<PAGE> 1
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: February 25, 2000
SERVICE MERCHANDISE COMPANY, INC.
(Debtor-in-Possession as of March 27, 1999)
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 1-9223 62-0816060
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
7100 Service Merchandise Boulevard, Brentwood, TN 37027
- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 660-6000
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 5. Other Events
- --------------------------------------------------------------------------------
Service Merchandise Company, Inc. (the "Company") has filed its monthly
operating report for the period commencing January 3, 1999 and ending January
30, 2000 (the "Operating Report") with the United States Bankruptcy Court for
the Middle District of Tennessee, a copy of which is attached hereto as Exhibit
99, in connection with its voluntary petitions for reorganization under Chapter
11 of title 11 of the United States Bankruptcy Code in Case No. 399-02649.
The Company cautions investors or potential investors not to place
undue reliance upon the information contained therein. The Operating Report
contains unaudited information, and is in a format, prescribed by the applicable
bankruptcy laws. There can be no assurance that, from the prospective of an
investor or potential investor in the Company's securities, the Operating Report
is complete. The Operating Report also contains information for periods which
may be shorter or otherwise different from those contained in the Company's
reports pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such information may not be indicative of the Company's
financial condition or operating results for the periods reflected in the
Company's financial statements or in its reports pursuant to the Exchange Act
and investors and potential investors in the Company's securities are cautioned
to refer to the Exchange Act filings. Moreover, the Operating Report and other
communications from the Company may include forward-looking statements subject
to various assumptions regarding the Company's operating performance that may
not be realized and subject to significant business, economic and competitive
uncertainties and contingencies, including those described in this report, many
of which are beyond the Company's control. Consequently such matters should not
be regarded as a representation or warranty by the Company that such matters
will be realized or are indicative of the Company's financial condition or
operating results for future periods or the periods covered in the Company's
reports pursuant to the Exchange Act. Actual results for such periods may differ
materially from the information contained in the Operating Report and the
Company undertakes no obligation to update or revise such Operating Report.
The Operating Report includes a Rolling Revised Cash Flow Forecast
which is a forward-looking statement subject to various assumptions regarding
the Company's business, operating performance and other factors including
revenues, expenses, asset dispositions, trade terms and capital expenditures,
and various risks and uncertainties including those set forth below. This
information should be read in conjunction with the Company's reports filed
pursuant to the Exchange Act. Investors and potential investors in the Company's
securities are cautioned that such information is being reported publicly
because it is being distributed to a large number of the Company's vendors for
purposes of their credit analyses. The Company undertakes no obligation to
update such information or to disclose similar information in future Operating
Reports. The Rolling Revised Cash Flow Forecast was not examined, reviewed or
compiled by the Company's independent public accountants. The Rolling Revised
Cash Flow Forecast is subject to future adjustments, if any, that could
materially affect such information.
2
<PAGE> 3
The Company's liquidity, capital resources and results of operations
are subject to a number of risks and uncertainties including, but not limited
to, the following: approval of plans and activities by the Bankruptcy Court,
including the proposed extension of the exclusivity period; the ability of the
Company to continue as a going concern; the ability of the Company to operate
pursuant to the terms of the DIP Facility; risks associated with third parties
seeking and obtaining Court action to terminate or shorten the exclusivity
period; the ability of the Company to operate successfully under a Chapter 11
proceeding, achieve planned sales and margin, and create and have approved a
reorganization plan in the Chapter 11 Cases; potential adverse developments with
respect to the Company's liquidity or results of operations; the ability of the
Company to obtain shipments, negotiate and maintain terms with vendors and
service providers for current orders; the ability to develop, fund and execute a
Year 2000 Business Plan; the ability of the Company to attract, retain and
compensate key executives 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 which may affect consumer confidence and consumer demand for
the types of goods sold by the Company; 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; real estate occupancy and development costs, including the
substantial fixed investment costs associated with opening, maintaining or
closing a Company store; uncertainties with respect to continued public trading
in the Company's securities; and the ability to effect conversions to new
technological systems.
3
<PAGE> 4
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: February 25, 2000 By: /s/ Thomas L. Garrett, Jr.
---------------------------------------
Thomas L. Garrett, Jr.
Senior Vice President, Chief Financial
Officer
4
<PAGE> 5
EXHIBIT INDEX
No. Exhibit
- --------- -------------------------------------------------------
99 Operating Report for the period ending January 30, 2000
<PAGE> 1
Exhibit 99
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF TENNESSEE
In re: Case No.: 399-02649
-----------------
SERVICE MERCHANDISE COMPANY, INC. THROUGH 399-02680
--------------------------------- -----------------
Judge: PAINE
-----------------
Chapter 11
Debtor(s)
MONTHLY OPERATING REPORT FOR PERIOD ENDING January 30, 2000
-----------------
COMES NOW, SERVICE MERCHANDISE COMPANY, INC.
