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 August 25, 2002
--------------------------
COMES NOW, SERVICE MERCHANDISE COMPANY, INC.
------------------------------------------
Debtor-In-Possession, and hereby submits its Preliminary Monthly Operating
Report for the period commencing July 29, 2002 and ending August 25, 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: September 17, 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: JULY 29,2002 THROUGH AUGUST 25, 2002
1. Payroll
WAGES TAXES
OFFICERS TITLE GROSS NET DUE PAID
- ------------------------------------------------------------------------------------------------------------------------------------
C. STEVEN MOORE SENIOR VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER, $ 27,693.91 $ 19,023.59 $ 2,049.91 $ 6,369.05
GENERAL COUNSEL AND SECRETARY
MICHAEL E. HOGREFE SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER $ 23,847.83 $ 16,586.80 $ 1,697.59 $ 5,312.08
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 29, 2002 THROUGH AUGUST 25, 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 29 THOUGH AUGUST 25, 2002
3. BANK ACCOUNTS
TOTAL CASH AND CASH EQUIVALENTS
CASH IN STORES AND HOME OFFICE -
- ------------------------------
CORPORATE ACCOUNTS 1,087,290
- ------------------
CREDIT CARD CASH ACCOUNTS (SALES PROCESSED BY CREDIT CARD COMPANY) 18,300
- ------------------------------------------------------------------
OTHER DEPOSITORY ACCOUNTS
- -------------------------
OTHER CASH ACCOUNTS 10,913
INVESTMENTS
- -----------
SHORT TERM INVESTMENTS 93,041,959
TOTAL CASH PER GENERAL LEDGER 94,158,462
============
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 29 THOUGH AUGUST 25, 2002
RECEIPTS AND DISBURSEMENTS
(DOLLARS IN THOUSANDS)
ACTUAL ACTUAL ACTUAL ACTUAL TOTAL
Monday 07/29/02 08/05/02 08/12/02 08/19/02 07/29/02
Sunday 08/04/02 08/11/02 08/18/02 08/25/02 08/25/02
------- ------- ------- ------- -------
Receipts:
Sales receipts/Profit Sharing $ -- $ -- $ -- $ -- $ --
Miscellaneous receipts 734 1,253 463 174 2,624
Real Estate Proceeds/Settlement -- 494 -- -- 494
Expense reimbursements 2 -- -- 3 5
------- ------- ------- ------- -------
Total available collections 736 1,747 463 177 3,123
Disbursements:
All disbursements 2,356 2,324 1,708 2,028 8,416
------- ------- ------- ------- -------
Total disbursements 2,356 2,324 1,708 2,028 8,416
------- ------- ------- ------- -------
Net receipts/(disbursements) $(1,620) $ (577) $(1,245) $(1,851) $(5,293)
======= ======= ======= ======= =======
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 29 THOUGH AUGUST 25, 2002
ROLLING REVISED CASH FLOW FORECAST
(DOLLARS IN THOUSANDS)
Actual
08/25/02
--------
Ending total revolver balance $ --
Term loan --
Standby letters of credit 8,027
Trade letters of credit --
------
Total extensions of credit 8,027
Borrowing base --
------
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 29, 2002 THROUGH August 25, 2002
4. Payments to Professionals July 29, 2002 through August 25, 2002
VENDOR # VENDOR NAME CHECK AMT. CHECK DATE CHECK #
- -------------------------------------------------------------------------------------------------------------------
99329 Aegis Property Tax Specialists $ 2,250.00 07/30/02 50071968
48779 Loss, Pavone and Orel $ 545.00 08/02/02 50072068
103608 Abacus Advisory and Consulting $ 400,000.00 08/09/02 50072170
57117 Deloitte and Touche $ 22,950.00 08/09/02 50072171
57117 Deloitte and Touche $ 5,000.00 08/09/02 50072172
86237 Brusniak, Clement, Harrison and McCool, PC $ 285.00 08/12/02 50072187
95384 Deloitte and Touche, LLP $ 4,211.00 08/13/02 50072199
44013 McCarter and English $ 5,295.15 08/15/02 50072276
103439 Ernst and Young Corporate Finance $ 36,668.00 08/15/02 B0027397
71217 Bass, Berry and Sims $ 138,036.84 08/15/02 B0027398
101730 CBIZ Property Tax Solutions $ 12,000.00 08/16/02 50072301
99459 Robert L. Berger and Associates $ 10,639.21 08/16/02 B0027405
67017 Barkley and Thompson $ 119.79 08/19/02 50072320
71403 Seyfarth, Shaw, Fairweather and Geraldson $ 165.00 08/22/02 50072416
44013 McCarter and English $ 52.49 08/22/02 50072435
48779 Loss, Pavone and Orel $ 1,446.50 08/22/02 50072436
