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 June 30, 2002
-------------------
COMES NOW, SERVICE MERCHANDISE COMPANY, INC.
------------------------------------
Debtor-In-Possession, and hereby submits its Preliminary Monthly Operating
Report for the period commencing May 27, 2002 and ending June 30, 2002 as
shown by the report and exhibits consisting of 15 pages and containing the
following as indicated:
X 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.
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: July 22, 2002 DEBTOR-IN-POSSESSION
-------------
By: /s/ Michael 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
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: MAY 27, 2002 THROUGH JUNE 30, 2002
1. PAYROLL
WAGES TAXES
OFFICERS TITLE GROSS NET DUE PAID
- -----------------------------------------------------------------------------------------------------------------------------------
C. STEVEN MOORE SENIOR VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER, $37,639.00 $25,214.82 $2,295.45 $8,738.14
GENERAL COUNSEL AND SECRETARY
MICHAEL E. HOGREFE SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER $32,811.40 $21,486.01 $1,799.77 $7,138.42
JOE M. ELLIOTT VICE PRESIDENT, PROPERTY ADMINISTRATION $14,642.40 $ 9,549.92 $ 790.18 $3,036.90
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 2
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: MAY 27, 2002 THROUGH JUNE 30, 2002
2. INSURANCE
COVERAGE POLICY EXPIRATION PREMIUM DATE COVERAGE
TYPE NAME OF CARRIER AMOUNT NUMBER DATE AMOUNT PAID THROUGH
- ------------------------------------------------------------------------------------------------------------------------------------
Property Fireman's Fund Insurance Co $5 Million 01MXI9761300 12/31/02 $453,750 06/30/02
Royal Indemnity Co. $5 Million RHD317182 12/31/02 $60,000 06/30/02
Westchester Fire $15 Million WXA663479-0 12/31/02 $51,500 06/30/02
Commonwealth Ins Co $25 Million CLP 10333 12/31/02 $79,459 06/30/02
Boiler & Machinery Hartford Steam Boiler $10 Million FBP4914359 12/31/02 $20,248 12/31/02
Transit Fireman's Fund Insurance Co $1 Million OIMXI97600751 12/31/02 $10,000 12/31/02
General Liability Ace American Ins Co $5 Million XSLG2057804A 12/31/02 $250,000 12/31/02
Tenants Liability - AOS Pacific Employers Ins. Co. $5 Million HDOG20578129 12/31/02 Incl. In GL 12/31/02
Tenants Liability-First Union Pacific Employers Ins. Co. $5 Million HODG20578087 12/31/02 Incl. In GL 12/31/02
Workers' Compensation-AOS Pacific Employers Ins Co Statutory WLRC43124456 12/31/02 $201,195 12/31/02
WC Excess Ace American Ins Co Statutory XWC014136 12/31/02 $24,034 12/31/02
Workers' Compensation-DAS Pacific Employers Ins Co Statutory WLRC43124493 12/31/02 Included 12/31/02
WC Retro Pacific Employers Ins. Co. Statutory SCFC43031673 12/31/02 Included 12/31/02
WC Contractual Indemnity Illinois Union Insurance Co Statutory CTPG20577794 12/31/02 $15,750 12/31/02
Auto Pacific Employers Ins Co $1 Million ISAH07969661 12/31/02 $43,572 12/31/02
Umbrella Ohio Casualty Group $25 Million BX(02)O52805120 06/30/02 $52,006 06/30/02
Excess Liability Great American Assurance $25 Million EXC5752226 06/30/02 $18,600 06/30/02
International Ace American Ins Co $1 Million PHF051491 12/31/02 $2,500 12/31/02
Directors & Officers Continental Insurance Co $10 Million 300714943 12/31/02 $514,286 12/31/02
Federal Insurance Co $10 Million 81278902-A 12/31/02 $470,250 12/31/02
Royal Insurance Co $10 Million PSF000009 12/31/02 $470,250 12/31/02
Fiduciary National Union Fire Ins Co $5 Million 8726812 12/31/02 $28,423 12/31/02
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: MAY 27, 2002 THOUGH JUNE 30, 2002
3. BANK ACCOUNTS
TOTAL CASH AND CASH EQUIVALENTS
CASH IN STORES AND HOME OFFICE
CORPORATE ACCOUNTS 5,876,722
CREDIT CARD CASH ACCOUNTS (SALES PROCESSED BY CREDIT CARD COMPANY) (21,991)
OTHER DEPOSITORY ACCOUNTS
OTHER CASH ACCOUNTS 78,339
INVESTMENTS
SHORT TERM INVESTMENTS 98,380,700
TOTAL CASH PER GENERAL LEDGER $104,313,770
============
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 4
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: MAY 27, 2002 THOUGH JUNE 30, 2002
RECEIPTS AND DISBURSEMENTS
(DOLLARS IN THOUSANDS)
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL TOTAL
Monday 05/27/02 06/03/02 06/10/02 06/17/02 06/24/02 05/27/02
Sunday 06/02/02 06/09/02 06/16/02 06/23/02 06/30/02 06/23/02
