.
.
.
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF TENNESSER
In re: Case No.: 399-02649 THROUGH 399-02680
------------------------------
SERVICE MERCHANDISE COMPANY, INC. Judge: PAINE
--------------------------------- ------------------------------
Chapter 11
</Table>
Debtor(s)
MONTHLY OPERATING REPORT FOR PERIOD ENDING February 23, 2003
---------------------------
COMES NOW, SERVICE MERCHANDISE COMPANY, INC.
-----------------------------------------------
Debtor-In-Possession, and hereby submits its Preliminary Monthly Operating
Report for the period commencing January 27, 2003 and ending February 23,
---------------- ------------
2003 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.
<Table>
Date: 3/17/03 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) 660-3477
------------------------------------------------------
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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
1. PAYROLL
WAGES TAXES
OFFICERS TITLE GROSS NET DUE PAID
- ----------------------------------------------------------------------------------------------------------------------------------
C. STEVEN MOORE SENIOR VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER, $27,693.91 $16,334.03 $2,297.89 $7,148.98
GENERAL COUNSEL AND SECRETARY
MICHAEL E. HOGREFE SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER $23,847.83 $14,212.44 $1,924.50 $6,028.65
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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
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 06/30/03 $20,625 06/30/03
Royal Indemnity Co. $5.5 Million R2HD325112 06/30/03 $60,000 06/30/03
Boiler & Machinery Hartford Steam Boiler $16.5 Million FBP4914359 12/31/03 $20,248 12/31/03
General Liability Ace American Ins Co $5 Million XSLG2057804A 12/31/03 $8,500 12/31/03
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 12/31/03 $2,500 12/31/03
Umbrella Westchester Fire $25 Million CUA151233 06/30/03 $280,400 06/30/03
Directors & Officers Continental Insurance Co $10 Million 300714943 12/31/03 $514,286 12/31/03
Federal Insurance Co $10 Million 81278902-A 12/31/03 $470,250 12/31/03
Royal Insurance Co $10 Million PSF000009 12/31/03 $470,250 12/31/03
Fiduciary National Union Fire Ins Co $3 Million 2678130 12/31/03 $60,000 12/31/03
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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
3. BANK ACCOUNTS
TOTAL CASH AND CASH EQUIVALENTS
CORPORATE ACCOUNTS $ 853,835
CREDIT CARD CASH ACCOUNTS (SALES PROCESSED BY CREDIT CARD COMPANY) -
OTHER DEPOSITORY ACCOUNTS
102920O CLEARING ACCT - CASH MGMT -
105600O FOUNTAINHEAD FUNDING ACCOUNT 5,143
OTHER CASH ACCOUNTS 5,143
INVESTMENTS
SHORT TERM INVESTMENTS 93,162,939
-----------
TOTAL CASH PER GENERAL LEDGER $94,021,917
===========
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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
RECEIPTS AND DISBURSEMENTS
(DOLLARS IN THOUSANDS)
ACTUAL ACTUAL ACTUAL ACTUAL TOTAL
MONDAY 01/27/03 02/03/03 02/10/03 02/17/03 01/27/03
SUNDAY 02/02/03 02/09/03 02/16/03 02/23/03 02/23/03
-------- -------- -------- -------- --------
Receipts:
Sales receipts/Profit Sharing $ - $ - $ - $ - $ -
Miscellaneous receipts 255 69 181 90 595
Real Estate Proceeds/Settlement - - - - -
Expense reimbursements - - - - -
----- ----- ----- ----- -------
Total available collections 255 69 181 90 $ 595
Disbursements:
All disbursements 914 187 573 469 $ 2,143
----- ----- ----- ----- -------
Total disbursements 914 187 573 469 2,143
----- ----- ----- ----- -------
Net receipts/(disbursements) $(659) $(118) $(392) $(379) $(1,548)
===== ===== ===== ===== =======
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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
ROLLING REVISED CASH FLOW FORECAST
(DOLLARS IN THOUSANDS)
ACTUAL
02/23/03
--------
Ending total revolver balance $ -
Term loan -
Standby letters of credit 4,805
Trade letters of credit -
------
Total extensions of credit 4,805
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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
4. PAYMENTS TO PROFESSIONALS JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
VENDOR # VENDOR NAME CHECK AMT. CHECK DATE CHECK #
- -------------------------------------------------------------------------------------------
103439 E & Y Corporate Finance $13,052.00 01/27/03 B0027504
99454 Harwell, Howard, Hyne 5,589.92 01/27/03 B0027505
95913 Locke, Reynolds, LLP 568.74 01/30/03 70002430
67017 Barkley and Thompson 182.40 01/30/03 70002432
99326 The Aegis Group 794.73 01/30/03 70002435
99444 Strick and Company, Inc. 801.00 02/14/03 B0027510
