-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NQTFdKBP2x1zshjqpXQPSoJfa1tlxMCaepmTIEa5DPeCQdAAP8Pqpv6vAM1CDURF WHpow3UhuzTNde+vYOGbwA== 0000089107-95-000003.txt : 19950518 0000089107-95-000003.hdr.sgml : 19950518 ACCESSION NUMBER: 0000089107-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950402 FILED AS OF DATE: 19950517 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SERVICE MERCHANDISE CO INC CENTRAL INDEX KEY: 0000089107 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISC GENERAL MERCHANDISE STORES [5399] IRS NUMBER: 620816060 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09223 FILM NUMBER: 95540561 BUSINESS ADDRESS: STREET 1: 7100 SERVICE MERCHANDISE DR CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6156606000 MAIL ADDRESS: STREET 1: PO BOX 24600 CITY: NASHVILLE STATE: TN ZIP: 37202 10-Q 1 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 April 2, 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 April 30, 1995, there were 99,652,142 shares of Service Merchandise Company, Inc. common stock outstanding. 2 SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES TABLE OF CONTENTS Page No. PART I - FINANCIAL INFORMATION Consolidated Statements of Operations (Unaudited) - First Quarter Ended April 2, 1995 and April 3, 1994 . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Balance Sheets - April 2, 1995 (Unaudited), April 3, 1994 (Unaudited) and January 1, 1995 . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows (Unaudited) - First Quarter Ended April 2, 1995 and April 3, 1994 . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . 6-7 Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited). . 8-10 PART II - OTHER INFORMATION Other Information . . . . . . . . . . . . . . . . 11 Exhibits . . . . . . . . . . . . . . . . . . . . . 12 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 13 -2- 3 SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) (In thousands, except per share data)
First Quarter Ended --------------------- April 2, April 3, --------- --------- 1995 1994 --------- --------- Net sales $737,129 $724,209 Costs and expenses: Cost of merchandise sold and buying and occupancy expense 567,845 557,611 --------- --------- Gross margin after cost of merchandise sold and buying and occupancy expense 169,284 166,598 Selling, general and administrative expenses 174,170 155,213 Depreciation and amortization 15,872 15,862 --------- --------- Loss before interest and income taxes (20,758) (4,477) Interest expense-debt 14,540 14,247 Interest expense-capitalized leases 2,422 2,644 --------- --------- Loss before income tax benefit (37,720) (21,368) Income tax benefit (14,711) (8,547) --------- --------- Loss before extraordinary item (23,009) (12,821) Extraordinary loss from early extinguishment of debt, net of tax benefit of $0 and $843, respectively - (1,265) --------- --------- Net loss ($23,009) ($14,086) ========= ========= Weighted average common shares and common share equivalents outstanding 101,111 101,688 ========= ========= Per common share: Loss before extraordinary item ($0.23) ($0.13) Extraordinary loss from early extinguishment of debt, net of tax benefit - (0.01) --------- --------- Net loss per common share ($0.23) ($0.14) ========= ========= See Notes to Consolidated Financial Statements.