---------------------------------
Debtor-In-Possession, and hereby submits its preliminary Monthly Operating
Report for the period commencing January 3, 2000 and ending January 30,
2000 as shown by the report and exhibits consisting of 11 pages and
containing the following as indicated:
[X] Monthly Reporting Questionnaire (Attachment 1)
[ ] 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)
[ ] 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.
This report is based on preliminary unaudited results, and includes those
reports agreed upon as appropriate at this time between the Debtor and the
U.S. Trustee. The Debtor and the U.S. Trustee have also agreed that the
Debtor will file the remaining reports and forms by March 6, 2000. 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: 2-21-00 DEBTOR - IN - POSSESSION
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By: /s/ Tom Garrett
-------------------------------------------
Name and Title: TOM GARRETT,
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SENIOR VICE PRESIDENT & CFO
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Address: 7100 SERVICE MERCHANDISE DRIVE
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BRENTWOOD, TENNESSEE 37027
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Telephone No: 660-3477
------------------------------
Note: Report subject to further verification and account reconciliation
procedures
<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 3, 2000 THROUGH JANUARY 30, 2000
1. Payroll
<TABLE>
<CAPTION>
WAGES TAXES
OFFICERS TITLE GROSS NET DUE PAID
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SAM CUSANO CHIEF EXECUTIVE OFFICER 50,188.10 27,870.76 4,218.26 14,740.21
STEVE MOORE SENIOR VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER,
GENERAL COUNSEL AND SECRETARY 27,693.91 16,522.46 2,198.69 7,544.16
TOM GARRETT SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER 25,089.38 15,939.83 1,518.14 5,832.77
GARY SEASE SENIOR VICE PRESIDENT, LOGISTICS 25,507.28 14,463.43 1,908.69 6,802.26
CHARLES SEPTER PRESIDENT AND CHIEF OPERATING OFFICER 39,229.81 21,400.26 3,188.97 11,393.83
KENNETH BRAME SENIOR VICE PRESIDENT, INFORMATION SERVICES AND
CHIEF INFORMATION OFFICER 23,118.27 13,674.62 1,638.64 6,053.93
ROBERT J. PINDRED VICE PRESIDENT AND TREASURER 10,788.04 7,276.64 672.90 1,996.90
JOE M. ELLIOTT ASSISTANT VICE PRESIDENT, PROPERTY ADMINISTRATION 8,139.03 5,080.93 488.62 1,465.49
ERIC KOVATS VICE PRESIDENT, STORES 17,474.45 10,775.71 1,103.20 4,097.74
KARREN PRASIFKA ASSISTANT GENERAL COUNSEL VICE PRESIDENT 13,135.16 8,135.92 1,235.01 3,662.03
BILLY STEWART ASSISTANT TAX VICE PRESIDENT, TAX 6,550.98 4,678.28 335.72 995.56
KENNETH A CONWAY VICE PRESIDENT AND CONTROLLER 12,335.22 8,639.66 846.69 2,508.17
</TABLE>
<PAGE> 3
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASED NAME: SERVICE MERCHANDISE CONPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: January 3, 2000 THROUGH January 30, 2000
2. INSURANCE
<TABLE>
<CAPTION>
COVERAGE POLICY EXPIRATION PREMIUM DATE COVERAGE
TYPE NAME OF CARRIER AMOUNT NUMBER DATE AMOUNT PAID THRU
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property Security Ins Co of Hartford $5 Million CCIPW12011 05/01/00 $921,750 05/01/00
Royal $5 Million RHD314289 12/31/00 $100,000 12/31/00
Westchester Fire $15 Million 1XA394310 12/31/00 $ 50,100 12/31/00
Allianz Insurance Co $12 Million CLP1034720 12/31/00 $ 20,040 12/31/00
TIG Insurance Co $13 Million XPT38797667 12/31/00 $ 32,500 12/31/00
Westchester Fire $20 Million 1XA394311 12/31/00 $ 10,020 12/31/00
Allianz Insurance Co $30 Million CLP1034720 12/31/00 $ 15,030 12/31/00
Allianz Insurance Co $25 Million CLP1034720 12/31/00 $ 6,680 12/31/00
Boiler & Machinery Hartford Steam Boiler $10 Million BMTBD 05/01/00 $ 11,900 05/01/00
