EXHIBIT 99
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 July 28, 2002
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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 July 1, 2002 and ending July 28, 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: August 20, 2002 DEBTOR-IN-POSSESSION
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By: /s/ Michael E. Hogrege, Sr.
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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
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: JULY 1, 2002 THROUGH JULY 28, 2002
1. PAYROLL
WAGES TAXES
OFFICERS TITLE GROSS NET DUE PAID
- ------------------------------------------------------------------------------------------------------------------------------------
C. STEVEN MOORE SENIOR VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER, $ 30,071.90 $ 20,160.83 $2,295.44 $ 6,498.86
GENERAL COUNSEL AND SECRETARY
MICHAEL E. HOGREFE SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER $ 26,215.82 $ 17,537.01 $1,931.80 $ 5,387.59
JOE M. ELLIOTT VICE PRESIDENT, PROPERTY ADMINISTRATION $281,541.80 $199,854.80 $ -- $81,687.00
The associate listed below received terminated vacation pay and severance
included in the amounts above.
JOE M. ELLIOTT
$ 16,156.76 Vacation
$265,385.04 Severance
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: JULY 1, 2002 THROUGH JULY 28, 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 $478,750 12/31/02
Royal Indemnity Co. 11.5 Million R2HD325112 12/31/02 $50,000 12/31/02
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
TN-Work Comp Assigned Rsk Continental Casualty Co Statutory 6S59UB878X943102 06/01/03 $3,989 06/01/03
Auto Pacific Employers Ins Co $1 Million ISAH07969661 12/31/02 $43,572 12/31/02
Umbrella Westchester Fire $25 Million CUA151233 06/30/03 $280,400 06/30/03
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 $29,839 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: JULY 1 THOUGH JULY 28, 2002
3. BANK ACCOUNTS
TOTAL CASH AND CASH EQUIVALENTS
CASH IN STORES AND HOME OFFICE --
CORPORATE ACCOUNTS 1,714,652
CREDIT CARD CASH ACCOUNTS (SALES PROCESSED BY CREDIT CARD COMPANY) (20,999)
OTHER DEPOSITORY ACCOUNTS
OTHER CASH ACCOUNTS 81,747
INVESTMENTS
SHORT TERM INVESTMENTS 98,268,553
TOTAL CASH PER GENERAL LEDGER $ 100,043,952
=============
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: JULY 1 THOUGH JULY 28, 2002
RECEIPTS AND DISBURSEMENTS
(DOLLARS IN THOUSANDS)
ACTUAL ACTUAL ACTUAL ACTUAL TOTAL
Monday 07/01/02 07/08/02 07/15/02 07/22/02 07/01/02
Sunday 07/07/02 07/14/02 07/21/02 07/28/02 07/28/02
-------- -------- -------- -------- --------
Receipts:
Sales receipts/Profit Sharing $ -- $ -- $ -- $ -- $ --
Miscellaneous receipts 3,956 809 1,135 10,571 16,471
Real Estate Proceeds/Settlement 10 1,489 -- -- 1,499
Expense reiumbursements -- -- -- 20 20
------ ------- ------- ------- --------
Total available collections 3,966 2,298 1,135 10,591 17,990
Disbursements:
All disbursements 3,717 2,692 9,739 2,288 18,436
------ ------- ------- ------- --------
Total disbursements 3,717 2,692 9,739 2,288 18,436
------ ------- ------- ------- --------
Net receipts/(disbursements) $ 249 $ (394) $(8,604) $ 8,303 $ (446)
====== ======= ======= ======= ========
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: JULY 1 THOUGH JULY 28, 2002
ROLLING REVISED CASH FLOW FORECAST
(DOLLARS IN THOUSANDS)
ACTUAL
07/28/02
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Ending total revolver balance $ --
Term loan --
Standby letters of credit 8,038
Trade letters of credit --
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Total extensions of credit 8,038
Borrowing base --
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Availability $ --
========
(1) 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 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: July 01, 2002 THROUGH July 28, 2002
4. PAYMENTS TO PROFESSIONALS JULY 01, 2002 THROUGH JULY 28, 2002
VENDOR # VENDOR NAME CHECK AMT. CHECK DATE CHECK #
- ----------------------------------------------------------------------------------------------------------------------------
67017 Barkley and Thompson $640.40 07/01/02 50071024
86237 Brusniak, Clement, Harrison and McCool, PC $575.00 07/02/02 50071042
99329 Aegis Property Tax Specialists $3,621.44 07/02/02 50071043
95384 Deloitte and Touche, LLP $21,714.61 07/08/02 50071239
44013 McCarter and English $15,179.53 07/08/02 50071248
95384 Deloitte and Touche, LLP $13,470.97 07/09/02 50071298
44013 McCarter and English $6,059.55 07/10/02 50071314
100906 Peter J. Solomon Company, Ltd. $140,000.00 07/11/02 B0027355
101993 Rothschild, Inc. $15,000.00 07/11/02 B0027356
103439 Ernst and Young Corporate Finance $52,468.80 07/11/02 B0027359
71217 Bass, Berry and Sims $92,333.02 07/11/02 B0027361
98378 Skadden, Arps, Slate, Meagher and Flom, Illinois $351,673.00 07/11/02 B0027362
99104 Jay Alix and Associates $7,551.22 07/11/02 B0027363
99391 Otterbourg, Steindler, Houston, Rosen, PC $61,563.52 07/11/02 B0027364
99454 Harwell, Howard, Hyne, Gabbert and Manner, PC, Inc. $7,795.20 07/11/02 B0027365
101730 CBIZ Property Tax Solutions, Inc. $4,663.17 07/12/02 50071369
101730 CBIZ Property Tax Solutions, Inc. $142.30 07/12/02 50071370
101730 CBIZ Property Tax Solutions, Inc. $564.42 07/12/02 50071371
101730 CBIZ Property Tax Solutions, Inc. $6,456.28 07/12/02 50071372
99329 Aegis Property Tax Specialists $2,100.00 07/12/02 50071378
101730 CBIZ Property Tax Solutions, Inc. $342.71 07/15/02 50071397
