FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
.............................................................................
FORM 10-K/A
AMENDMENT NO. 1
.............................................................................
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
ADVANTICA RESTAURANT GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3487402
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
203 EAST MAIN STREET
SPARTANBURG, SOUTH CAROLINA 29319-9966
(Address of Principal Executive Offices)
(864) 597-8000
(Registrant's telephone number, including area code)
Explanatory Note: This Amendment No. 1 to the Annual Report on Form 10-K of the
above-referenced registrant is being filed pursuant to Rule 15d-21 of the
Commission solely to furnish the financial statements required by Form 11-K with
respect to the Flagstar 401(k) Plan and the Denny's 401(k) Plan.
<PAGE>
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Annual Report for 1997
on Form 10-K as set forth in the pages attached hereto:
Part II, Item 8. Financial Statements and Supplemental Data.
Part IV, Item 14. Exhibits, Financial Statement Schedules, and
reports on Form 8-K.
Exhibit 23.1. Consent of Deloitte & Touche LLP pursuant
to Note to Required Information of Form 11-K.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANTICA RESTAURANT GROUP, INC.
(Registrant)
DATE: June 30, 1998
------------------------------------------
BY: /s/ Rhonda J. Parish
Executive Vice President, General Counsel and Secretary
<PAGE>
Part II, Item 8. Financial Statements and Supplemental Data of the
Annual Report for 1997 on Form 10-K is hereby amended to include the following:
FINANCIAL STATEMENTS
OF
FORM 11-K
ANNUAL REPORT
Filed pursuant to Rule 15d-21
promulgated under Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
Full title of the plans and the address of the plans, if different from that of
the issuer named below:
1. FLAGSTAR 401(k) PLAN
2. DENNY'S 401(k) PLAN
C/O DENNY'S, INC.
203 EAST MAIN STREET
SPARTANBURG, SOUTH CAROLINA 29319-9966
Name of the issuer of the securities held pursuant to the plans and the address
of its principal executive offices:
FLAGSTAR COMPANIES, INC.
203 EAST MAIN STREET
SPARTANBURG, SOUTH CAROLINA 29319-9966
Part IV, Item 14(a)(1) of the Annual Report on Form 10-K for the
period ended December 31, 1997 is amended to insert the following financial
statements required by Form 11-K, copies of which are filed herewith:
1. Flagstar 401(k) Plan Financial Statements at December 31, 1997
and 1996 and for Each of the Three Years in the Period ended
December 31, 1997, Supplemental Schedules for the Year Ended
December 31, 1997 and Independent Auditors' Report.
2. Denny's 401(k) Plan Financial Statements at December 31,
1997 and 1996 and for Each of the Three Years in the Period
ended December 31, 1997, Supplemental Schedules for the Year
Ended December 31, 1997 and Independent Auditors' Report.
Part IV, Item 14(a)(3) and the Exhibit Index of the Annual Report on
Form 10-K for the period ended December 31, 1997 are amended to insert the
following exhibit required by Form 11-K in appropriate numerical order, a copy
of which is filed herewith.
Exhibit No. Description
23.1 Consent of Deloitte & Touche LLP pursuant to Note
to Required Information of Form 11-K.
<PAGE>
- --------------------------------------------------------------------------------
Flagstar 401(k) Plan
Financial Statements at December 31, 1997 and 1996 and for each of the Three
Years in the Period Ended December 31, 1997, Supplemental Schedules for the Year
Ended December 31, 1997, and Independent Auditors' Report
<PAGE>
FLAGSTAR 401(K) PLAN
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------------------------------------------------
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of December 31, 1997 and
1996 2
Statements of Changes in Net Assets Available for Benefits for the
Years Ended December 31, 1997, 1996 and 1995 3
Notes to Financial Statements 4-15
SUPPLEMENTAL SCHEDULES:
IRS Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes as of
December 31, 1997 16
IRS Form 5500, Item 27d - Schedule of Reportable Transactions for the Year
Ended December 31, 1997 17
</TABLE>
NOTE: Schedules required under the Employee Retirement Income Security
Act of 1974, other than the schedules listed above, are omitted
because of the absence of conditions under which such schedules are
required.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee
Flagstar 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Flagstar 401(k) Plan (the "Plan") as of December 31, 1997 and 1996, and
the related statements of changes in net assets available for benefits for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1997 and 1996, and the changes in net assets available for benefits for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
foregoing Table of Contents are presented for the purpose of additional analysis
and are not a required part of the basic financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to the auditing procedures
applied in our audit of the basic 1997 financial statements and, in our opinion,
are fairly stated in all material respects when considered in relation to the
basic financial statements taken as a whole.