-3- 4 SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except per share data)
(Unaudited) ---------------------- April 2, April 3, January 1, 1995 1994 1995 (1) ---------- ---------- ---------- ASSETS Current Assets: Cash and cash equivalents $24,958 $23,988 $173,264 Accounts receivable, net of allowance of $3,377, $3,180 and $3,217, respectively 42,041 41,986 55,134 Refundable income taxes 4,044 - - Inventories 1,179,813 1,095,461 1,004,282 Prepaid expenses 32,259 36,764 27,778 ---------- ---------- ---------- TOTAL CURRENT ASSETS 1,283,115 1,198,199 1,260,458 Property and equipment: Owned assets, net of accumulated depreciation of $469,561, $420,345 and $456,589, respectively 586,461 572,957 594,772 Capitalized leases, net of accumulated amortization of $76,777, $70,332 and $76,033, respectively 50,035 58,076 51,932 Other assets and deferred charges 21,149 27,033 19,740 ---------- ---------- ---------- TOTAL ASSETS $1,940,760 $1,856,265 $1,926,902 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable to banks $229,000 $75,000 - Accounts payable 564,430 563,197 $639,766 Accrued expenses 168,441 143,734 205,709 State and local sales taxes 28,555 28,605 61,668 Income taxes - 3,414 39,364 Current maturities of long-term debt 9,367 75,433 13,098 Current maturities of capitalized lease obligations 7,923 8,065 7,871 ---------- ---------- ---------- TOTAL CURRENT LIABILITIES 1,007,716 897,448 967,476 Long-term debt 543,908 612,132 544,808 Capitalized lease obligations 71,843 79,941 73,615 Deferred income taxes 4,627 968 4,627 ---------- ---------- ---------- TOTAL LIABILITIES 1,628,094 1,590,489 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 99,650, 99,388 and 99,818 shares, respectively 49,825 49,694 49,909 Additional paid-in capital 5,421 4,058 6,115 Deferred compensation (2,712) (876) (2,789) Retained earnings 260,132 212,900 283,141 ---------- ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 312,666 265,776 336,376 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,940,760 $1,856,265 $1,926,902 ========== ========== ========== (1) Derived from fiscal year ended January 1, 1995 audited financial statements. See Notes to Consolidated Financial Statements.
-4- 5 SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (In thousands)
First Quarter Ended ------------------- April 2, April 3, ------------------- 1995 1994 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($23,009) ($14,086) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 16,594 17,822 Loss on disposal of property and equipment 4 157 Write-off debt issuance cost - 90 Changes in assets and liabilities (net of disposition): Accounts receivable, net 13,093 11,028 Inventories (175,531) (156,202) Prepaid expenses (4,481) (6,866) Accounts payable (75,336) (67,526) Accrued expenses and state and local sales taxes (70,373) (74,663) Income taxes (43,408) (51,500) --------- --------- NET CASH USED BY OPERATING ACTIVITIES (362,447) (341,746) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment - owned (5,740) (11,322) Proceeds from the disposal of property and equipment 100 62 Other, net (1,861) (444) --------- --------- NET CASH USED BY INVESTING ACTIVITIES (7,501) (11,704) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term borrowings 229,000 75,000 Repayment of long-term debt (4,643) (20,951) Repayment of capitalized lease obligations (1,756) (1,872) Exercise of stock options and forfeiture of restricted stock, net (959) 169 --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 221,642 52,346 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (148,306) (301,104) CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 173,264 325,092 --------- --------- CASH AND CASH EQUIVALENTS-END OF PERIOD $24,958 $23,988 ========= ========= See Notes to Consolidated Financial Statements.
