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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: March 31, 1999
SERVICE MERCHANDISE COMPANY, INC.
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(Exact name of registrant as specified in its charter)
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Tennessee 1-9223 62-0816060
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
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7100 Service Merchandise Boulevard, Brentwood, TN 37027
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 660-6000
Not Applicable
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(Former name or former address, if changed since last report)
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Item 3. Bankruptcy or Receivership
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On March 15, 1999, five of the Registrant's vendors filed an
involuntary Chapter 11 reorganization petition in the United States Bankruptcy
Court for the Middle District of Tennessee (the "Bankruptcy Court") seeking
court supervision of the Registrant's restructuring efforts. On March 27, 1999,
the Registrant and 31 of its subsidiaries (collectively, the "Debtors") filed
voluntary petitions with the Bankruptcy Court for reorganization under Chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code") (Case No.
399-02649). The cases have been consolidated for the purpose of joint
administration and have been assigned to Judge George C. Paine. At a first day
hearing held on March 29, 1999, the Bankruptcy Court entered first day orders
granting authority to the Debtors, among other things, to pay pre-petition and
post-petition employee wages, salaries, benefits and other employee obligations;
pay vendors and other providers in the ordinary course for goods and services
from March 15, 1999 and honor customer service programs, including warranties,
returns, layaways and gift certificates.
The Bankruptcy Court also approved, on an interim basis, the Debtors'
$750 million debtor-in-possession financing facility ("DIP Financing"). The DIP
Financing is being provided pursuant to a commitment from the Registrant's
current senior lenders led by Citicorp USA, Inc., as administrative agent,
BankBoston, N.A., as documentation agent and collateral monitoring agent, and
Salomon Smith Barney Inc., as sole arranger and book manager. The final hearing
on the DIP Financing is scheduled for April 27, 1999.
Copies of all first day orders and other pleadings filed in the case
may be obtained for a nominal cost directly from:
Professional Reprographics
333 Union Street, Suite B-100
Nashville, TN 37201
Telephone: 615/255-6094
Facsimile: 615/255-6092
Item 5. Other Events
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On March 23, 1999, the Registrant's Board of Directors appointed S.
Cusano as Chief Executive Officer and Charles Septer as President and Chief
Operating Officer. C. Steven Moore, Senior Vice President and General Counsel,
will also assume the additional role of Chief Administrative Officer. On March
27, 1999, Thomas L. Garrett, Jr., was named Chief Financial Officer and Eric
Kovats was appointed Vice President, Hardlines Stores Organization.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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See attached press release.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
SERVICE MERCHANDISE COMPANY, INC.
Date: March 31, 1999 By: /s/ C. Steven Moore
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C. Steven Moore
Senior Vice President, General Counsel
and Chief Administrative Officer
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EXHIBIT INDEX
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No. Exhibit
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99.1 Press release dated March 30, 1999.
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EXHIBIT 99.1
PRESS RELEASE
The following is the text of a press release issued by Service Merchandise
Company, Inc. on March 30, 1999.
SERVICE MERCHANDISE RECEIVES APPROVAL OF FIRST-DAY ORDERS IN
CONNECTION WITH VOLUNTARY RESTRUCTURING UNDER CHAPTER 11
$750 MILLION DIP FINANCING GRANTED, INTERIM APPROVAL OF CHIEF FINANCIAL OFFICER
AND VICE PRESIDENT OF STORES ORGANIZATION NAMED
NASHVILLE, Tenn.--March 30, 1999--Service Merchandise Company, Inc. (NYSE:SME)
announced today it has received Bankruptcy Court approval to, among other
things, pay pre-petition and post-petition employee wages, salaries,
commissions, workers' compensation, health benefits, life and disability
insurance and other employee obligations during its voluntary restructuring
under Chapter 11, which commenced on March 27, 1999. The Court also authorized
the Company to pay vendors and other providers in the ordinary course for goods
and services received from March 15, and to honor customer service programs,
including warranties, returns, layaways and gift certificates.
In addition, the Court approved interim debtor-in-possession (DIP) financing for
immediate use by the Company to continue operations, pay employees and purchase
goods and services going forward. Service Merchandise has received a commitment
for up to $750 million in DIP financing from the Company's current senior
lenders led by Citicorp USA, Inc., as administrative agent, BankBoston, N.A., as
documentation agent and collateral monitoring agent, and Salomon Smith Barney
Inc., as sole arranger and book manager. The final hearing on the DIP agreement
has been set for April 27. The Court also scheduled a hearing at that time on a
motion the Company filed Saturday seeking approval of an employee retention
program.
