<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- --------------
Commission File No. 1-9223
SERVICE MERCHANDISE COMPANY, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 62-0816060
(State or other Jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
P. O. Box 24600, Nashville, TN
37202-4600
(Mailing Address)
7100 Service Merchandise Drive, Brentwood, TN
(Address of principal executive offices)
37027
(Zip code)
(615) 660-6000
(Registrant's telephone number including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- ----
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of the latest practicable date.
As of October 29, 1995, there were 99,673,104 shares of
Service Merchandise Company, Inc. common stock outstanding.
<PAGE> 2
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
PART I - FINANCIAL INFORMATION
Consolidated Statements of Operations (Unaudited) -
Three and Nine Periods Ended October 1, 1995 and
October 2, 1994 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets - October 1, 1995
(Unaudited), October 2, 1994 (Unaudited) and
January 1, 1995 . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows (Unaudited) -
Nine Periods Ended October 1, 1995 and October 2, 1994 . . 5
Notes to Consolidated Financial Statements (Unaudited) . . 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited). . . . . . 8-11
PART II - OTHER INFORMATION
Other Information . . . . . . . . . . . . . . . . . . . . . 12
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-2-
<PAGE> 3
<TABLE>
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
<CAPTION>
Three Periods Ended Nine Periods Ended
-------------------- -----------------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
-------- --------- ---------- ----------
1995 1994 1995 1994
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $730,031 $757,662 $2,332,035 $2,327,805
Costs and expenses:
Cost of merchandise sold and buying and occupancy expenses 553,868 582,414 1,772,284 1,785,727
-------- -------- ---------- ----------
Gross margin after cost of merchandise sold and buying and
occupancy expenses 176,163 175,248 559,751 542,078
Selling, general and administrative expenses 154,062 157,794 505,519 481,545
Depreciation and amortization 14,763 15,064 46,646 46,826
-------- -------- ---------- ----------
Earnings before interest and income taxes 7,338 2,390 7,586 13,707
Interest expense-debt 19,011 17,089 50,793 46,672
Interest expense-capitalized leases 2,327 2,515 7,121 7,741
-------- -------- ---------- ----------
Loss before income tax benefit (14,000) (17,214) (50,328) (40,706)
Income tax benefit (5,460) (6,885) (19,628) (16,282)
-------- -------- ---------- ----------
Loss before extraordinary item (8,540) (10,329) (30,700) (24,424)
Extraordinary loss from early extinguishment of debt, net
of tax benefit of $3,551. - - - (5,326)
-------- -------- ---------- ---------
Net loss ($8,540) ($10,329) ($30,700) ($29,750)
======== ======== ========== =========
Weighted average common shares and common
share equivalents outstanding 101,857 101,094 101,395 101,391
======== ======== ========== =========
Per common share:
Loss before extraordinary item ($0.08) ($0.10) ($0.30) ($0.24)
Extraordinary loss from early extinguishment of debt, net
of tax benefit - - - (0.05)
-------- -------- ---------- ---------
Net loss per common share ($0.08) ($0.10) ($0.30) ($0.29)
======== ======== ========== =========
See Notes to Consolidated Financial Statements.
