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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: January 7, 2000
SERVICE MERCHANDISE COMPANY, INC.
(Debtor-in-Possession as of March 27, 1999)
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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.)
7100 Service Merchandise Boulevard, Brentwood, TN 37027
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(Address of principal executive offices) (Zip Code)
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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 5. Other Events
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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: January 7, 2000 By: /s/ C. Steven Moore
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C. Steven Moore
Senior Vice President, Chief
Administrative Officer, Secretary and
General Counsel
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EXHIBIT INDEX
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No. Exhibit
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99 Press release dated January 6, 2000
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EXHIBIT 99
PRESS RELEASE
SERVICE MERCHANDISE COMPLETES SUCCESSFUL 1999 HOLIDAY SELLING SEASON;
ANNOUNCES PRELIMINARY 1999 BUSINESS PLAN RESULTS;
SURPASSES 9-MONTH TARGETED CONTINUING EBITDAR OF $35 MILLION
COMPANY SEEKS FURTHER EXTENSION OF EXCLUSIVE PLAN PERIOD CONSISTENT WITH
STRATEGIC REORGANIZATION TIMELINE FOR 2000 HOLIDAY SEASON
NASHVILLE, TENNESSEE - JANUARY 6, 2000 - Service Merchandise Company,
Inc. (OTCBB:SVCDQ) announced today that it has successfully completed its 1999
holiday season and, subject to physical inventory results and other normal
year-end adjustments, should substantially exceed the benchmark targets
established in its 1999 Business Plan. Having surpassed the commitments
forecasted to its creditors during 1999 and consistent with its strategic
reorganization timeline developed and announced in the first quarter of 1999,
Service Merchandise said it is seeking a further extension of the period in
which the Company has the exclusive right to file or advance a plan of
reorganization in its Chapter 11 case through the 2000 holiday season.
In a motion filed with the United States Bankruptcy Court in Nashville
on Wednesday and presently set for hearing on January 25, 2000, the Company
seeks an extension of the plan proposal period through and including April 30,
2001 and an extension of the Company's exclusive right to solicit acceptances of
its plan through and including June 30, 2001. The Company has proposed that its
Official Committee of Unsecured Creditors have an opportunity
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to request that the Court reevaluate the proposed extension in May 2000
following the formal presentation of Service Merchandise's Year 2000 Business
Plan in March 2000.
"The extension will provide Service Merchandise the opportunity to
complete, present and implement its 2000 Business Plan, assess the results of
the Plan and formulate, propose, solicit acceptances of and confirm a
reorganization plan prior to the original termination date of its $750 million
debtor-in-possession (DIP) financing agreement in June 2001," said Chief
Executive Officer Sam Cusano.
"From the outset of our reorganization cases, the Company's goal has
been to first stabilize Service Merchandise's business operations - including
marketing, merchandising, store operations, E-commerce and other distribution
channels - in 1999 and then formulate a 2000 Business Plan which, if successful,
should be the basis for the Company's successful emergence from Chapter 11 in
2001. Stabilization of the business is only the first step of a reorganization,
however, we recognize that many challenges lie ahead before Service Merchandise
can return to long-term growth and profitability," Mr. Cusano said.
"While final year-end results will not be reported until the year-end
closing process is completed at the end of this month, we are pleased to report
that the Company has met each of its primary 1999 goals and substantially
exceeded target EBITDAR (earnings before interest, taxes, depreciation,
amortization and restructuring charges) for continuing store operations during
the nine months ended December 31, 1999 of approximately $35 million." He noted
that the targeted EBITDAR represents an approximate $7 million improvement in
performance over the same 1998 nine-month period on a comparable store basis.
Based on preliminary financial information, the Company's December 1999
sales exceeded $500 million while gross margin exceeded the Plan by more than
$5 million. More
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than 7 million customer transactions took place at Service Merchandise during
the December holiday period.
Mr. Cusano noted that liquidity remained strong in 1999, with more than
$150 million of excess availability maintained under the Company's DIP financing
agreement throughout the course of the reorganization cases to date, and that
the Company expected to have more than $250 million of excess availability in
January 2000. Actual vendor support (e.g. accounts payable) exceeded the Plan by
$34 million or 43 percent during peak inventory requirements in late October and
early November. Out-of-stock inventory occurrences (including in-transit
shipments) were reduced from 14 percent at the commencement of the Chapter 11
cases to 2 percent entering into the Christmas selling season.
"The holiday selling season was the critical test for Service
Merchandise, and the Company's efforts at the store and corporate levels
combined with the support of our lender, vendors and customers have resulted in
strong December sales performance," said President and Chief Operating Officer
Charles Septer.
"During the past year, the Company has improved vendor and customer
relations, refocused its merchandising mix, re-established its private label
credit card program, and completed successful store rationalization, asset
disposition and cost reduction programs. Combined with other significant
achievements during 1999, we believe Service Merchandise is well-positioned to
formulate the 2000 Business Plan and implement a successful reorganization
strategy consistent with our original timetable," Mr. Cusano said.
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. The Company presented its
1999 Plan to its principal lenders, vendors and other creditors in Nashville on
July 14, 1999. The 2000 Plan is presently scheduled for similar presentation on
March 21, 2000 in Nashville.
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Service Merchandise is a specialty retailer focusing on fine jewelry,
home and gift products.
This press release includes certain forward-looking statements
(statements other than with respect to historical fact) based upon management's
beliefs, as well as assumptions made by and data currently available to
management. This information has been, or in the future may be, included in
reliance on the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on a variety of
assumptions that may not be realized and are subject to significant business,
economic, judicial and competitive uncertainties and potential contingencies,
including those set forth below, many of which are beyond the Company's control.
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 forward-looking statements and 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;
completion of the Company's physical inventory count and year-end adjustments
which may result in adjustment to preliminary results; 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.
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