-5- 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 quarter of the year due to the seasonality of its business. The results of operations for the first quarter ended April 2, 1995 and April 3, 1994 are not necessarily indicative of the operating results for the entire fiscal year. B. The first quarters ended April 2, 1995 and April 3, 1994 each contained 91 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 first quarter ended April 2, 1995 and April 3, 1994 were $10.9 million and $11.4 million, respectively. Cash payments for income taxes for the first quarter ended April 2, 1995 and April 3, 1994 were $28.7 million and $42.1 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. The maximum commitment level for the year ending December 30, 1995 is $575 million. The $600 million Reducing Revolving Credit Facility extends the maturity of the Company's working capital facility from December 31, 1995 to June 8, 1999, reduces 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), releases the security interests held in connection with the prior facility and provides 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 $229 million as of April 2, 1995. -6- 7 SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(continued) On April 13, 1995, the Company amended the existing Reducing Revolving Credit Facility to allow for increased operating flexibility within certain financial covenants and the potential for an increase in the applicable interest rate to LIBOR + 1.25% from LIBOR + 1.00% should the Company's senior unsecured debt rating decrease to BB- and Ba3 as rated by Standard & Poor's and Moody's, respectively. F. During the first quarter of fiscal 1994, the Company incurred an extraordinary loss of $1.3 million, or $0.01 per share, related to the early extinguishment of $17 million of high-coupon mortgages with interest rates ranging between 10% and 12.5%. -7- 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. FIRST QUARTER ENDED APRIL 2, 1995 VS. FIRST QUARTER ENDED APRIL 3, 1994 NET SALES Net sales for the first quarter of 1995 were $737.1 million compared to $724.2 million last year, representing an increase of $12.9 million, or 1.8%. Comparable store sales decreased 3.3% for the first quarter as compared to last year. The decrease was attributable to the generally weak retail environment experienced throughout the first quarter, a shift in the Company's promotional calendar, and to a lesser extent, Easter falling later than in the prior year. The sales mix between jewelry and hardlines in the quarter was essentially unchanged from the same quarter in the prior year. At the end of the first quarter, Service Merchandise was operating a total of 408 catalog stores, a net increase of 18 stores from a year ago. GROSS MARGIN The gross margin for the first quarter of fiscal 1995, including buying and occupancy expense, was $169.3 million, or 23.0% of net sales, as compared with $166.6 million, or 23.0% of net sales, a year ago. Merchandise margin rates, before buying and occupancy expense, for both jewelry and hardlines increased as compared to last year. Hardlines margins strengthened to a greater degree than jewelry. This improvement in the overall merchandise margin rate was offset by the increased occupancy costs associated with the 18 net stores opened over the past year and an increase in transportation costs. -8- 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 were $174.2 million, or 23.6% of net sales, for the first quarter of 1995 versus $155.2 million, or 21.4% of net sales, in the year-earlier quarter. Developments contributing to the higher expense percentage included planned increases in store payroll, costs associated with operating new stores opened since the first quarter of 1994 and the decline in comparable store sales. The Company also experienced, to a lesser extent, higher advertising costs from a year ago due to increases in postal rates and paper costs. INTEREST EXPENSE Interest expense for the first quarter of 1995 was $17.0 million as compared to the first quarter of 1994 of $16.9 million. Interest expense for the quarter remained flat in part because an increase in short-term rates, in general, affecting the Company's variable rate debt was offset by the negotiation of interest rate reductions on the Reducing Revolving Credit Facility and lower capital lease interest payments. TAXES ON INCOME The Company recognized an income tax benefit of $14.7 million and $8.5 million for the first quarter ended April 2, 1995 and April 3, 1994, respectively. The effective tax rates for the quarter ended April 2, 1995 and April 3, 1994 were 39% and 40%, respectively. For the fiscal year ended January 1, 1995 the effective income tax rate was 39%. EXTRAORDINARY ITEMS In the first quarter of fiscal 1994, the Company incurred an extraordinary loss of $1.3 million, or $0.01 per share, related to the early