<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 2, 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 November 29, 1999 and ending
January 2, 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 2, 2000 By: /s/ C. Steven Moore
-------------------------------------------
C. Steven Moore
Senior Vice President, Chief Administrative
Officer, Secretary and General Counsel
4
<PAGE> 5
EXHIBIT INDEX
No. Exhibit
- --- ------------------------------------------------------
99 Operating Report for the period ending January 2, 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 2, 2000
---------------
COMES NOW, SERVICE MERCHANDISE COMPANY, INC.
---------------------------------
Debtor-In-Possession, and hereby submits its Preliminary Monthly
Operating Report for the period commencing November 29, 1999 and ending
January 2, 2000 as shown by the report and exhibits consisting of 10
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 (Secured Debt) 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 February 21,
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: _____________ DEBTOR - IN - POSSESSION
By: __________________________________________
Name and Title: TOM GARRETT,
------------------------------
SENIOR VICE PRESIDENT & CFO
------------------------------
Address: 7100 SERVICE MERCHANDISE DRIVE
------------------------------
BRENTWOOD, TENNESSEE 37027
------------------------------
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: NOVEMBER 29, 1999 THROUGH JANUARY 2, 2000
1. Payroll
<TABLE>
<CAPTION>
WAGES TAXES
OFFICERS TITLE GROSS NET DUE PAID
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SAM CUSANO CHIEF EXECUTIVE OFFICER 63,495.00 38,277.48 5,058.27 18,045.23
STEVE MOORE SENIOR VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER,
GENERAL COUNSEL AND SECRETARY 34,483.63 22,425.30 2,510.58 8,924.95
TOM GARRETT SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER 31,147.08 21,855.90 1,944.63 6,631.52
GARY SEASE SENIOR VICE PRESIDENT, LOGISTICS 35,555.86 18,043.98 2,350.73 10,082.97
CHARLES SEPTER PRESIDENT AND CHIEF OPERATING OFFICER 48,845.20 30,792.21 3,847.36 13,573.48
KENNETH BRAME SENIOR VICE PRESIDENT, INFORMATION SERVICES AND
CHIEF INFORMATION OFFICER 28,695.20 18,863.33 2,035.60 7,054.51
ROBERT J. PINDRED VICE PRESIDENT AND TREASURER 20,289.98 8,922.77 694.10 4,048.96
JOE M. ELLIOTT ASSISTANT VICE PRESIDENT, PROPERTY ADMINISTRATION 10,164.30 68,845.47 504.47 1,409.50
ERIC KOVATS VICE PRESIDENT, STORES 22,965.40 14,429.08 1,406.86 5,007.37
KARREN PRASIFKA ASSISTANT GENERAL COUNSEL VICE PRESIDENT 16,375.30 10,996.53 1,254.71 4,056.26
BILLY STEWART ASSISTANT VICE PRESIDENT, TAX 8,183.10 6,058.45 348.07 856.71
KENNETH A. CONWAY VICE PRESIDENT AND CONTROLLER 17,933.56 11,267.26 871.08 3,312.60
The associate listed below received relocation which
is included in the amounts above.
ROBERT J. PINDRED 8,163.85
KENNETH A. CONWAY 3,136.80
</TABLE>
<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: NOVEMBER 29, 1999 THROUGH JANUARY 2, 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 5/1/00 $921,750 5/1/00
Commonwealth $5 Million US2387 5/1/00 $92,419 5/1/00
Westchester Fire $15 Million 1XA394310 5/1/00 $75,000 5/1/00
Allianz Insurance Co $12 Million CLP1034720 5/1/00 $30,000 5/1/00
TIG Insurance Co $13 Million XPT38797554 5/1/00 $32,500 5/1/00
Westchester Fire $30 Million 1XA394311 5/1/00 $15,000 5/1/00
Allianz Insurance Co $12 Million CLP1034720 5/1/00 $22,500 5/1/00
Allianz Insurance Co $25 Million CLP1034720 5/1/00 $10,000 5/1/00
Boiler & Machinery Hartford Steam Boiler $10 Million BMTBD 5/1/00 $11,900 5/1/00
Transit Security Ins Co of Hartford $1 Million CCIMG72820 5/1/00 $10,000 5/1/00
Ocean Cargo Phoenix Assurance Co of NY $10 Million CR37211 5/1/00 $40,000 5/1/00
Special Crime Reliance Insurance Co $25 Million NFK1951937 5/1/02 $13,458 5/1/02
Crime National Union Fire Ins Co $10 Million 858-0797 3/1/00 $56,505 3/1/00
Fiduciary National Union Fire Ins Co $10 Million 267-81-30 3/1/00 $19,462 3/1/00
Employment Practices Chubb Insurance Co $10 Million 81278901A 3/1/00 $221,575 3/1/00
Liability Royal Insurance Co $10 Million PSF000010 3/1/00 $88,200 3/1/00
Directors & Officers Continental Insurance Co $10 Million 300714943 3/1/01 $453,500 3/1/01