Greenville, SC
June 12, 1998
- 1 -
<PAGE>
FLAGSTAR 401(K) PLAN
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
- -----------------------------------------------------------------------------------------------------------------------
1997 1996
ASSETS:
<S> <C> <C>
Investments, at fair value $ 38,261,922 $ 43,083,238
------------ ------------
Receivables:
Employer's contribution 14,215 -
Participants' contributions 62,832 32,209
------------ ------------
Total receivables 77,047 32,209
------------ ------------
Cash and cash equivalents 40,572 1,014
------------ ------------
TOTAL ASSETS 38,379,541 43,116,461
LESS - ACCRUED LIABILITIES - 20,199
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 38,379,541 $ 43,096,262
============ ============
</TABLE>
See notes to financial statements.
-2-
<PAGE>
FLAGSTAR 401(K) PLAN
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
ADDITIONS:
Investment income:
Net appreciation (depreciation) in fair value of
investments $ 3,238,618 $ 2,049,081 $ (1,291,039)
Interest and dividends 111,908 1,195,041 6,067,826
----------- ----------- ------------
Total investment income 3,350,526 3,244,122 4,776,787
----------- ----------- ------------
Contributions:
Employer's 524,004 - 1,292,158
Participants' 2,514,255 1,736,294 2,841,109
----------- ----------- ------------
Total contributions 3,038,259 1,736,294 4,133,267
----------- ----------- ------------
TOTAL ADDITIONS 6,388,785 4,980,416 8,910,054
----------- ----------- ------------
DEDUCTIONS:
Benefits paid to participants 10,999,480 13,184,969 31,461,507
Administrative expenses 106,026 194,210 287,184
----------- ----------- ------------
TOTAL DEDUCTIONS 11,105,506 13,379,179 31,748,691
----------- ----------- ------------
NET DECREASE (4,716,721) (8,398,763) (22,838,637)
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 43,096,262 51,495,025 74,333,662
----------- ----------- ------------
NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 38,379,541 $ 43,096,262 $ 51,495,025
============ ============ ============
</TABLE>
See notes to financial statements.
-3-
<PAGE>
FLAGSTAR 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN
The following description of the Flagstar 401(k) Plan ("the Plan")
provides only general information. Participants should refer to the plan
document for a more complete description of the Plan's provisions.
General - The Plan, formerly the Flagstar Thrift Plan and, prior to that,
the Thrift Plan for Noncontract Employees of TW Services, Inc., is a
qualified deferred compensation plan, subject to the Employee Retirement
Income Security Act of 1974. Any nonhighly compensated salaried employee
of Advantica Restaurant Group, Inc. ("Advantica") and Flagstar Systems,
Inc. ("Spartan", together, the "Company" and "Plan Sponsors") who has
attained age 21 and has completed twelve months of service with the
Company is eligible to participate in the Plan. Prior to May 6, 1994, any
salaried employee of Canteen Corporation, prior to November 30, 1994, any
salaried employee of TW Recreational Services, Inc. ("TWRS"), and prior to
November 22, 1995 any salaried employee of Volume Services, Inc. ("VS")
could participate in the Plan in accordance with the same eligibility
requirements. The Flagstar 401(k) Plan Committee and the plan
administrator control and manage the operation and administration of the
Plan. NationsBank served as the Trustee of the Plan prior to July 1, 1996,
when American Express Trust Company replaced NationsBank as trustee.
Effective June 17, 1994 (the "Transition Date"), IM Vending Inc., Canteen
Corporation and the subsidiaries of Canteen Corporation, (collectively,
the "Canteen Group") were sold to an entity outside of the Advantica
controlled group. Effective May 6, 1994, employees classified as Canteen
Group employees were no longer eligible to become participants in the
Plan. Effective as of the Transition Date and thereafter, the Canteen
Group is not a Plan Sponsor or participating employer under the Plan and
active employees of the Canteen Group as of the Transition Date were not
permitted to make pre-tax deferral contributions under the Plan and were
not eligible to receive employer contributions under the Plan. In
accordance with the Plan provisions, Canteen Group employees were given
the right to elect to receive a lump sum distribution of their entire
Pre-Tax Account as of the Transition Date, receive distribution of the
Pre-Tax Account when they separate from service with the Canteen Group, or
postpone distribution of the account if their account balance did not
exceed $3,500 as of the Transition Date. As of December 31, 1996 and 1995,
Canteen Group employee participant account balances included in the net
assets available for benefits of the Plan were approximately $435,000 and
$9,261,000, respectively. There were no Canteen Group employee participant
account balances included in net assets available for benefits as of
December 31, 1997.