extinguishment of $17 million of high coupon mortgages with interest rates ranging between 10% and 12.5%. LIQUIDITY AND CAPITAL RESOURCES Working capital totaled $275.4 million at the end of the first quarter of 1995, a decrease of 8.4% from working capital at April 3, 1994 of $300.8 million which primarily resulted from an increase in short-term borrowings resulting from the refinancing of the Secured Term Loan offset by increased inventory levels. The current ratio at both April 2, 1995 and April 3, 1994 was 1.3:1. -9- 10 Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) (continued) Working capital requirements fluctuate significantly during the year due to the seasonal nature of the retail catalog store business. These requirements are financed through a combination of internally generated cash flow from operating activities and short-term seasonal borrowings. At April 2, 1995, short-term borrowings totaled $229.0 million ($328.4 million available for borrowing) compared to $75.0 million ($359.1 million available for borrowing) at April 3, 1994, an increase of $154.0 million. The increase is primarily attributable to the refinancing of the Secured Term Loan referred to below as well as increased inventory levels. 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. The maximum commitment level for the year ending December 30, 1995 is $575 million. The $600 million Reducing Revolving Credit Facility extends the maturity of the Company's working capital facility from December 31, 1995 to June 8, 1999, reduces 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), releases the security interests held in connection with the prior facility and provides 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 $229 million as of April 2, 1995. On April 13, 1995, the Company amended the existing Reducing Revolving Credit Facility to allow for increased operating flexibility within certain financial covenants and the potential for an increase in the applicable interest rate to LIBOR + 1.25% from LIBOR + 1.00% should the Company's senior unsecured debt rating decrease to BB- and Ba3 as rated by Standard & Poor's and Moody's, respectively. Total long-term debt, including current maturities and capitalized leases, decreased to $633.0 million at April 2, 1995 from $775.6 million at April 3, 1994. The decrease in total long-term debt was primarily the result of the prepayment of the $122 million Term Loan, the early extinguishment of a $10.1 million mortgage and $13.7 million of scheduled payments for mortgages, Industrial Revenue Bond's and capitalized lease obligations. Additions to owned property and equipment were $5.7 million for the first quarter ended April 2, 1995 compared to $11.3 million for the same quarter last year. The Company opened a net of 2 catalog stores during the first quarter ended April 2, 1995, and the Company plans for the new store growth rate to be approximately 3% for fiscal 1995. In fiscal 1994, the Company opened a net of 15 catalog stores. The Company expects to incur capital expenditures of approximately $60 million 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. -10- 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable. Item 2. Changes in the Rights of the Company's Security Holders On April 13, 1995, the Company amended the existing Reducing Revolving Credit Facility to allow for increased operating flexibility within certain financial covenants and the potential for an increase in the applicable interest rate to LIBOR + 1.25% from LIBOR + 1.00% should the Company's senior unsecured debt rating decrease to BB- and Ba3 as rated by Standard & Poor's and Moody's, respectively. 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. -11- 12 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 Item 601 of Regulation S-K Brief Description ---------------------- ----------------- 4.1 Amendment No. 1 to Credit Agreement effective April 13, 1995 among Service Merchandise Company, Inc., various Banks and Chemical Bank as Administrative Agent. 11 Statement re: Computation of Net Loss Per Common Share for the First Quarter Ended April 2, 1995 and April 3, 1994. 27 Financial Data Schedule for the First Quarter ended April 2, 1995. 