Transit Security Ins Co of Hartford $1 Million CCIMG72820 05/01/00 $ 10,000 05/01/00
Ocean Cargo Phoenix Assurance Co of NY $10 Million CR37211 05/01/00 $ 40,000 05/01/00
Special Crime Reliance Insurance Co $25 Million NFK1951937 05/01/02 $ 13,458 05/01/02
Crime National Union Fire Ins Co $10 Million 858-0797 03/01/00 $ 56,505 03/01/00
Fiduciary National Union Fire Ins Co $10 Million 267-81-30 03/01/00 $ 19,462 03/01/00
Employment Practices Chubb Insurance Co $10 Million 81278901A 03/01/00 $221,575 03/01/00
Liability Royal Insurance Co $10 Million PSF000010 03/01/00 $ 88,200 03/01/00
Directors & Officers Continental Insurance Co $10 Million 300714943 03/01/01 $453,500 03/01/01
Chubb Insurance Co $10 Million 81278902-A 03/01/01 $266,666 03/01/01
Royal Insurance Co $10 Million PSF000009 03/01/01 $133,000 03/01/01
Umbrella Federal Insurance Co $50 Million 79763295 12/31/01 $ 63,357 12/31/00
Excess Liability American Guarantee & Liab $50 Million AEC287610700 12/31/00 $ 25,000 12/31/00
International Ace American Ins Co $1 Million PHF051491 12/31/00 $ 2,500 12/31/00
Punitive Damages Chubb Atlantic Indemnity $50 Million (00) 3310-05-98 12/31/00 $ 17,160 12/31/00
Punitive Damages - Excess Zurich International Bermuda $50 Million ZGEB-091 PD 12/31/00 $ 5,000 12/31/00
General Liability Ace American Ins Co $5 Million XSLG19903254 12/31/00 $ 11,032 02/29/00
Workers' Compensation Pacific Employers Ins Co Statutory WLRC42662112 12/31/00 $ 19,978 02/29/00
WC Excess Ace American Ins Co Statutory XWC011950 12/31/00 $ 1,601 02/29/00
WC Contractual Indemnity Illinois Union Insurance Co Statutory CTPG19903461 12/31/00 $ 2,083 02/29/00
WC Nevada Ace American Ins Co Statutory NWCC42662173 12/31/00 $ 1,737 02/29/00
Auto Pacific Employers Ins Co $1 Million ISAH07571008 12/31/00 $ 2,083 02/29/00
</TABLE>
<PAGE> 4
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASH NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: JANUARY 3, 2000 THROUGH JANUARY 30, 2000
3. BANK ACCOUNTS
<TABLE>
<S> <C>
TOTAL CASH AND CASH EQUIVALENTS
CASH IN STORES AND HOME OFFICE
HOME OFFICE $ 9,750
RETAIL SAFE FUNDS $ 2,094,081
CORPORATE ACCOUNTS $ 2,268,021
STORE DEPOSITORY ACCOUNTS
FIRST TENNESSEE $ 2,885,755
FIRSTAR $ 1,376
SOCIETY NATIONAL BANK $ 353,809
BANK OF BOSTON $ 395,510
BANK OF BOSTON CONNECTICUT $ 171,002
MERCANTILE BANK $ 18,004
FIRST UNION $ 2,995,689
HARRIS TRUST $ 558,190
BANK ONE LOUISIANA $ 456,700
ABN - AMRO BANK $ 343,126
COMERICA BANK $ 247,110
AM SOUTH $ 234,334
BANK OF AMERICA CALIFORNIA $ 73,204
FIRST AMERICAN NATIONAL BANK $ 172,169
HERITAGE BANK OF NEVADA $ 775
BANK OF OKLAHOMA $ 117,432
CHASE BANK OF TEXAS $ 635,520
HIBERNIA $ 42,150
SINGLE STORE DEPOSITORY ACCOUNTS $ 2,035,675
FIRST NATIONAL BANK OF MARYLAND $ 39,307
FIFTH THIRD BANK $ 43,593
WELLS FARGO BANK $ 66,266
NATIONSBANK $ 169,007
BANK ONE, IN $ 207,209
PNC BANK $ 738,437
BANK ONE , TEXAS $ 35,017
CREDIT CARD CASH ACCOUNTS (SALES PROCESSED BY CREDIT CARD COMPANY) $10,227,750
OTHER DEPOSITORY ACCOUNTS
SERVICE MERCHANDISE - MUSCULAR DYSTROPHY ASSOC $ 25,623
OTHER CASH ACCOUNTS $ 1,033,515
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TOTAL CASH PER GENERAL LEDGER $28,695,105
===========
</TABLE>
<PAGE> 5
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASH NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: JANUARY 3, 2000 THROUGH JANUARY 30, 2000
RECEIPTS AND DISBURSEMENTS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Actual Actual Actual Actual Total
Monday 01/03/00 01/10/00 01/17/00 01/24/00 01/03/00
Sunday 01/09/00 01/16/00 01/23/00 01/30/00 01/30/00
------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Receipts:
Sales receipts $31,184 $ 22,617 $ 20,538 $ 21,581 $ 95,920
Miscellaneous receipts 15,060 3,267 2,497 820 21,644