</TABLE>
-3-
<PAGE> 4
<TABLE>
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share data)
<CAPTION>
(Unaudited)
---------------------
Oct. 1, Oct. 2, January 1,
1995 1994 1995 (1)
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $18,901 $15,864 $173,264
Accounts receivable, net of allowance of
$3,022, $3,151 and $3,217, respectively 36,456 39,261 55,134
Refundable income taxes 12,193 12,538 -
Inventories 1,328,436 1,327,219 1,004,282
Prepaid expenses 65,050 50,230 27,778
---------- ---------- ----------
TOTAL CURRENT ASSETS 1,461,036 1,445,112 1,260,458
Property and Equipment:
Owned assets, net of accumulated depreciation of
$492,527, $443,958 and $456,589, respectively 574,319 574,891 594,772
Capitalized leases, net of accumulated amortization
of $79,624, $74,076 and $76,033, respectively 46,391 53,889 51,932
Other assets and deferred charges 22,894 19,849 19,740
---------- ---------- ----------
TOTAL ASSETS $2,104,640 $2,093,741 $1,926,902
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $445,700 $425,400 -
Accounts payable 517,448 596,262 $639,766
Accrued expenses 169,076 148,029 205,709
State and local sales taxes 28,734 30,166 61,668
Income taxes - - 39,364
Current maturities of long-term debt 1,830 13,126 13,098
Current maturities of capitalized lease obligations 7,413 7,894 7,871
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 1,170,201 1,220,877 967,476
Long-term debt 554,577 545,061 544,808
Capitalized lease obligations 68,400 75,876 73,615
Deferred income taxes 5,993 1,696 4,627
---------- ---------- ----------
TOTAL LIABILITIES 1,799,171 1,843,510 1,590,526
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, authorized 4,600
shares, undesignated as to rate and other rights,
none issued
Series A Junior Preferred Stock, $1 par value,
authorized 400 shares, none issued
Common stock, $.50 par value, authorized 500,000
shares, issued and outstanding 99,670, 99,334 and
99,818 shares, respectively 49,835 49,667 49,909
Additional paid-in capital 5,466 3,640 6,115
Deferred compensation (2,273) (312) (2,789)
Retained earnings 252,441 197,236 283,141
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 305,469 250,231 336,376
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,104,640 $2,093,741 $1,926,902
========== ========== ==========
(1) Derived from fiscal year ended January 1, 1995
audited financial statements.
See Notes to Consolidated Financial Statements.
</TABLE>
-4-
<PAGE> 5
<TABLE>
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<CAPTION>
Nine Periods Ended
-----------------------
Oct. 1, Oct. 2,
----------- -----------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($30,700) ($29,750)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 48,748 50,472
Deferred taxes on income 1,366 728
Loss on disposal of property and equipment 198 1,735
Write-off debt issuance cost - 6,830
Changes in assets and liabilities (net of disposition):
Accounts receivable, net 18,678 13,753
Inventories (324,154) (387,960)
Prepaid expenses (37,272) (20,332)
Accounts payable (122,318) (34,461)
Accrued expenses and state and local sales taxes (68,114) (68,644)
Income taxes (51,557) (67,452)
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (565,125) (535,081)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment - owned (23,597) (43,873)
Proceeds from the disposal of property and equipment 1,492 1,901
Other assets, net (4,315) 47
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (26,420) (41,925)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in debt issuance costs (199) (1,783)
Proceeds from short-term borrowings 445,700 425,400
Proceeds from long-term debt 3,600 3,200
Repayment of long-term debt (5,137) (153,554)
Repayment of capitalized lease obligations (5,873) (5,850)
Exercise of stock options and forfeiture of restricted stock, net (909) 365
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 437,182 267,778
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (154,363) (309,228)
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 173,264 325,092
----------- -----------
CASH AND CASH EQUIVALENTS-END OF PERIOD $18,901 $15,864
=========== ===========
See Notes to Consolidated Financial Statements.
</TABLE>
-5-
<PAGE> 6
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. The consolidated financial statements, except for the consolidated
balance sheet as of January 1, 1995, have been prepared by the
Company without audit.
In management's opinion, the information and amounts furnished in
this report reflect all adjustments (consisting of normal
recurring adjustments) considered necessary for the fair
presentation of the financial position and results of operations
for the interim periods presented. Certain prior period amounts
have been reclassified to conform to the current year's
presentation. These financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 1995.
The Company has historically incurred a net loss for the first
three quarters of the year due to the seasonality of its business.
The results of operations for the third quarter ended October 1,
1995 and October 2, 1994 are not necessarily indicative of the
operating results for the entire fiscal year.
B. The third quarters ended October 1, 1995 and October 2, 1994 each
contained 91 selling days. Year to date ended October 1, 1995
contained 272 selling days versus year to date ended October 2,
1994 which contained 273 selling days.
C. The net loss per common share is computed by dividing the net loss
by the weighted average number of common shares and common share
equivalents outstanding.
