further verification and account reconciliation
procedures
Page 1
FORM OPR-1 AND 2
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS)
December 30, November 25,
2001 2001
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ASSETS
Current Assets:
Cash and cash equivalents $ 33,865 $ 46,773
Accounts receivable 6,719 7,530
Inventories 394,601 542,561
Prepaid Expenses 11,106 22,663
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TOTAL CURRENT ASSETS 446,291 619,527
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PROPERTY AND EQUIPMENT
Owned assets, net of accumulated depreciation 338,263 341,275
Capitalized leases, net of accumulated amortization 10,219 10,407
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TOTAL PROPERTY AND EQUIPMENT 348,482 351,682
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Other assets and deferred charges 34,777 35,464
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TOTAL ASSETS $ 829,550 $ 1,006,673
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LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Liabilities Not Subject To Compromise
Current Liabilities:
Notes payable to banks $ 149,699 $ 346,063
Accounts payable 31,416 65,080
Accrued expenses 88,989 92,651
Fed & State Income tax 10,767 9,524
Current maturities capitalized leases 102 101
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TOTAL CURRENT LIABILITIES 280,973 513,419
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Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 2
FORM OPR-1 AND 2
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS)
December 30, November 25,
2001 2001
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Long-Term Liabilities:
Long-term debt 60,000 60,000
Capitalized lease obligations 2,295 2,303
Liabilities Subject To Compromise:
Accrued restructuring costs 42,067 42,067
Capitalized lease obligations 18,932 19,213
Long-term debt 405,391 406,383
Accounts payable 198,842 198,948
Accrued expenses 102,799 95,429
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Total Liabilities Subject To Compromise 768,031 762,040
TOTAL LIABILITIES 1,111,299 1,337,762
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY
Common stock 49,935 49,935
Additional paid-in-capital 5,881 5,881
Deferred compensation (94) (106)
Accumulated other comprehensive loss (179) (1,941)
Retained (deficit) earnings (337,292) (384,858)
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TOTAL SHAREHOLDERS' (DEFICIT) EQUITY (281,749) (331,089)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $ 829,550 $ 1,006,673
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Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 3
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: NOVEMBER 26, 2001 THROUGH DECEMBER 30, 2001
SCHEDULE OF POST PETITION LIABILITIES-ACCOUNTS PAYABLE
Month Ended: 12/30/2001
FORM OPR-4
Total
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Trade Accounts Payable (Merchandise) $ 31,416
Total
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Expense & other payables $ 88,989
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 4
FORM OPR-5
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS)
Activity Activity Activity YTD Activity YTD
November 26, 2001 November 27, 2000 January 1, 2001 January 3, 2000
through through through through
December 30, 2001 December 31, 2000 December 30, 2001 December 31, 2000
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Net Sales $ 294,399 $ 328,830 $ 1,074,646 $ 1,550,001
Costs of merchandise sold and buying and occupancy
expense 199,475 209,367 776,430 1,167,452
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Gross margin after cost of merchandise sold and
buying and occupancy expenses 94,924 119,463 298,216 382,549
Selling, General and Administrative Expenses:
Net Employment Expense 18,696 27,727 170,169 280,879
Net Advertising 16,531 21,099 63,996 94,138
Banking and Other Fees 3,633 4,170 17,820 21,714
Real Estate and Other Taxes 706 659 21,121 21,549
Supplies 1,377 2,127 9,246 12,827
Communication and Equipment 334 478 3,817 4,677
Travel 337 565 4,044 6,496
UCC and Other Services 1,050 1,099 (2,792) (5,921)
Legal and Professional 234 403 3,989 3,987
Sales and Shipping 39 139 1,084 1,281
Insurance 1,146 (1,315) 5,855 2,954
Miscellaneous (283) (456) 223 (380)
Credit Card Services (15) (129) (22,051) (674)
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Total Selling, General and Administrative Expenses 43,785 56,566 276,521 443,527
Other expense/(income), net 2 (7) 1,347 (15,211)
Restructuring charge (credit) -- (81) -- (2,507)
Depreciation and amortization 3,943 3,875 41,324 39,352
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Earnings (loss) before interest, reorganization
items, and income tax 47,194 59,110 (20,976) (82,612)
Interest expense - debt 3,445 4,412 38,447 38,329
Interest expense - capitalized leases 243 212 3,098 3,468
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Earnings (loss) before reorganization items, and
income tax 43,506 54,486 (62,521) (124,409)
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 5
FORM OPR-5
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS)
Activity Activity Activity YTD Activity YTD
November 26, 2001 November 27, 2000 January 1, 2001 January 3, 2000
through through through through
December 30, 2001 December 31, 2000 December 30, 2001 December 31, 2000
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Reorganization Items:
Severance -- -- -- 9,423
Legal and Professional 1,908 11,238 24,061 44,867
Miscellaneous 204 1,120 2,764 4,224
Loss (Gain) on Disposal of Assets -- 395 1,533 (2,609)
Close Store Charges -- 44 246 (352)
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Total Reorganization Items 2,112 12,797 28,604 55,553
Earnings (loss) before income tax 41,394 41,689 (91,125) (179,962)
Income tax benefit 6,172 406 6,172 406
Cumulative Effect of Change in Accounting
Principles -- -- -- --
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Net earnings (loss) $ 47,566 $ 42,095 $ (84,953) $ (179,556)
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Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
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