-------- -------- -------- -------- -------- --------
Receipts:
Sales receipts/Profit Sharing $ -- $ -- $ -- $ -- $ -- $ --
Miscellaneous receipts 409 1,421 273 404 305 2,812
Real Estate Proceeds/Settlement 5 44 -- -- 6 55
Expense reimbursements -- 6,630 -- -- -- 6,630
------- ------ ------- ------- -------- --------
Total available collections 414 8,095 273 404 311 9,497
Disbursements:
All disbursements 1,852 5,299 1,891 1,372 12,072 $ 22,486
------- ------ ------- ------- -------- --------
Total disbursements 1,852 5,299 1,891 1,372 12,072 $ 22,486
------- ------ ------- ------- -------- --------
Net receipts/(disbursements) $(1,438) $2,796 $(1,618) $ (968) $(11,761) $(12,989)
======= ====== ======= ======= ======== ========
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 5
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: MAY 27, 2002 THOUGH JUNE 30, 2002
ROLLING REVISED CASH FLOW FORECAST
(DOLLARS IN THOUSANDS)
ACTUAL
06/30/02
--------
Ending total revolver balance $ --
Term loan --
Standby letters of credit 17,739
Trade letters of credit --
--------
Total extensions of credit 17,739
Borrowing base --
--------
Availability $ --
========
(1) As of 4/16/02, The Standby Letters of Credit were fully cash collateralize
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 6
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: MAY 27, 2002 THROUGH JUNE 30, 2002
4. PAYMENTS TO PROFESSIONALS MAY 27, 2002 THROUGH JUNE 30, 2002
VENDOR # VENDOR NAME CHECK AMT. CHECK DATE CHECK #
- ---------------------------------------------------------------------------------------------------------------------------------
103439 Ernst and Young Corporate Finance $82,046.00 11/26/01 B0026253
103439 Ernst and Young Corporate Finance $112,894.00 12/26/01 B0026443
103439 Ernst and Young Corporate Finance $137,183.35 01/25/02 B0026584
103439 Ernst and Young Corporate Finance $97,108.00 02/25/02 B0026891
103439 Ernst and Young Corporate Finance $124,046.00 03/25/02 B0027040
103439 Ernst and Young Corporate Finance $81,362.30 03/28/02 B0027084
103439 Ernst and Young Corporate Finance $55,645.00 04/15/02 B0027147
103439 Ernst and Young Corporate Finance $32,324.00 05/24/02 B0027279
57117 Deloitte and Touche $20,000.00 05/29/02 50070122
44013 McCarter and English $104.62 05/29/02 50070152
84740 Taft, Stettinius and Hollister $15,009.67 05/29/02 50070153
44013 McCarter and English $3,452.51 06/04/02 50070427
98378 Skadden, Arps, Slate, Meagher and Flom, LLP $589,476.00 06/04/02 B0027286
99104 Jay Alix and Associates $4,040.68 06/04/02 B0027287
99329 Aegis Property Tax Specialists $2,137.50 06/05/02 50070459
99329 Aegis Property Tax Specialists $2,718.75 06/05/02 50070460
86237 Brusniak, Clement, Harrison and McCool, PC $195.00 06/06/02 50070480
2642 Waller, Lansden, Dortch and Davis $938.65 06/11/02 50070554
101625 DG Hart Associates $19,319.55 06/12/02 50070603
99459 Robert L. Berger and Associates $19,129.21 06/13/02 B0027323
99444 Sitrick and Company, Inc. $1,275.19 06/14/02 B0027313
48779 Loss, Pavone and Orel $2,249.50 06/17/02 50070681
103967 Hedrick, Eatman, Garner and Kinocheloe $1,256.85 06/18/02 50070690
71217 Bass, Berry and Sims $148,827.35 06/21/02 B0027318
98378 Skadden, Arps, Slate, Meagher and Flom, LLP $208,842.00 06/21/02 B0027319
99391 Otterbourg, Steindler, Houston and Rosen, PC $24,980.73 06/21/02 B0027320
99454 Harwell, Howard, Hyne, Gabbert and Manner, PC $5,184.00 06/21/02 B0027321
103439 Ernst and Young Corporate Finance $30,799.00 06/25/02 B0027322
103608 Abacus Advisory and Consulting Corp, LLC $92,612.45 06/26/02 50070819
*Note: Vendor #103439 was added November, 2001. Has not been reported
previously.*
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 7
FORM OPR-1 AND 2
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS)
JUNE 30,
2002
---------
ASSETS
Current Assets:
Cash and cash equivalents $ 104,314
Accounts receivable 5,469
Prepaid Expenses 3,945
---------
TOTAL CURRENT ASSETS 113,728
---------
PROPERTY AND EQUIPMENT
Owned assets, net of accumulated depreciation 39,985
Other assets and deferred charges 28,148
---------
TOTAL ASSETS $ 181,861
=========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Liabilities Not Subject To Compromise
Current Liabilities:
Accounts payable $ 22,657
Accrued expenses 55,542
State & Local tax 462
---------
TOTAL CURRENT LIABILITIES 78,661
---------