D. Cash payments for interest for the nine periods ended October 1,
1995 and October 2, 1994 were $50.0 million and $47.3 million,
respectively. Cash payments for income taxes for the nine periods
ended October 1, 1995 and October 2, 1994 were $30.3 million and
$46.9 million, respectively. The Company considers all highly
liquid investments purchased as part of its daily cash management
activities to be cash equivalents. Such investments are generally
made for periods covering 1 to 30 days.
E. On June 8, 1994, the Company completed a $600 million Reducing
Revolving Credit Facility which replaced its existing $475
million Revolving Credit Facility and $122 million outstanding
under the existing Secured Term Loan. The maximum commitment
level for the new facility reduces $25 million annually until
reaching $475 million at December 31, 1998. Currently, the
maximum commitment level is $575 million. The $600 million
Reducing Revolving Credit Facility extended the maturity of the
Company's working capital facility from December 31, 1995 to June
8, 1999, reduced the effective interest rate on those borrowings
to LIBOR + 1.0% from LIBOR + 1.5% (both rates include a 3/8%
facility fee on the committed amount), released the security
interests held in connection with the prior facility and provided
for generally less restrictive covenants. The Reducing Revolving
Credit Facility includes a $400 million competitive bid facility
which allows the Company to solicit bids from its lenders to
borrow at interest rates below the contractual rate. Short-term
borrowings related to the Credit Facility were $445.7 million and
$425.4 million as of October 1, 1995 and October 2, 1994,
respectively.
-6-
<PAGE> 7
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)(continued)
F. During the first half of fiscal 1994, the Company incurred an
extraordinary loss of $5.3 million, or $0.05 per share. This
extraordinary loss included a $1.3 million charge in the first
quarter of 1994 resulting from the early extinguishment of $17
million of high-coupon mortgages with interest rates ranging
between 10% and 12.5% and a non-cash extraordinary loss of $4.0
million, or $0.04 per share, related to a write-off of deferred
finance charges, in the second quarter of 1994, associated with
the refinancing of the Company's $475 million Revolving Credit
Facility and $122 million Term Loan (See Note E).
-7-
<PAGE> 8
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (UNAUDITED)
For comparative purposes, interim balance sheets are more meaningful
when compared to the balance sheets at the same point in time of the
prior year. Comparisons to balance sheets of the most recent fiscal
year end may not be meaningful due to the seasonal nature of the
Company's business.
RESULTS OF OPERATIONS
The nature of the Company's business is highly seasonal. Historically,
sales in the fourth quarter have been substantially higher than sales
achieved in each of the first three quarters of the fiscal year.
Thus expenses and, to a greater extent, operating income
vary greatly by quarter. Caution, therefore, is advised when
appraising results for a period shorter than a full year, or when
comparing any period other than to the same period of the previous year.
THIRD QUARTER ENDED OCTOBER 1, 1995 VS. THIRD QUARTER ENDED
OCTOBER 2, 1994
NET SALES
Net sales for the third quarter of 1995 were $730.0 million compared
to $757.7 million in the third quarter of 1994, representing a 3.6%
decrease. Comparable store sales decreased 6.8%. The decline was the
result of decreased circulation of core advertising materials, a less
aggressive promotional pricing program and the overall weak retail
environment. Sales weakened as the quarter progressed, in part
reflecting a difficult comparison to the heavy promotional environment
that existed in the latter half of the third quarter of 1994. Total
jewelry sales were essentially unchanged with hardlines experiencing a
decline. At the end of the third quarter of 1995, Service Merchandise
was operating 406 stores, a net increase of 13 stores from a year ago.
GROSS MARGIN
Gross margin after buying and occupancy expenses for the third quarter
of 1995 was $176.2 million, or 24.1% of net sales, compared to $175.2
million, or 23.1% of net sales, a year ago. The improved gross margin
rates reflect the Company's focus on higher margin categories and the
shift in sales mix towards jewelry. Buying and occupancy expenses
increased as a percent of sales due to the comparable store sales
decline; this partially offset the increased gross margin rate.