------- -------- -------- -------- ---------
Total available collections 46,244 25,884 23,035 22,401 117,564
Disbursements:
Merchandise disbursements 19,137 17,050 13,902 17,405 67,494
Non-merchandise disbursements 19,781 18,050 29,255 21,371 88,457
------- -------- -------- -------- ---------
Total disbursements 38,918 35,100 43,157 38,776 155,951
------- -------- -------- -------- ---------
Net receipts (disbursements) $ 7,326 $ (9,216) $(20,122) $(16,375) $ (38,387)
======= ======== ======== ======== =========
</TABLE>
<PAGE> 6
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASH NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: JANUARY 3, 2000 THROUGH JANUARY 30, 2000
ROLLING REVISED CASH FLOW FORECAST
(Dollars in Thousands)
<TABLE>
<CAPTION>
Actual Actual Forecast Forecast
01/30/00 02/06/00 02/27/00 04/02/00
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Ending total revolver balance $ 81,313 $102,564 $102,377 $127,180
Term loan 99,250 99,250 99,250 99,250
Standby letters of credit 27,138 27,138 27,138 27,138
Trade letters of credit 39,592 36,614 30,168 27,984
-------- -------- -------- --------
Total extensions of credit 247,293 265,566 258,933 281,552
Borrowing base 524,757 530,340 542,115 530,869
-------- -------- -------- --------
Availability $277,464 $264,774 $283,182 $249,317
======== ======== ======== ========
</TABLE>
<PAGE> 7
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASED NAME: SERVICE MERCHANDISE CONPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: January 3, 2000 THROUGH January 30, 2000
4. Payments to Professionals January 3, 2000 through January 30, 2000
<TABLE>
<CAPTION>
Vendor # Vendor Name Check Amt. Check Date Check #
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
84740 Taft, Stettinius & Hollister $2,418.51 1/5/00 30031853
48779 Loss, Pavone & Orel $498.95 1/5/00 30031959
48779 Loss, Pavone & Orel $261.25 1/6/00 30032189
57117 Deloitte & Touche $78,799.00 1/7/00 30032249
80443 Coudert Brothers $9,050.50 1/7/00 30032270
99459 Robert L. Berger & Associates $7,590.05 1/7/00 B0020647
99277 Rosemont & Associates $5,442.17 1/13/00 30032955
57117 Deloitte & Touche $37,654.88 1/28/00 30035550
52999 Butler, Snow, O'Mara, Stevens & Cananda $1,464.08 1/28/00 30035578
99391 Otterbourg, Steindler, Houston & Rosen, PC $130,078.40 1/28/00 B0020879
100906 Peter J. Solomon $116,703.60 1/28/00 B0020880
63078 Weil, Gotshal & Manges, LLP $4,340.91 1/28/00 B0020881
98378 Skadden, Arps, Slate, Meagher & Flom $263,332.00 1/28/00 B0020882
99444 Sitrick & Company $34,140.10 1/28/00 B0020884
79108 Ernst & Young $7,730.00 1/28/00 B0020886
99454 Harwell, Howard, Hyne, Gabbert & Manner, PC $20,998.61 1/28/00 B0020887
99104 Jay Alix & Associates $115,000.99 1/28/00 B0020888
71217 Bass, Berry & Sims $84,517.89 1/28/00 B0020889
</TABLE>
<PAGE> 8
CHAPTER 11
MONTHLY OPERATING REPORT
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: JANUARY 3, 2000 THROUGH JANUARY 30, 2000
SUMMARY OF ACCOUNTS RECEIVABLE
Month Ended: 01/30/00
FORM OPR-3 NOT APPLICABLE
<PAGE> 9
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASH NAME: SERVICE MERCHANDISE COMPANY, INC. et. al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: JANUARY 3, 2000 THROUGH JANUARY 30, 2000
SCHEDULE OF POST PETITION LIABILITIES
FORM OPR-4
(Dollars in Thousands)
<TABLE>
<CAPTION>
DATE TOTAL DUE
INCURRED DATE DUE (1/30/00 Balance)
-----------------------------------------------------
<S> <C> <C> <C>
POST PETITION SECURED DEBT
Revolver borrowings 03/27/99 06/30/01 $ 81,313
Facility standby letters of credit 03/27/99 06/30/01 27,138
Facility trade letters of credit 03/27/99 06/30/01 39,592
Term loans 03/27/99 06/30/01 99,250
---------
TOTAL EXTENSIONS OF CREDIT $ 247,293
=========
ACCRUED INTEREST PAYABLE $ 984
=========
</TABLE>