71217 Bass, Berry and Sims 94,227.96 2/14/2003 B0027512
99329 The Aegis Group 531.00 02/17/03 70002525
99459 Robert L. Berger and Associates 18,499.75 02/19/03 B0027514
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)
FEBRUARY 23,
2003
------------
ASSETS
Current Assets:
Cash and cash equivalents $ 94,022
Accounts receivable 402
Prepaid Expenses 100
--------
TOTAL CURRENT ASSETS 94,524
--------
PROPERTY AND EQUIPMENT
Owned assets, net of accumulated depreciation 36,924
Capitalized leases, net of accumulated amortization -
--------
TOTAL PROPERTY AND EQUIPMENT 36,924
--------
Other assets and deferred charges 15,770
--------
TOTAL ASSETS $147,218
========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Liabilities Not Subject To Compromise
Current Liabilities:
Notes payable to banks $ -
Accounts payable 12,411
Accrued expenses 25,678
State & Local tax 363
Current maturities capitalized leases -
--------
TOTAL CURRENT LIABILITIES 38,452
========
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:
Long-term debt -
Capitalized lease obligations -
Liabilities Subject To Compromise:
Accrued restructuring costs 42,067
Capitalized lease obligations -
Long-term debt 314,562
Accounts payable 220,184
Accrued expenses 108,083
---------
Total Liabilities Subject To Compromise 684,896
TOTAL LIABILITIES 723,348
---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY
Common stock 49,936
Additional paid-in-capital 5,881
Deferred compensation -
Accumulated other comprehensive loss -
Retained (deficit) earnings (631,947)
---------
TOTAL SHAREHOLDERS' (DEFICIT) EQUITY (576,130)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $ 147,218
=========
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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
SUMMARY OF ACCOUNTS RECEIVABLE
MONTH ENDED: FEBRUARY 23, 2003
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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
SCHEDULE OF POST PETITION LIABILITIES-ACCOUNTS PAYABLE
MONTH ENDED: 2/23/2003
FORM OPR-4
Total
-------
Trade Accounts Payable (Merchandise) $12,411
Total
-------
Expense & other payables $25,678
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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
SCHEDULE OF POST PETITION LIABILITIES
FORM OPR-4
(DOLLARS IN THOUSANDS)
DATE DATE TOTAL
TAXES PAYABLE INCURRED DUE DUE
------------------------------
Federal income tax ** Various Various -
State income tax Various Various $ (189)
------
SUBTOTAL $ (189)
------
Sales/use tax SUBTOTAL * Various Various $ 565
------
Personal property tax * Various Various $ 7
Real estate taxes * Various Various $3,330
Inventory taxes * Various Various $ (406)
Gross receipts/bus licenses * Various Various $ 8
Franchise taxes * Various Various $ 599
------
SUBTOTAL $3,538
------
------
TOTAL TAXES PAYABLE $3,914
======
* 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: JANUARY 27, 2003 THROUGH FEBRUARY 23, 2003
SCHEDULE OF POST PETITION LIABILITIES
FORM OPR-4
(DOLLARS IN THOUSANDS)
DATE TOTAL DUE
INCURRED DATE DUE (2/23/03 BALANCE)
----------------------------------------------------
POST PETITION SECURED DEBT
Revolver borrowings 04/14/00 NA -
Facility standby letters of credit 04/14/00 NA $4,805
Facility trade letters of credit 04/14/00 NA -
Term loans 04/14/00 NA -
------
TOTAL EXTENSIONS OF CREDIT $4,805
======
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
JANUARY 27, 2003
THROUGH
FEBRUARY 23, 2003
-----------------
Net Sales $ -
Costs of merchandise sold and buying and occupancy expense (4)
----
Gross margin after cost of merchandise sold and buying and occupancy expenses 4
Selling, General and Administrative Expenses:
Net Employment Expense 142
Net Advertising -
Banking and Other Fees (93)
Real Estate and Other Taxes 0
Supplies 0
Communication and Equipment 9
Travel 0
UCC and Other Services 0
Legal and Professional 4
Sales and Shipping -
Insurance -
Miscellaneous (55)
Credit Card Services -
----
Total Selling, General and Administrative Expenses 7
Other expense/(income), net -
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 (3)
Interest expense - debt -
Interest expense - capitalized leases -
----
Earnings (loss) before reorganization items, and income tax (3)
Reorganization Items:
Legal and Professional 48
(Gain) on Disposal of Assets (2)
Miscellaneous 28
Close Store Charges -
----
Total Reorganization Items 74
Earnings (loss) before income tax (77)
Income tax benefit -
Cumulative Effect of Change in Accounting Principles -
----
Net earnings (loss) $(77)
====
Note: The disclosure on page 1 is an integral part of these
consolidated financial statements and schedules. Page 15