-8-
<PAGE> 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Unaudited) (continued)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the third quarter
were $154.1 million, or 21.1% of net sales, compared to $157.8
million, or 20.8% of net sales, a year ago. The decrease in expense
dollars reflects tighter controls over employment costs and general
expenses. Advertising costs increased in the quarter despite
reductions in the distribution of core marketing materials designed to
offset increased paper and postage costs. The expense increase
relates primarily to the increased number of pages in the fall catalog
and the addition of two major market newspaper inserts.
INTEREST EXPENSE
Interest expense increased to $21.3 million in the quarter as compared
to $19.6 million in the third quarter of 1994. The increase in
interest expense is primarily attributable to higher variable interest
rates this year as compared to last year.
TAXES ON INCOME
The Company recognized an income tax benefit of $5.5 million and $6.9
million for the third quarters ended October 1, 1995 and October 2,
1994, respectively. The effective tax rates for the quarter ended
October 1, 1995 and October 2, 1994 were 39% and 40%, respectively.
For the fiscal year ended January 1, 1995 the effective income tax
rate was 39%.
NINE PERIODS ENDED OCTOBER 1, 1995 VS. NINE PERIODS ENDED OCTOBER 2, 1994
NET SALES
Net sales for the first three quarters of 1995 were $2,332.0 million,
an increase of 0.2% from net sales for the first three quarters of
1994 of $2,327.8 million. Comparable store sales decreased 3.3% in
the first three quarters of 1995 primarily due to an overall weak
retail environment.
-9-
<PAGE> 10
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Unaudited) (continued)
GROSS MARGIN
Gross margin, after taking into account buying and occupancy expenses,
for the nine periods ended October 1, 1995 was $559.8 million, or 24.0% of
net sales as compared to $542.1 million, or 23.3% of net sales, for the same
period a year ago. Merchandise margin rates for both jewelry and hardlines
increased at similar rates over last year due to improved pricing and
promotion of higher margin categories and merchandise. This
improvement in the overall merchandise margin rate was partially
offset by the increased occupancy costs associated with the 13 net
stores opened over the past year and an increase in transportation
costs. The shift in sales mix towards jewelry throughout the year
also contributed to the higher gross margin rate.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $505.5
million, or 21.7% of net sales, for the nine periods ended October 1,
1995 as compared to $481.5 million, or 20.7% of net sales, for the
same sales period a year ago. Developments contributing to the higher
expenses included planned increases in store payroll in the first half
of the year relating to the Company's customer service initiatives
combined with higher advertising costs resulting from nine additional
non-core publications in effect during the period as compared to the
same period last year and increases in postal rates and paper costs.
The increase in advertising costs was partially offset by reductions
in the distribution of core marketing materials in the third quarter.
INTEREST EXPENSE
Interest expense for the first three quarters of 1995 was $57.9
million as compared to $54.4 million for the same period a year ago.
The increase was primarily attributable to higher variable interest
rates under the Company's credit facilities.
TAXES ON INCOME
The Company recognized an income tax benefit of $19.6 million for the
nine periods ended October 1, 1995 compared to an income tax benefit
of $16.3 million for the same period a year ago. The estimated annual
effective tax rates for the nine periods ended October 1, 1995 and
October 2, 1994 were 39% and 40%, respectively. For the fiscal year
ended January 1, 1995 the effective income tax rate was 39%.
EXTRAORDINARY ITEMS
During the first half of fiscal 1994, the Company incurred an
extraordinary loss of $5.3 million, or $0.05 per share. This
extraordinary loss included a $1.3 million charge in the first quarter
of 1994 resulting from the early extinguishment of $17 million of high
coupon mortgages with interest rates ranging between 10% and 12.5% and
a non-cash extraordinary loss of $4.0 million, or $0.04 per share,
related to a write-off of deferred finance charges, in the second
quarter of 1994, associated with the refinancing of the Company's $475
million Revolving Credit Facility and $122 million Term Loan.