6(b) Reports on Form 8-K There were no reports on Form 8-K during the first quarter ended April 2, 1995. -12- 13 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: May 12, 1995 /s/ Raymond Zimmerman ---------------------- Raymond Zimmerman Chairman of the Board (Chief Executive Officer) Date: May 12, 1995 /s/ Gary M. Witkin ---------------------- Gary M. Witkin President (Chief Operating Officer) Date: May 12, 1995 /s/ S. Cusano ---------------------- S. Cusano Vice President and Chief Financial Officer (Chief Financial Officer) (Chief Accounting Officer) -13- EX-4 2 14 EXHIBIT 4.1 FIRST AMENDMENT --------------- FIRST AMENDMENT (this "Amendment"), dated as of April 13, 1995, among SERVICE MERCHANDISE COMPANY, INC. (the "Borrower"), the various lending institutions party to the Credit Agreement referred to below (the "Banks"), and CHEMICAL BANK, as Administrative Agent (in such capacity, the "Agent"). All capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement referred to below. W I T N E S S E T H : --------------------- WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit Agreement, dated as of June 8, 1994 (as amended, modified or supplemented through the date hereof, the "Credit Agreement"); and WHEREAS, the parties hereto wish to amend the Credit Agreement as herein provided; NOW, THEREFORE, it is agreed that as of the First Amendment Effective Date (as defined below): 1. The figure $120,000,000 in clause (i) of Section 2.01(b) of the Credit Agreement is hereby changed to $150,000,000. 2. The reference to Category 3 in Section 3.01(a)(ii) of the Credit Agreement as the highest Category is hereby changed to refer to Category 4 as the highest Category. The table setting out the Facility Fee percentages for Categories 1-3 in Section 3.01(a) of the Credit Agreement is hereby deleted and the following table is inserted in lieu thereof: Category Facility Fee -------- ------------ Category 4 1/5 of 1% Category 3 1/4 of 1% Category 2 3/8 of 1% Category 1 3/8 of 1% 15 3. The third and last entry under the heading "Fiscal Quarter Ended" and its corresponding Minimum Consolidated Net Worth of $360,000,000 under the heading "Amount" in Section 9.05 of the Credit Agreement is hereby deleted and the following two entries are inserted in lieu thereof: Fiscal Quarter Ended Amount -------------- ------ Fiscal quarters ending closest to December 31, 1995, March 31, 1996, June 30, 1996 and September 30, 1996 $340,000,000 Fiscal quarters ending closest to December 31, 1996, and thereafter $360,000,000 4. The two entries under the heading "Fiscal Quarter Ended" and their corresponding ratios under the heading "Ratio" in Section 9.06 of the Credit Agreement are hereby deleted and the following five entries are inserted in lieu thereof: Fiscal Quarter Ended Ratio -------------- ----- Fiscal quarters ending closest to June 30, 1994, September 30, 1994, December 31, 1994, and March 31, 1995 2.00:1 Fiscal quarters ending closest to June 30, 1995 and September 30, 1995 1.5:1 16 Fiscal quarters ending closest to December 31, 1995, March 31, 1996, June 30, 1996 and September 30, 1996 1.75:1 Fiscal quarters ending closest to December 31, 1996, March 31, 1997, June 30, 1997 and September 30, 1997 2.00:1 Fiscal quarters ending closest to December 31, 1997, and thereafter 2.25:1 5. The first sentence of Section 9.08 of the Credit Agreement is hereby deleted and the following sentence is inserted in lieu thereof: 9.08 Consolidated Debt to Total Capitalization Ratio. The Borrower will not permit the ratio of (i) Consolidated Debt to (ii) Total Capitalization at any time during any period beginning on the last day of any fiscal quarter set forth below and ending on the day before the last day of the next fiscal quarter set forth below to be greater than the ratio set forth opposite such date below: 6. The first sentence of Section 9.09 of the Credit Agreement is hereby deleted and the following sentence is inserted in lieu thereof: 9.09 Consolidated Senior Debt to Total Capitalization Ratio. The Borrower will not permit the Ratio of (i) Consolidated Senior Debt to (ii) Total Capitalization at any time during any period beginning on the last day of any fiscal quarter set forth below and ending on the day before the last day in the next fiscal quarter set forth below to be greater than the ratio set forth opposite such date below: 7. The figure $120,000,000 in Section 9.16 of the Credit Agreement is hereby changed to $150,000,000. 