EXHIBIT 99.1
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF TENNESSEE
In re: Case No.: 399-02649 THROUGH 399-02680
SERVICE MERCHANDISE COMPANY, INC. Judge: PAINE
Chapter 11
Debtor(s)
MONTHLY OPERATING REPORT FOR PERIOD ENDING January 27, 2002
COMES NOW, SERVICE MERCHANDISE COMPANY, INC.
Debtor-In-Possession, and hereby submits its Preliminary Monthly Operating
Report for the period commencing December 31, 2001 and ending January 27, 2002
as shown by the report and exhibits consisting of 6 pages and containing the
following as indicated:
Monthly Reporting Questionnaire (Attachment 1)
-------
X Comparative Balance Sheets (Forms OPR-1 & OPR-2)
-------
N/A Summary of Accounts Receivable (Form OPR-3)
-------
X Schedule of Postpetition Liabilities (Form OPR-4)
-------
X Statement of Income (Loss) (Form OPR-5)
-------
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 February 18, 2002, the
preliminary January 27, 2002 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: 3-18-02 DEBTOR-IN-POSSESSION
By: /s/ M. E. Hogrefe
------------------------------------------------
Name and Title: MICHAEL E. HOGREFE,
SR. VP AND CHIEF FINANCIAL OFFICER
Address: 7100 SERVICE MERCHANDISE DRIVE
BRENTWOOD, TENNESSEE 37027
Telephone No: (615) 660-3340
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)
JANUARY 27,
2002
ASSETS
Current Assets:
Cash and cash equivalents $ 13,890
Accounts receivable 13,414
Inventories 15,492
Prepaid Expenses 2,235
---------
TOTAL CURRENT ASSETS 45,031
---------
PROPERTY AND EQUIPMENT
Owned assets, net of accumulated depreciation 338,274
Capitalized leases, net of accumulated amortization 10,219
---------
TOTAL PROPERTY AND EQUIPMENT 348,493
---------
Other assets and deferred charges 16,543
---------
TOTAL ASSETS $ 410,067
=========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Liabilities Not Subject To Compromise
Current Liabilities:
Notes payable to banks $ --
Accounts payable 39,105
Accrued expenses 72,781
State & Local tax 6,420
Current maturities capitalized leases 102
---------
TOTAL CURRENT LIABILITIES 118,408
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Note: The disclosure on page 1 is an integral part of these consolidated
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)
JANUARY 27,
2002
Long-Term Liabilities:
Long-term debt --
Capitalized lease obligations 2,286
Liabilities Subject To Compromise:
Accrued restructuring costs 42,067
Capitalized lease obligations 18,647
Long-term debt 403,973
Accounts payable 208,701
Accrued expenses 109,176
---------
Total Liabilities Subject To Compromise 782,564
TOTAL LIABILITIES 903,258
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY
Common stock 49,936
Additional paid-in-capital 5,881
Deferred compensation (85)
Accumulated other comprehensive loss --
Retained (deficit) earnings (548,923)
---------
TOTAL SHAREHOLDERS' (DEFICIT) EQUITY (493,191)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $ 410,067
=========
Note: The disclosure on page 1 is an integral part of these consolidated
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: DECEMBER 31, 2001 THROUGH JANUARY 27, 2002
SCHEDULE OF POST PETITION LIABILITIES-ACCOUNTS PAYABLE
Month Ended: 1/27/02
FORM OPR-4
Total
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Trade Accounts Payable (Merchandise) $39,105
Total
-------
Expense & other payables $ 72,781
Note: The disclosure on page 1 is an integral part of these consolidated
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
DECEMBER 31, 2001
THROUGH
JANUARY 27, 2002
-----------------
Net Sales $ 289,909
Costs of merchandise sold and buying and occupancy expense 400,146
---------
Gross margin after cost of merchandise sold and buying and occupancy expenses (110,237)
Selling, General and Administrative Expenses:
Net Employment Expense 17,390
Net Advertising 2,515
Banking and Other Fees 887
Real Estate and Other Taxes 1,877
Supplies 5,160
Communication and Equipment 241
Travel 102
UCC and Other Services 406
Legal and Professional 234
Sales and Shipping 124
Insurance 1,574
Miscellaneous (150)
Credit Card Services 1
---------
Total Selling, General and Administrative Expenses 30,361
Other expense/(income), net 36
Note: The disclosure on page 1 is an integral part of these consolidated
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
DECEMBER 31, 2001
THROUGH
JANUARY 27, 2002
-----------------
Restructuring charge (credit) --
Depreciation and amortization --
---------
Earnings (loss) before interest, reorganization items, and income tax (140,634)
Interest expense - debt 14,249
Interest expense - capitalized leases 625
---------
Earnings (loss) before reorganization items, and income tax (155,508)
Reorganization Items:
Legal and Professional 2,665
Severance and Miscellaneous 48,065
Loss (Gain) on Disposal of Assets --
Close Store Charges 5,263
---------
Total Reorganization Items 55,993
Earnings (loss) before income tax (211,501)
Income tax benefit (130)
Cumulative Effect of Change in Accounting Principles --
---------
Net earnings (loss) $(211,631)
=========
Note: The disclosure on page 1 is an integral part of these consolidated
statements and schedules.
Page 6