Chubb Insurance Co $10 Million 81278902-A 3/1/01 $266,666 3/1/01
Royal Insurance Co $10 Million PSF000009 3/1/01 $133,000 3/1/01
Umbrella Federal Insurance Co $50 Million 79763295 12/31/00 $63,357 1/1/00
Excess Liability American Guarantee & Liab $50 Million AEC287610702 12/31/00 $25,000 1/1/00
International Cigna Insurance Co $1 Million PHF051491 12/31/00 $2,500 1/1/00
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 Cigna Insurance Co $5 Million XSLG19903254 12/31/00 $11,032 1/1/00
Workers' Compensation Pacific Employers Ins Co Statutory WLRC42662112 12/31/00 $19,978 1/1/00
WC Excess Cigna Insurance Co Statutory XWC011950 12/31/00 $1,601 1/1/00
WC Contractual Indemnity Illinois Union Insurance Co Statutory CTPG19903461 12/31/00 $2,083 1/1/00
WC Nevada Ace American Ins Co Statutory NWCC42662173 12/31/00 $1,743 1/1/00
Auto Pacific Employers Ins Co $1 Million ISAH07571008 12/31/00 $2,083 1/1/00
</TABLE>
<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: NOVEMBER 29, 1999 THROUGH JANUARY 2, 2000
3. BANK ACCOUNTS
<TABLE>
<CAPTION>
<S> <C>
TOTAL CASH AND CASH EQUIVALENTS
CASH IN STORES AND HOME OFFICE
HOME OFFICE $ 9,750
RETAIL SAFE FUNDS 5,866,770
CORPORATE ACCOUNTS 22,546,707
STORE DEPOSITORY ACCOUNTS
FIRST TENNESSEE 1,725,687
FIRSTAR 197,742
SOCIETY NATIONAL BANK 1,674,986
BANK OF BOSTON 411,070
BANK OF BOSTON CONNECTICUT 229,255
MERCANTILE BANK 300,081
FIRST UNION 3,295,123
HARRIS TRUST 991,786
BANK ONE LOUISIANA 1,326,573
ABN - AMRO BANK 1,201,139
COMERICA BANK 334,487
AM SOUTH 983,430
BANK OF AMERICA CALIFORNIA 134,564
FIRST AMERICAN NATIONAL BANK 383,821
BANK OF OKLAHOMA 777,212
CHASE BANK OF TEXAS 980,545
HIBERNIA 289,409
SINGLE STORE DEPOSITORY ACCOUNTS 3,386,076
FIRST NATIONAL BANK OF MARYLAND 112,590
FIFTH THIRD BANK 303,579
HERITAGE BANK OF NV 525
WELLS FARGO BANK 371,084
NATIONSBANK 395,468
BANK ONE, IN 659,558
PNC BANK 2,369,575
BANK ONE , TEXAS 37,121
CREDIT CARD CASH ACCOUNTS (SALES PROCESSED BY CREDIT CARD COMPANY) 9,322,193
OTHER DEPOSITORY ACCOUNTS
SERVICE MERCHANDISE - MUSCULAR DYSTROPHY ASSOC. 18,274
OTHER CASH ACCOUNTS 955,123
-----------
TOTAL CASH PER GENERAL LEDGER $61,591,301
===========
</TABLE>
<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: NOVEMBER 29, 1999 THROUGH JANUARY 2, 2000
RECEIPTS AND DISBURSEMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Actual Actual Actual Actual Actual Total
Monday 11/29/99 12/6/99 12/13/99 12/20/99 12/27/99 11/29/99
Sunday 12/5/99 12/12/99 12/19/99 12/26/99 1/2/00 1/2/00
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Receipts:
Sales Receipts $100,909 $103,427 $128,333 $172,156 $87,118 $591,943
Miscellaneous Receipts -- 23 -- -- -- 23
-------- -------- -------- -------- ------- --------
Total Available collections 100,909 103,450 128,333 172,156 87,118 591,966
Disbursements:
Merchandise disbursements 33,804 25,391 19,082 26,389 20,335 125,001
Non-merchandise disbursements 20,505 19,413 27,088 44,975 20,137 132,118
-------- -------- -------- -------- ------- --------
Total Disbursements: 54,309 44,804 46,170 71,364 40,472 257,119
-------- -------- -------- -------- ------- --------
Net Receipts/(Disbursements) $ 46,600 $ 58,646 $ 82,163 $100,792 $46,646 $334,847
======== ======== ======== ======== ======= ========
</TABLE>
<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: NOVEMBER 29, 1999 THROUGH JANUARY 2, 2000
ROLLING REVISED CASH FLOW FORECAST
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Actual Actual Forecast Forecast Forecast
1/2/00 1/16/00 1/30/00 2/27/00 4/2/00
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Ending Total Revolver Balance $ 42,977 $ 44,849 $101,701 $115,759 $132,151
Term Loan 99,500 99,250 99,250 99,250 99,250
Standby Letters of Credit 27,227 27,189 27,189 27,189 27,189
Trade Letters of Credit 52,157 45,257 41,873 30,168 27,984
-------- -------- -------- -------- --------
Total Extensions of Credit 221,861 216,545 270,013 272,366 286,574
Borrowing Base 546,767 528,873 526,980 546,534 530,869
-------- -------- -------- -------- --------
Availability $324,906 $312,328 $256,967 $274,168 $244,295
======== ======== ======== ======== ========
</TABLE>
Note: Report subject to further verification and reconciliation procedures.