-10-
<PAGE> 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Unaudited) (continued)
LIQUIDITY AND CAPITAL RESOURCES
Working capital totaled $290.8 million at October 1, 1995, an increase
of 29.7% from working capital at October 2, 1994 of $224.2 million.
Short-term borrowings totaled $445.7 million at October 1, 1995
($116.2 million available for borrowing) compared to $425.4 million at
October 2, 1994 ($134.7 million available for borrowing), an increase
of $20.3 million. The increase in both working capital and short-term
borrowings is primarily attributable to lower comparable store sales
and decreased inventory turnover. Working capital requirements
fluctuate significantly during the year due to the seasonal nature of
the Company's business. These requirements are financed through
a combination of internally generated cash flow from operating
activities and short-term seasonal borrowings. The current ratio
at both October 1, 1995 and October 2, 1994 was 1.2:1.
On June 8, 1994, the Company completed a $600 million Reducing
Revolving Credit Facility which replaced its existing $475 million
Revolving Credit Facility and $122 million outstanding under the
existing Secured Term Loan. The maximum commitment level for the new
facility reduces $25 million annually until reaching $475 million at
December 31, 1998. Currently, the maximum commitment level is $575
million. The $600 million Reducing Revolving Credit Facility extended
the maturity of the Company's working capital facility from December
31, 1995 to June 8, 1999, reduced the effective interest rate on those
borrowings to LIBOR + 1.0% from LIBOR + 1.5% (both rates include a
3/8% facility fee on the committed amount), released the security
interests held in connection with the prior facility and provided for
generally less restrictive covenants. The Reducing Revolving Credit
Facility includes a $400 million competitive bid facility which allows
the Company to solicit bids from its lenders to borrow at interest
rates below the contractual rate. Short-term borrowings related to
the Credit Facility were $445.7 million and $425.4 million as of
October 1, 1995 and October 2, 1994, respectively.
Total debt, including current maturities and capitalized leases,
decreased to $632.2 million at October 1, 1995 from $642.0 million at
October 2, 1994. The decrease in total debt was primarily the result
of scheduled payments for capitalized lease obligations, mortgages,
and Industrial Revenue Bonds.
Additions to owned property and equipment were $23.6 million for the
nine periods ended October 1, 1995 compared to $43.9 million for the
same period last year. The Company operated 406 catalog stores as of
October 1, 1995, a net increase of 13 stores from a year ago. Company
plans call for new stores opening at a rate of approximately 3% for
1995, some of which will replace existing stores which will be closed.
The Company expects to incur capital expenditures of approximately $50
million primarily for new store openings during fiscal 1995 and plans
to fund these expenditures through a combination of cash flow from
operations and borrowings under the Reducing Revolving Credit
Facility.
-11-
<PAGE 12>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in the Rights of the Company's Security Holders
Not applicable.
Item 3. Defaults by the Company on Its Senior Securities
Not applicable.
Item 4. Results of Votes of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
-12-
<PAGE> 13
PART II - OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K
6(a) Exhibits filed with this Form 10-Q
Exhibit No. Under Items
601 of Regulation S-K Brief Description
--------------------- -----------------
11 Statement re
Computation of Loss
Per Common Share for
the Three Periods Ended
and Nine Periods Ended
October 1, 1995 and October 2, 1994
27 Financial Data Schedule
for the Nine Periods Ended
October 1, 1995
6(b) Reports on Form 8-K
There were no reports on Form 8-K during the three periods ended
October 1, 1995.
-13-
<PAGE 14>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SERVICE MERCHANDISE
COMPANY, INC.