8. The definitions "Category 2" and "Category 3" in Section 11.01 of the Credit Agreement shall become "Category 3" and "Category 4", respectively. The definition "Category 1" in Section 11.01 of the Credit Agreement is hereby deleted and the following two definitions are inserted in lieu thereof: 17 "Category 1" shall mean the Category which is applicable when the Borrower then has received with respect to its senior unsecured indebtedness either (i) a rating of BB- or lower by S&P or (ii) a rating of Ba3 or lower by Moody's. Promptly following such time that the Borrower has received a Category 1 rating, the chief financial officer of the Borrower shall deliver an officer's certificate to the Administrative Agent certifying the existence of such rating. "Category 2" shall mean the Category which is applicable when the Borrower then has received with respect to its senior unsecured indebtedness either (i) a rating of BB+ or BB by S&P or (ii) a rating of Ba1 or Ba2 by Moody's. Promptly following such time that the Borrower has received a Category 2 rating, the chief financial officer of the Borrower shall deliver an officer's certificate to the Administrative Agent certifying the existence of such rating. 9. The definition "Category" in Section 11.01 of the Credit Agreement is hereby deleted and the following definition is inserted in lieu thereof: "Category" shall mean and include each of Category 1, Category 2, Category 3 and Category 4. 10. The reference to the rate 5/8 of 1% per annum in clause (i) of the definition "Applicable Eurodollar Margin" in Section 11.01 is hereby changed to refer to the rate 7/8 of 1% per annum. The reference to Category 3 in the definition "Applicable Eurodollar Margin" in clause (ii) of Section 11.01 as the highest Category is hereby changed to refer to Category 4 as the highest Category. The table setting out the Applicable Eurodollar Margin for Categories 1-3 in the definition "Applicable Eurodollar Margin" in Section 11.01 of the Credit Agreement is hereby deleted and the following table is inserted in lieu thereof: Applicable Category Eurodollar Margin ---------- ----------------- Category 4 3/10 of 1% Category 3 1/2 of 1% Category 2 5/8 of 1% Category 1 7/8 of 1% 11. In order to induce the undersigned Banks to enter into this Amendment, the Borrower hereby represents 18 and warrants that (x) no Default or Event of Default exists on the First Amendment Effective Date (as defined below) both before and after giving effect to this Amendment and (y) all of the representations and warranties contained in the Credit Agreement shall be true and correct in all material respects as of the First Amendment Effective Date both before and after giving effect to this Amendment, with the same effect as though such representations and warranties had been made on and as of the First Amendment Effective Date (it being understood that any representation or warranty made as of a specified date shall be required to be true and correct in all material respects only as of such specific date). 12. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. 13. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Agent. 14. This Amendment and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the State of New York. 15. This Amendment shall become effective on the date (the "First Amendment Effective Date") when the Borrower and the Required Banks (i) shall have signed a counterpart hereof (whether the same or different counterparts) and (ii) shall have delivered (including by way of telecopier) the same to the Agent at the Notice Office. 16. From and after the First Amendment Effective Date all references in the Credit Agreement and the other Credit Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby. 19 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. Address: - ------- 7100 Service Merchandise Drive SERVICE MERCHANDISE COMPANY, Brentwood, TN 37027 INC. Attn: Michael E. Hogrefe Telephone: (615) 660-6000 By /s/ Michael E. Hogrefe Telecopy: (615) 660-3667 ------------------------- Title: 270 Park Avenue CHEMICAL BANK 10th Floor Individually, and as New York, New York 10017 Administrative Agent Attn: Christopher C. Wardell Telephone: (212) 270-2053 By /s/ Lisa D. Benitez Telecopy: (212) 270-3860 ------------------------ Title: LISA D. BENITEZ VICE PRESIDENT With a copy to: Chemical Securities Inc. 10 South LaSalle Street