101730 CBIZ Property Tax Solutions, Inc. $6,624.70 07/15/02 50071398
71217 Bass, Berry and Sims $120,671.31 07/15/02 B0027354
99459 Robert L. Berger and Associates $15,030.09 07/17/02 B0027375
57117 Deloitte and Touche $20,000.00 07/19/02 50071492
57117 Deloitte and Touche $20,000.00 07/19/02 50071493
71403 Seyfarth, Shaw, Fairweather and Geraldson $1,475.21 07/23/02 50071571
44013 McCarter and English $65.62 07/23/02 50071585
48779 Loss, Pavone and Orel $150.00 07/23/02 50071586
67017 Barkley and Thompson $796.50 07/23/02 50071587
103967 Hedrick, Eatman, Garner and Kinocheloe, LLP $547.50 07/24/02 50071602
103439 Ernst and Young Corporate Finance $21,744.00 07/25/02 B0027369
99391 Otterbourg, Steindler, Houston, Rosen, PC $39,024.28 07/25/02 B0027370
99454 Harwell, Howard, Hyne, Gabbert and Manner, PC, Inc. $6,207.58 07/25/02 B0027371
96221 Holt and Babbington, PC $604.12 07/26/02 50071765
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)
July 28,
2002
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ASSETS
Current Assets:
Cash and cash equivalents $ 100,044
Accounts receivable 12,120
Prepaid Expenses 331
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TOTAL CURRENT ASSETS 112,495
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PROPERTY AND EQUIPMENT
Owned assets, net of accumulated depreciation 36,913
Other assets and deferred charges 19,182
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TOTAL ASSETS $ 168,590
=========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Liabilities Not Subject To
Compromise
Current Liabilities:
Accounts payable $ 18,385
Accrued expenses 42,167
State & Local tax 461
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TOTAL CURRENT LIABILITIES 61,013
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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)
Long-Term Liabilities:
Liabilities Subject To Compromise:
Accrued restructuring costs 42,066
Long-term debt 314,562
Accounts payable 214,061
Accrued expenses 102,273
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Total Liabilities Subject To Compromise 672,962
TOTAL LIABILITIES 733,975
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY
Common stock 49,935
Additional paid-in-capital 5,881
Retained (deficit) earnings (621,202)
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TOTAL SHAREHOLDERS' (DEFICIT) EQUITY (565,385)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $ 168,590
=========
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: JULY 1, 2002 THROUGH JULY 28, 2002
SUMMARY OF ACCOUNTS RECEIVABLE
MONTH ENDED: JULY 28, 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: July 1, 2002 THROUGH July 28, 2002
SCHEDULE OF POST PETITION LIABILITIES-ACCOUNTS PAYABLE
Month Ended: 07/28/2002
FORM OPR-4
Total
--------
Trade Accounts Payable (Merchandise) $ 18,385
Total
--------
Expense & other payables * $ 42,167
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: JULY 1, 2002 THROUGH JULY 28, 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 $ (99)
--------
SUBTOTAL $ (1,783)
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Sales/use tax SUBTOTAL * Various Various $ 558
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Personal property tax * Various Various $ 911
Real estate taxes * Various Various $ 6,712
Inventory taxes * Various Various $ --
Gross receipts/bus licenses * Various Various $ (117)
Franchise taxes * Various Various $ 735
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SUBTOTAL $ 8,241
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--------
TOTAL TAXES PAYABLE $ 7,016
========
* 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: JULY 1 THOUGH JULY 28, 2002
SCHEDULE OF POST PETITION LIABILITIES
FORM OPR-4
(DOLLARS IN THOUSANDS)
DATE TOTAL DUE
INCURRED DATE DUE (7/28/02 BALANCE)
---------------------------------------------
POST PETITION SECURED DEBT
Revolver borrowings 04/14/00 NA $ --
Facility standby letters of credit 04/14/00 NA 8,038
Facility trade letters of credit 04/14/00 NA --
Term loans 04/14/00 NA --
------
TOTAL EXTENSIONS OF CREDIT $8,038
======
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
JULY 1, 2002
THROUGH
JULY 28, 2002
-------------
Net Sales $ 18
Costs of merchandise sold and buying and occupancy expense 1,110
-------
Gross margin after cost of merchandise sold and buying and occupancy expenses (1,092)
Selling, General and Administrative Expenses:
Net Employment Expense (872)
Net Advertising 54
Banking and Other Fees (112)
Real Estate and Other Taxes 374
Supplies 4
Communication and Equipment 74
Travel 1
UCC and Other Services (5)
Legal and Professional (167)
Sales and Shipping (47)
Insurance 256
Miscellaneous 1,768
Credit Card Services --
-------
Total Selling, General and Administrative Expenses 1,328
Other expense/(income), net (9)
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 (2,411)
Interest expense - debt --
Interest expense - capitalized leases --
-------
Earnings (loss) before reorganization items, and income tax (2,411)
Reorganization Items:
Legal and Professional 1,107
Miscellaneous (4,594)
Loss (Gain) on Disposal of Assets (7,210)
Close Store Charges 1,397
-------
Total Reorganization Items (9,300)
Earnings (loss) before income tax 6,889
Income tax benefit --
Cumulative Effect of Change in Accounting Principles --
-------
Net earnings (loss) $ 6,889
=======
Note: The disclosure on page 1 is an integral part of these consolidated
financial statements and schedules.
Page 15