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SERVICE MERCHANDISE COMPANY, INC. REPORTS FIRST QUARTER RESULTS

 NASHVILLE, Tenn., April 12 /PRNewswire/ -- Service Merchandise Company, Inc. (NYSE: SME) today announced sales and earnings for the first quarter ended March 31, 1993.
 First Quarter Ended March 31, 1993
 Net sales for the first quarter of 1993 were $672,863,000 compared to $664,654,000 for the first quarter of 1992, an increase of $8,209,000 or 1.2 percent. The first quarter of 1993 had five less selling days as compared to the same quarter last year due to differences in fiscal year ends and leap year in 1992. Adjusting for the five less selling days, comparable store sales increased 2.7 percent for the quarter. Sales in March of 1993 were adversely affected by the severe weather striking the east coast and central portions of the country causing temporary closings of a significant number of stores. The Company has added a net of 13 new stores since the first quarter of 1992.
 The net loss for the three months ended March 31, 1993 was $10,713,000, or $.10 per share, compared to a net loss of $9,391,000, or $.09 per share, for the same quarter last year. The increase in the quarterly net loss was primarily a result of decreased margin rate, partially offset by decreased interest expense.
 Gross margin for the first quarter of 1993, after taking into account buying and occupancy expense, was $154,516,000 as compared to $157,099,000 for the same quarter last year, a decrease of $2,583,000. As a percentage of net sales, gross margin, after taking into account buying and occupancy expense, was 23.0 percent as compared to 23.6 percent for the first quarter of 1992. The decrease in margin rate reflected slightly lower jewelry and hardlines margins resulting from the Company's competitive pricing strategy which had not been fully implemented during the first quarter of 1992.
 Selling, general and administrative expenses increased slightly to $140,477,000, or 20.9 percent of net sales, for the first quarter of 1993 as compared to $137,612,000, or 20.7 percent of net sales, for the same quarter a year ago. The increased percentage of net sales is primarily attributable to the fewer selling days coupled with the weather-related store closings, resulting in lower sales volume available to cover fixed costs.
 Interest expense on debt and capitalized leases decreased by $4,046,000, or 18.5 percent, as compared to the first quarter of 1992. The lower interest expense was due to the favorable impact of reduced interest rates and reduction of recapitalization debt.
 During the first quarter of 1993, the company recorded an extraordinary loss from early extinguishment of debt and a cumulative benefit from change in accounting principle. The extraordinary loss of $7,598,000, which is net of tax benefit of $4,858,000, reflects early extinguishment in February 1993 of the Company's $300 million 11 3/4 percent Senior Subordinated Notes due 1996. The cumulative benefit of $7,742,000 reflects the Company's adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," effective Jan. 3, 1993.
 There have been several significant developments thus far in 1993. The Company refinanced its $300 million of subordinated debt, lowering the annual interest rate from 11 3/4 percent to 9 percent and extending the maturity from 1996 to 2004. The refinancing will result in substantial interest savings to the Company as well as enhance the Company's capital structure.
 Secondly, the Company received the commitment of its senior lenders for an amendment to the existing Credit Agreement. The amendment will include a considerable reduction in the contractual interest rate on both the $475 million Revolving Credit Facility and $157 million Term Loan, creation of a competitive bid facility and expansion of capital expenditure capability. The Company plans on utilizing the expanded capital expenditures for new store openings.
 Additionally, the Company recently announced a promotional arrangement with Bill Cosby in which Mr. Cosby will be featured as a celebrity spokesperson for the Company in a multi-media advertising campaign, and Service Merchandise will sponsor a championship auto racing team.
 Raymond Zimmerman, President and Chairman of the Board stated, "Considering the adverse effects of the quarter's inclement weather, we are pleased with a comparable store sales increase of 2.7 percent. Margin rate declined in comparison to the prior year; however, the decline is less marked than in prior quarters as we approach the anniversary of implementing our competitive pricing strategy. So far 1993 has seen successful refinancing of our subordinated debt and renegotiation of our senior debt terms, reflecting our strong financial position, improved credit quality and consistent financial performance. The benefit of these actions will be recognized throughout the year in terms of significant interest savings. We are especially pleased with our promotional arrangement with Bill Cosby and welcome him to the Service Merchandise team."
 Service Merchandise Company, Inc., "America's Leading Jeweler," operates 371 Service Merchandise stores and two Kids Central USA stores in 37 states.
 SERVICE MERCHANDISE COMPANY, INC. (N)
 (in thousands except per share data)
 Three Months Ended
 3/31/93 3/31/92
 Net sales $672,863 $664,654
 Loss before extraordinary
 loss and cumulative effect
 of change in accounting
 principle ($10,857) ($9,391)
 Extraordinary loss from
 early extinguishment of
 debt, net of tax benefit
 of $4,858 ($7,598) --
 Cumulative effect of change
 in accounting principle $7,742 --
 Net loss ($10,713) ($9,391)
 Loss per share: (A)
 Loss before extraordinary
 loss and cumulative effect
 of change in accounting
 principle ($0.11) ($0.09)
 Extraordinary loss from
 early extinguishment of
 debt, net of tax benefit ($0.07) --
 Cumulative effect of change
 in accounting principle $0.08 --
 Net loss ($0.10) ($0.09)
 Weighted average common shares
 and common share equivalents
 outstanding (A) 102,143 101,178
 Comparable store sales
 increase (B) 2.7 pct.
 (A) 1992 per share data has been restated to reflect the three-for-two common stock split effected in the form of a 50 percent stock dividend in May 1992.
 (B) Adjusted to reflect comparable number of selling days.
 -0- 4/12/93
 /CONTACT: S. P. Braud, Corporate Vice President-Treasurer-Chief Financial Officer, Service Merchandise Company, Inc., 615-660-3300/
 (SME)


CO: Service Merchandise Company, Inc. ST: Tennessee IN: REA SU: ERN

MM -- CH007 -- 4912 04/12/93 16:48 EDT
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Date:Apr 12, 1993
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