In related decisions, the Court approved the Company's requests to continue
various vendor-related programs, including payment of pre-petition consignment
claims and acceptance of consignment procedures, as well as completing the final
inventory clearances at stores previously announced to be closed.
Chief Executive Officer Sam Cusano said he was extremely pleased that the Court
approved all of the Company's first-day orders, as well as by the strong support
received at the first-day hearing by the Company's banks, the informal committee
of vendors and bondholder representatives. He noted that the voluntary Chapter
11 restructuring should have no impact on the day-to-day operations of the
Company's stores, distribution centers and offices, or on its ability to serve
its customers. "There will be no interruption in operations at the Company's
stores, and we will continue to purchase and pay for goods and services from our
suppliers." He
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also stated that Service Merchandise has already contacted a number of its major
vendors, who have indicated their support.
"With our first-day motions approved and our interim DIP financing in place, we
can now renew our focus on the core operations of our business and concentrate
on our key constituencies -- our customers, our vendors and our employees. We
will continue our restructuring initiatives aimed at increasing operating
efficiencies, reducing overhead and improving margins and profitability.
Concentrating on these areas will enable Service Merchandise to maximize the
value of the business for all of the Company's stakeholders," Mr. Cusano said.
In other action, Thomas L. Garrett, Jr., has been appointed Senior Vice
President and Chief Financial Officer, succeeding Mr. Cusano. Mr. Garrett, 45,
joined Service Merchandise in 1996 as Vice President and Treasurer. Prior to
that, he had been with Goodyear Tire & Rubber Co. since 1976, serving in various
finance positions, including Director of Treasury.
Eric Kovats, 44, was appointed Vice President, Hardlines Stores Organization,
assuming responsibility for the operations of the Company's stores. Mr. Kovats
joined Service Merchandise in 1973, and has served in various store management
and district management positions. He had been a Regional Vice President since
1996.
Service Merchandise and its subsidiaries filed voluntary petitions for
reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Middle
District of Tennessee in Nashville on March 27, 1999.
Service Merchandise is a specialty retailer focusing on fine jewelry, gifts and
home decor products.
This press release includes certain forward-looking statements in reliance on
the "safe harbor" provisions of The Private Securities Litigation Reform Act of
1995. Any such forward-looking statements are subject to a number of risks and
uncertainties, including but not limited to the factors identified below. Actual
results may differ materially from those anticipated in any such forward-looking
statements. The Company undertakes no obligation to update or revise any such
forward-looking statements.
The Company's liquidity, capital resources, and results of operations may be
affected from time to time by a number of factors and risks, including, but not
limited to, the ability of the Company to execute definitive DIP financing
documents which are approved by the Bankruptcy Court; the ability of the Company
to operate successfully under a Chapter 11 proceeding; approval of plans and
activities by the Bankruptcy Court; risks associated with operating a business
in Chapter 11; adverse developments with respect to the Company's liquidity or
results of operations; the ability of the Company to obtain shipments and
negotiate terms with vendors and service providers for current orders; the
ability of the Company to negotiate terms with landlords with respect to stores
to be closed and current and future lease obligations; the ability to conduct
going out of business inventory sales to result in improved liquidity; the
ability to develop, fund and execute a new operating plan for the Company; the
ability of the Company to attract and retain key executives
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and associates; competitive pressures from other retailers, including specialty
retailers and discount stores, which may affect the nature and viability of the
Company's business strategy; trends in the economy as a whole; the ability to
maintain gross profit margins; the seasonal nature of the Company's business and
the ability of the Company to predict consumer demand as a whole, as well as
demand for specific goods; the ability of the Company to attract and retain
customers; costs associated with the shipping, handling and control of inventory
and the Company's ability to optimize its supply chain; potential adverse
publicity; availability and cost of management and labor employed; real estate
occupancy and development costs, including the substantial fixed investment
costs associated with opening, maintaining or closing a Company store; the
ability to liquidate unwanted inventory at existing or closed stores; and the
ability to effect conversions to new technological systems, including becoming
Year 2000 compliant.