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 8
FORM OPR-1 AND 2
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS)
Liabilities Subject To Compromise:
Accrued restructuring costs 42,067
Long-term debt 313,812
Accounts payable 218,619
Accrued expenses 101,006
---------
Total Liabilities Subject To Compromise 675,504
TOTAL LIABILITIES 754,165
---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY
Common stock 49,936
Additional paid-in-capital 5,881
Deferred compensation (31)
Retained (deficit) earnings (628,090)
---------
TOTAL SHAREHOLDERS' (DEFICIT) EQUITY (572,304)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $ 181,861
=========
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 9
CHAPTER 11
MONTHLY OPERATING REPORT
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: MAY 27, 2002 THROUGH JUNE 30, 2002
SUMMARY OF ACCOUNTS RECEIVABLE
MONTH ENDED: JUNE 30, 2002
FORM OPR-3 NOT APPLICABLE
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 10
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: MAY 27, 2002 THROUGH JUNE 30, 2002
SCHEDULE OF POST PETITION LIABILITIES-ACCOUNTS PAYABLE
Month Ended: 06/30/2002
FORM OPR-4
Total
--------
Trade Accounts Payable (Merchandise) $ 22,657
Total
--------
Expense & other payables * $ 55,542
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 11
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: MAY 27, 2002 THROUGH JUNE 30, 2002
SCHEDULE OF POST PETITION LIABILITIES
FORM OPR-4
(DOLLARS IN THOUSANDS)
DATE DATE TOTAL
TAXES PAYABLE INCURRED DUE DUE
Federal income tax ** Various Various $(1,684)
State income tax Various Various $ (98)
-------
SUBTOTAL $(1,782)
-------
Sales/use tax SUBTOTAL * Various Various $ 558
-------
Personal property tax * Various Various $ 893
Real estate taxes * Various Various $ 7,003
Inventory taxes * Various Various $ --
Gross receipts/bus licenses * Various Various $ (49)
Franchise taxes * Various Various $ 736
-------
SUBTOTAL $ 8,583
-------
-------
TOTAL TAXES PAYABLE $ 7,359
=======
* liability included in accrued expenses on OPR-2
** tax reserve
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 12
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: MAY 27, 2002 THOUGH JUNE 30, 2002
SCHEDULE OF POST PETITION LIABILITIES
FORM OPR-4
(DOLLARS IN THOUSANDS)
DATE TOTAL DUE
INCURRED DATE DUE (6/30/02 BALANCE)
--------------------------------------------------
POST PETITION SECURED DEBT
Revolver borrowings 04/14/00 NA $ --
Facility standby letters of credit 04/14/00 NA 17,739
Facility trade letters of credit 04/14/00 NA --
Term loans 04/14/00 NA --
--------
TOTAL EXTENSIONS OF CREDIT $ 17,739
========
ACCRUED INTEREST PAYABLE $ --
========
As of 4/16/02, The Standby Letters of Credit were fully cash collateralized
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 13
FORM OPR-5
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS)
ACTIVITY
MAY 27, 2002
THROUGH
JUNE 30, 2002
-------------
Net Sales $ 194
Costs of merchandise sold and buying and occupancy expenses 3,889
---------
Gross margin after cost of merchandise sold and buying and occupancy exp (3,695)
Selling, General and Administrative Expenses:
Net Employment Expense 564
Net Advertising --
Banking and Other Fees (112)
Real Estate and Other Taxes 174
Supplies 5
Communication and Equipment 68
Travel 6
UCC and Other Services 21
Legal and Professional 28
Sales and Shipping 16
Insurance (12)
Miscellaneous 1,533
Credit Card Services --
---------
Total Selling, General and Administrative Expenses 2,291
Other expense/(income), net (20)
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 14
FORM OPR-5
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DEBTOR-IN-POSSESSION)
(IN THOUSANDS)
Restructuring charge (credit) --
Depreciation and amortization --
---------
Earnings (loss) before interest, reorganization items, and income tax (5,966)
Interest expense - debt 5
Interest expense - capitalized leases --
---------
Earnings (loss) before reorganization items, and income tax (5,971)
Reorganization Items:
Legal and Professional 1,238
Miscellaneous 109
Loss (Gain) on Disposal of Assets --
Close Store Charges 2,702
---------
Total Reorganization Items 4,049
Earnings (loss) before income tax (10,020)
Income tax benefit --
Cumulative Effect of Change in Accounting Principles --
---------
Net earnings (loss) $ (10,020)
=========
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 15