Date: November 10, 1995 /s/ Raymond Zimmerman
----------------------
Raymond Zimmerman
Chairman of the Board
and Chief Executive Officer
(Chief Executive Officer)
Date: November 10, 1995 /s/ Gary M. Witkin
----------------------
Gary M. Witkin
President and Chief Operating Officer
(Chief Operating Officer)
Date: November 10, 1995 /s/ S. Cusano
----------------------
S. Cusano
Vice President and
Chief Financial Officer
(Chief Financial Officer)
(Chief Accounting Officer)
-14-
<PAGE> 15
<TABLE>
EXHIBIT 11
SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES
Computation of Net Loss Per Common Share (Unaudited)
(In thousands, except per share data)
<CAPTION>
Three Nine
Periods Ended Periods Ended
------------------- -------------------
Oct. 1, Oct. 2, Oct. 1, Oct. 2,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary
- -------
Loss before extraordinary item ($8,540) ($10,329) ($30,700) ($24,424)
Extraordinary loss from early extinguishment of debt,
net of tax benefit of $3,551. - - - (5,326)
--------- --------- --------- ---------
Net loss ($8,540) ($10,329) ($30,700) ($29,750)
========= ========= ========= =========
Shares:
Weighted average common shares outstanding 99,136 98,576 99,029 98,532
Weighted average shares of restricted
stock outstanding 528 774 659 831
Additional shares assuming exercise of stock options 2,193 1,744 1,707 2,028
Weighted average common shares and common --------- --------- --------- ---------
share equivalents outstanding - primary 101,857 101,094 101,395 101,391
========= ========= ========= =========
Loss before extraordinary item ($0.08) ($0.10) ($0.30) ($0.24)
Extraordinary loss from early extinguishment of debt,
net of tax benefit - - - (0.05)
--------- --------- --------- ---------
Primary net loss per common share ($0.08) ($0.10) ($0.30) ($0.29)
========= ========= ========= =========
Assuming Full Dilution
- ----------------------
Loss before extraordinary item ($8,540) ($10,329) ($30,700) ($24,424)
Extraordinary loss from early extinguishment of debt,
net of tax benefit of $3,551. - - - (5,326)
--------- --------- --------- ---------
Net loss ($8,540) ($10,329) ($30,700) ($29,750)
========= ========= ========= =========
Shares:
Weighted average common shares outstanding 99,136 98,576 99,029 98,532
Weighted average shares of restricted
stock outstanding 528 774 659 831
Additional shares assuming exercise of stock options 2,236 1,778 1,737 2,045
Weighted average common shares and common --------- --------- --------- ---------
share equivalents outstanding - fully diluted 101,900 101,128 101,425 101,408
========= ========= ========= =========
Loss before extraordinary item ($0.08) ($0.10) ($0.30) ($0.24)
Extraordinary loss from early extinguishment of debt,
net of tax benefit - - - (0.05)
--------- --------- --------- ---------
Fully diluted net loss per common share ($0.08) ($0.10) ($0.30) ($0.29)
========= ========= ========= =========
-15-
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Service
Merchandise Company, Inc. Form 10-Q for the Nine Periods Ended October 1, 1995
and is qualified in its entirety by reference to such financial statements and
accompanying notes to the financial statements detailed in Part I of the Form
10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-2-1995
<PERIOD-END> OCT-1-1995
<CASH> 18,901
<SECURITIES> 0
<RECEIVABLES> 39,478
<ALLOWANCES> 3,022
<INVENTORY> 1,328,436
<CURRENT-ASSETS> 1,461,036
<PP&E> 1,192,861
<DEPRECIATION> 572,151
<TOTAL-ASSETS> 2,104,640
<CURRENT-LIABILITIES> 1,170,201
<BONDS> 622,977
<COMMON> 99,670<F1>
0
0
<OTHER-SE> 255,634
<TOTAL-LIABILITY-AND-EQUITY> 2,104,640
<SALES> 2,332,035
<TOTAL-REVENUES> 2,332,035
<CGS> 1,772,284
<TOTAL-COSTS> 1,772,284
<OTHER-EXPENSES> 552,165<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,914
<INCOME-PRETAX> (50,328)
<INCOME-TAX> (19,628)
<INCOME-CONTINUING> (30,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,700)
<EPS-PRIMARY> (0.30)
<EPS-DILUTED> (0.30)
<FN>
<F1> Amount represents the number of shares of $.50 par value common stock
issued and outstanding
<F2> Amount includes I) depreciation and amortization and II) selling, general
and administrative expenses.
</FN>
</TABLE>