Suite 2300 Chicago, Illinois 60603 Attn: Jennifer H. McGowan Telephone: (312) 807-4035 Telecopy: (312) 443-1964 20 One Ravinia Drive ABN AMRO BANK N.V., Suite 1200 ATLANTA AGENCY Atlanta, GA 30346-2103 Attn: Mr. Adam Greene Telephone: (404) 399-7378 By_____________________ Telecopy: (404) 395-9188 Title: By_____________________ Title: 245 Park Avenue ARAB BANKING CORPORATION New York, NY 10167 Attn: Ms. Louise Bilbro Telephone: (212) 850-0665 By____________________ Telecopy: (212) 599-8385 Title: 400 Perimeter Center Terrace THE FIRST NATIONAL BANK OF Suite 745 BOSTON Atlanta, GA 30346 Attn: Mr. William Purinton Telephone: (404) 393-4676 By /s/ William C. Purinton Telecopy: (404) 393-4166 ------------------------- Title: Vice President 430 Park Avenue THE BANK OF MONTREAL New York, NY 10022 Attn: Ms. Lisa Megeaski Telephone: (212) 605-1441 By /s/ Lisa Megeaski Telecopy: (212) 605-1455 --------------------- Title: Director One Wall Street THE BANK OF NEW YORK 22nd Floor New York, NY 10286 Attn: Mr. Greg Batson By /s/ Gregory L. Batson ----------------------- Title: GREGORY L. BATSON VICE PRESIDENT Telephone: (212) 635-6898 Telecopy: (212) 635-6434 21 National Banking Department THE BANK OF TOKYO 1251 6th Avenue, 12th Floor TRUST COMPANY New York, NY 10116 Attn: Amanda S. Ryan By /s/ Amanda S. Ryan ---------------------- Title: AMANDA S. RYAN Vice President Telephone: (212) 782-4318 Telecopy: (212) 782-6440 787 7th Avenue BANQUE PARIBAS New York, NY 10019 Attn: Ms. Ann Pifer Telephone: (212) 841-2383 By_______________________ Telecopy: (212) 841-2333 Title: By_______________________ Title: Two Paces West CANADIAN IMPERIAL BANK 2727 Paces Ferry Road OF COMMERCE Atlanta, GA 30339 Attn: Ms. Kathryn W. Sax Telephone: (404) 319-4903 By /s/ Kathryn W. Sax Telecopy: (404) 319-4954 --------------------------- Title: Authorized Signatory New York Branch THE DAIWA BANK, LIMITED 75 Rockefeller Plaza New York, NY 10019 Attn: Mr. Prescott Vann Telephone: (212) 554-7043 By /s/ Prescott Vann Telecopy: (212) 554-7210 ------------------------ Title: Vice President 75 Wall Street DRESDNER BANK AG, New York, NY 10005 NEW YORK BRANCH Attn: Mr. Andrew P. Nesi Telephone: (212) 574-0100 By /s/ Andrew P. Nesi Telecopy: (212) 574-0129 ------------------------ Title: Vice President By /s/ John Padilla ------------------------ Title: Assistant Treasurer 22 Marquis One Tower THE FUJI BANK, LTD. Suite 2100 245 Peachtree Center Ave., NE Atlanta, GA 30303-1208 Attn: Mr. Brett Johnson Telephone: (404) 653-2100 By_______________________ Telecopy: (404) 653-2119 Title: Two World Trade Center THE HOKKAIDO TAKUSHOKU 99th Floor BANK, LTD. New York, NY 10048 Attn: Mr. Scott D. Winston Telephone: (212) 912-6914 By /s/ Kathleen M. Sweeney Telecopy: (212) 466-6079 ------------------------ Title: Sr. Vice President and Manager 245 Park Avenue THE INDUSTRIAL BANK OF JAPAN, New York, NY 10167 LIMITED - NEW YORK BRANCH Attn: Mr. Jim Welch Telephone: (212) 309-6577 By /s/ Junri Oda Telecopy: (212) 682-2870 ------------------------ Title: SVP & Senior Manager 245 Peachtree Center Ave, NE LTCB TRUST COMPANY Suite 2801 Atlanta, GA 30303 Attn: Ms. Becky Sedler Telephone: (404) 659-7210 By /s/ John J. Sullivan Telecopy: (404) 658-9751 ------------------------ Title: Executive Vice President 140 Broadway MIDLAND BANK PLC New York, NY 10005 Attn: Ms. Gina Sidorsky Telephone: (212) 658-2750 By________________________ Telecopy: (212) 658-2586 Title: 23 499 Thornall Street MIDLANTIC NATIONAL BANK 9th Floor Edison, NJ 08818 Attn: Ms. Lynn Conover Telephone: (908) 321-2140 By_______________________ Telecopy: (908) 321-2144 Title: 225 Liberty Street THE MITSUBISHI BANK, 39th Floor LIMITED - NEW YORK BRANCH Two World Financial Center New York, NY 10281 Attn: Mr. William Brennan Telephone: (212) 667-2905 By /s/ Hiroaki Fuchida Telecopy: (212) 667-3562 ----------------------- Title: Hiroaki Fuchida Vice President, Manager 520 Madison Avenue THE MITSUBISHI TRUST AND 25th Floor BANKING CORPORATION New York, NY 10022 Attn: Ms. Pat Loret de Mola Telephone: (212) 891-8454 By________________________ Telecopy: (212) 755-2349 Title: (212) 486-0970 One NationsBank Plaza M-5 NATIONSBANK OF NORTH 311 Union Street CAROLINA, N.A. Nashville, TN 37239-1697 Attn: Ms. Kimberly Dupuy Telephone: (615) 749-3174 By /s/ Kimberly R. Dupuy Telecopy: (615) 749-4640 ----------------------- Title: Assistant Vice President 245 Park Avenue THE NIPPON CREDIT BANK, LTD. 30th Floor New York, NY 10167 Attn: Mr. Yasuhide Yahiro Telephone: (212) 984-1217 By /s/ Yasuhide Yahiro Telecopy: (212) 490-3895 ----------------------- Title: Assistant Vice President 24 Marquis One Tower THE SAKURA BANK, LIMITED Suite 2703 245 Peachtree Center Ave., N.E. Atlanta, GA 30303 Attn: Mr. Chad Zimmerman Telephone: (404) 521-3111 By /s/ Hiroyasu Imanishi Telecopy: (404) 521-1133 ------------------------ Title: Vice President & Sr. Manager Georgia Pacific Center THE SUMITOMO BANK, LIMITED Suite 3210 ATLANTA AGENCY 133 Peachtree Street, N.E. Atlanta, GA 30303 Attn: Mr. Gary Franke Telephone: (404) 526-8511 By /s/ M. Shinbo Telecopy: (404) 521-1187 ------------------------ Title: M. Shinbo, General Manager 55 East 52nd Street THE TOKAI BANK, LTD. New York, NY 10055 NEW YORK BRANCH Attn: Ms. Haruyo Niki Telephone: (212) 339-1123 By /s/ Akira Tsunekawa Telecopy: (212) 754-2170 ------------------------ Title: Akira Tsunekawa Joint General Manager One Detroit Center COMERICA BANK 500 Woodward Avenue, MC 3281 9th Floor Detroit, MI 48226 Attn: Mr. Bradley A. Terryn Telephone: (313) 222-6231 By /s/ Bradley A. Terryn Telecopy: (313) 222-3330 ----------------------- Title: Vice President 25 640 5th Avenue BANK OF IRELAND, CAYMAN BRANCH New York, NY 10019 Attn: Mr. Roger Burns Telephone: (212) 397-1712 By /s/ Roger Burns Telecopy: (212) 586-7752 ----------------------- Title: V.P. 1211 Avenue of the Americas WESTDEUTSCHE LANDESBANK New York, NY 10036 GIROZENTRALE, NEW YORK Attn: Mr. Alan Bookspan AND CAYMAN ISLAND BRANCHES Telephone: (212) 852-6023 By_______________________ Telecopy: (212) 852-6307 Title: By_______________________ Title: EX-11 3 26 EXHIBIT 11 SERVICE MERCHANDISE COMPANY, INC. AND SUBSIDIARIES Computation of Net Loss Per Common Share (Unaudited) (In thousands, except per share data)
First Quarter Ended ------------------------ April 2 April 3 1995 1994 --------- --------- Primary - ------- Loss before extraordinary item ($23,009) ($12,821) Extraordinary loss from early extinguishment of debt, net of tax benefit of $0 and $843, respectively - (1,265) --------- --------- Net loss ($23,009) ($14,086) ========= ========= Shares: Weighted average common shares outstanding 98,874 98,482 Weighted average shares of restricted stock outstanding 856 892 Additional shares assuming exercise of stock options 1,381 2,314 Weighted average common shares and common --------- --------- share equivalents outstanding - primary 101,111 101,688 ========= ========= Loss before extraordinary item ($0.23) ($0.13) Extraordinary loss from early extinguishment of debt, net of tax benefit - (0.01) --------- --------- Primary net loss per common share ($0.23) ($0.14) ========= ========= Assuming Full Dilution - ---------------------- Loss before extraordinary item ($23,009) ($12,821) Extraordinary loss from early extinguishment of debt, net of tax benefit of $0 and $843, respectively - (1,265) --------- --------- Net loss ($23,009) ($14,086) ========= ========= Shares: Weighted average common shares outstanding 98,874 98,482 Weighted average shares of restricted stock outstanding 856 892 Additional shares assuming exercise of stock options 1,407 2,322 Weighted average common shares and common --------- --------- share equivalents outstanding - fully diluted 101,137 101,696 ========= ========= Loss before extraordinary item ($0.23) ($0.13) Extraordinary loss from early extinguishment of debt, net of tax benefit - (0.01) --------- --------- Fully diluted net loss per common share ($0.23) ($0.14) ========= =========
EX-27 4
5 This schedule contains summary financial information extracted from the Service Merchandise Co., Inc. Form 10-Q for the quarterly period ended April 2, 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. 1,000 3-MOS DEC-31-1995 JAN-2-1995 APR-2-1995 24,958 0 45,418 3,377 1,179,813 1,283,115 1,182,834 546,338 1,940,760 1,007,716 615,751 99,650 0 0 262,841 1,940,760 737,129 737,129 567,845 567,845 190,042 0 16,962 (37,720) (14,711) (23,009) 0 0 0 (23,009) (0.23) (0.23) Amount represents the number of shares of $.50 par value common stock issued and outstanding. Amount includes I) depreciation and amortization and II) selling, general and administrative expenses.
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