99391 Otterbourg, Steindler, Houston and Rosen, PC $ 34,578.02 08/23/02 B0027400
98378 Skadden, Arps, Slate, Meagher and Flom $ 208,268.00 08/23/02 B0027401
99454 Harwell, Howard, Hynem Gabbert and Manner, PC $ 11,433.39 08/23/02 B0027402
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)
AUGUST 25,
2002
----------
ASSETS
Current Assets:
Cash and cash equivalents $ 94,158
Accounts receivable 13,681
Prepaid Expenses 409
--------
TOTAL CURRENT ASSETS 108,248
--------
PROPERTY AND EQUIPMENT
Owned assets, net of accumulated depreciation 36,924
Other assets and deferred charges 19,788
--------
TOTAL ASSETS $164,960
========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Liabilities Not Subject To Compromise
Current Liabilities:
Accounts payable $ 13,226
Accrued expenses 36,777
State & Local tax 454
--------
TOTAL CURRENT LIABILITIES 50,457
--------
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 218,973
Accrued expenses 103,464
---------
Total Liabilities Subject To Compromise 679,065
TOTAL LIABILITIES 729,522
---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY
Common stock 49,936
Additional paid-in-capital 5,881
Retained (deficit) earnings (620,379)
---------
TOTAL SHAREHOLDERS' (DEFICIT) EQUITY (564,562)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $ 164,960
=========
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 29, 2002 THROUGH AUGUST 25, 2002
SUMMARY OF ACCOUNTS RECEIVABLE
MONTH ENDED: AUGUST 25, 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 29, 2002 THROUGH August 25, 2002
SCHEDULE OF POST PETITION LIABILITIES-ACCOUNTS PAYABLE
Month Ended: 08/25/2002
FORM OPR-4
Total
----------------
Trade Accounts Payable (Merchandise) $ 13,226
Total
----------------
Expense & other payables * $ 36,777
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 29, 2002 THROUGH AUGUST 25 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 $ (1,925)
State income tax Various Various $ (118)
--------
SUBTOTAL $ (2,043)
--------
Sales/use tax SUBTOTAL * Various Various $ 560
--------
Personal property tax * Various Various $ 716
Real estate taxes * Various Various $ 6,049
Inventory taxes * Various Various $ --
Gross receipts/bus licenses * Various Various $ 4
Franchise taxes * Various Various $ 676
--------
SUBTOTAL $ 7,445
--------
--------
TOTAL TAXES PAYABLE $ 5,962
========
* 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 29 THOUGH AUGUST 25, 2002
SCHEDULE OF POST PETITION LIABILITIES
FORM OPR-4
(DOLLARS IN THOUSANDS)
DATE TOTAL DUE
INCURRED DATE DUE (8/25/02 BALANCE)
-----------------------------------------
POST PETITION SECURED DEBT
Revolver borrowings 04/14/00 NA $ --
Facility standby letters of credit 04/14/00 NA 8,027
Facility trade letters of credit 04/14/00 NA --
Term loans 04/14/00 NA --
--------
TOTAL EXTENSIONS OF CREDIT $ 8,027
========
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 29, 2002
THROUGH
AUGUST 25, 2002
---------------
Net Sales $ 57
Costs of merchandise sold and buying and occupancy expense 170
-------
Gross margin after cost of merchandise sold and buying and occupancy exp (113)
Selling, General and Administrative Expenses:
Net Employment Expense 297
Net Advertising (13)
Banking and Other Fees (125)
Real Estate and Other Taxes 599
Supplies 6
Communication and Equipment 70
Travel 2
UCC and Other Services 1
Legal and Professional 52
Sales and Shipping --
Insurance 3
Miscellaneous (10)
Credit Card Services --
-------
Total Selling, General and Administrative Expenses 882
Other expense/(income), net (8)
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 (987)
Interest expense - debt (204)
Interest expense - capitalized leases --
-------
Earnings (loss) before reorganization items, and income tax (783)
Reorganization Items:
Legal and Professional 752
Miscellaneous (348)
Loss (Gain) on Disposal of Assets --
Close Store Charges 1,587
-------
Total Reorganization Items 1,991
Earnings (loss) before income tax (2,774)
Income tax benefit 3,597
Cumulative Effect of Change in Accounting Principles --
-------
Net earnings (loss) $ 823
=======
NOTE: THE DISCLOSURE ON PAGE 1 IS AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS AND SCHEDULES.
Page 15