<PAGE> 7
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE CONPANY, INC. ET. AL.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: NOVEMBER 29, 1999 THROUGH JANUARY 2, 2000
4. PAYMENTS TO PROFESSIONALS NOVEMBER 29, 1999 THROUGH JANUARY 2, 2000
<TABLE>
<CAPTION>
Vendor # Vendor Name Check Amt. Check Date Check #
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
99391 Otterbourg, Steindler, Houston & Rosen $111,120.87 11/30/99 B0020318
79108 Ernst & Young $106,847.00 11/30/99 B0020319
98176 Price Waterhouse Coopers $29,039.80 12/2/99 30027725
86237 Brusniak, Clement, Harrison & McCool, PC $150.00 12/3/99 30027823
57117 Deloitte & Touche LLP $78,799.00 12/9/99 30028523
57117 Deloitte & Touche LLP $200,000.00 12/9/99 30028524
86237 Brusniak, Clement, Harrison & McCool, PC $325.00 12/9/99 30028669
52999 Butler, Snow, O'Mara, Stevens & Canada $3,977.48 12/9/99 30028647
3323 AvTax, Inc. $6,684.19 12/17/99 30029778
3323 AvTax, Inc. $5,401.25 12/17/99 30029779
3323 AvTax,Inc. $7,647.18 12/20/99 30029974
99277 Rosemont Business Services $16,237.50 12/20/99 30029977
57117 Deloitte & Touche LLP $57,580.84 12/21/99 30030099
71403 Seyfarth, Shaw, Fairweather & Geraldson $2,738.29 12/21/99 30030177
100906 Peter J. Solomon $124,432.63 12/21/99 B0020517
63078 Weil, Gotshal & Manges, LLP $8,797.17 12/21/99 B0020519
71217 Bass, Berry & Sims PLC $112,488.08 12/21/99 B0020521
98378 Skadden, Arps, Slate, Meagher, & Flom $301,203.00 12/21/99 B0020522
99391 Otterbourg, Steindler, Houston & Rosen $128,588.34 12/21/99 B0020524
99444 Sitrick & Company $20,091.26 12/21/99 B0020525
99454 Harwell, Howard, Hyne, Gabbert & Manner, PC $40,985.99 12/21/99 B0020526
79108 Ernst & Young $1,116.00 12/21/99 B0020529
80443 Coudert Brothers $5,026.91 12/23/99 30030623
2642 Waller, Lansden, Dortch, & Davis $8,208.17 12/27/99 30031005
48779 Loss, Pavone & Orel $895.30 12/27/99 30031006
67017 Barkley & Thompson $612.89 12/27/99 30031009
69583 McCarthy, Fingar, Donovan, Drazen & Smith, LLP $1,145.00 12/27/99 30031010
80679 Mclain & Merritt $302.00 12/27/99 30031011
84740 Taft, Stettinius & Hollister $339.78 12/27/99 30031012
99104 Jay Alix & Associates $145,747.04 12/29/99 B0020523
99459 Robert L Berger & Associates $19,752.90 12/30/99 B0020600
NOTE: Schedule is on a cash basis.
</TABLE>
<PAGE> 8
CHAPTER 11
MONTHLY OPERATING REPORT
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. et al.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: NOVEMBER 29, 1999 THROUGH JANUARY 2, 2000
SUMMARY OF ACCOUNTS RECEIVABLE
Month Ended: 01/02/00
FORM OPR-3 NOT APPLICABLE
<PAGE> 9
CHAPTER 11
MONTHLY OPERATING REPORT
MONTHLY REPORTING QUESTIONNAIRE
CASE NAME: SERVICE MERCHANDISE COMPANY, INC. ET. AL.
CASE NUMBER: 399-02649 THROUGH 399-02680
PERIOD: NOVEMBER 29, 1999 THROUGH JANUARY 2, 2000
SCHEDULE OF POST PETITION LIABILITIES
FORM OPR-4
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DATE TOTAL DUE
INCURRED DATE DUE (1/2/00 BALANCE)
-----------------------------------------------------
<S> <C> <C> <C>
POST PETITION SECURED DEBT
Revolver Borrowings 3/27/99 6/30/01 $ 42,976
Facility Standby Letters of Credit 3/27/99 6/30/01 27,227
Facility Trade Letters of Credit 3/27/99 6/30/01 52,157
Term Loans 3/27/99 6/30/01 99,500
---------
TOTAL EXTENSIONS OF CREDIT $ 221,860
==========
ACCRUED INTEREST PAYABLE $ 2,113
==========
</TABLE>