Effective December 12, 1995 and December 31, 1995 ("Transition Dates"),
TWRS and VS were sold to entities outside of the Advantica controlled
group. Effective December 31, 1995, employees classified as VS employees
were no longer eligible to become participants in the Plan. Effective as
of the respective Transition Dates and thereafter, TWRS and VS are not
Plan Sponsors or participating employers under the Plan and active
employees of TWRS and VS as of the Transition Dates were not permitted to
make pre-tax deferral contributions under the Plan and were not eligible
to receive employer contributions under the Plan.
-4-
<PAGE>
In accordance with the Plan provisions, TWRS and VS employees were given
the right to elect to receive a lump sum distribution of their entire
Pre-Tax Account as of the Transition Dates or receive distribution of
their Pre-Tax Accounts when they separate from service with TWRS or VS.
Effective April 1, 1997, non-highly compensated, salaried employees of FRD
Acquisition Co. ("FRD," a wholly-owned subsidiary of Advantica) who met
eligibility requirements became eligible to participate in the Plan and
were allowed to roll over other defined contribution plan amounts to the
Plan. As of December 31, 1997, approximately $500,000 had been transferred
into the Plan by FRD employees.
Contributions - Each year, participants' pre-tax contributions were
limited to 10% of eligible compensation, or $9,500 in 1997 and 1996 and
$9,240 in 1995, whichever is less. After-tax contributions were limited to
10% of each employee's eligible compensation, however, no after-tax
contribution could be made by an employee in any month in which the
employee made a pre-tax contribution. As of July 1, 1996, participants may
contribute up to 15% of eligible compensation or the amount denoted above,
whichever is less. Also as of July 1, 1996, participants may not make
after-tax contributions to the plan. The Company at its discretion may
have contributed an amount equal to 25% of each participating employee's
after-tax contributions up to 6% of such employee's compensation. The
Company may also have elected to make a bonus match of 75% for the first
$500 per year of employee pre-tax contributions. As of January 1, 1997
each individual sponsoring employer may make matching contributions in
amounts which they determine. Such contributions may be limited by
applicable regulations. These Company contributions are made to the Plan
monthly and are invested to mirror the employee election. In 1997, FRD
matched 25% of the first 3% of base compensation that participants
contributed to the plan. In 1997, all other participants received a match
of 40% of the first 6% of base compensation that participants contributed
to the plan. Participants may also contribute amounts representing
distributions from other qualified defined benefit or contribution plans.
Participant Accounts - A separate account is maintained for each
participant. Each participant's account is credited with the participant's
contribution and allocations of (a) the Company's contributions and (b)
earnings, and is charged with an allocation of administrative expenses.
Allocations are based on participant account balances. The benefit to
which a participant is entitled is the benefit that can be provided from
the participant's vested account.
Vesting - Participants who are employees of FRD are immediately vested in
their contributions plus actual earnings thereon. Vesting in the Company's
matching and discretionary contribution portion of their accounts plus
actual earnings thereon is based on years of continuous service. A
participant is 100 percent vested after five years of credited service.
All other participants are immediately vested in their contributions and
employer contributions, plus actual earnings thereon.
Investment Options - Prior to July 1, 1996, contributions to the Plan
could be invested in 25% increments in any combination of five funds
chosen by the participants: Interest Fund, Government Bond Fund, Dreyfus
Equity Fund, Vanguard Explorer Fund, and Flagstar Companies Employee Stock
Fund. Contributions were temporarily invested in short-term money market
deposits and/or commercial paper until employee elections were executed.
The Interest Fund consisted of insurance contracts that provided fixed
interest rates on the fund investments. The Dreyfus Equity Fund and
Vanguard Explorer Fund consisted of mutual funds that provided dividends
and gains/losses as the market fluctuated. The Flagstar Companies Employee
Stock Fund was invested in Flagstar Companies, Inc. common stock which
also generated gains/losses as the market fluctuated, but in no event
could more than 25% of the participating employees' contributions for any
pay period be invested in the Company's common stock. Participants could
change or transfer their investment options quarterly. A participating
employee, however, could not transfer amounts to the Company stock fund to
exceed 25% of his or her total investment in the Plan.
-5-
<PAGE>
As of July 1, 1996, participants may direct employee contributions in one
percent increments in any of eight investment options. Descriptions of the
investment options are provided by the funds' managers.
o The Flagstar Stable Value Fund is a pooled fund which invests primarily
in bank, insurance, and stable value investment contracts. The
guaranteed investment contracts held by the Plan at the time of the
change in trustee were transferred to this fund.
o The Aggressive Blend Fund is a pooled fund which invests in the Flagstar
Stable Value Fund, American Express collective trust funds, and mutual
funds.
o The Moderate Blend Fund is a pooled fund which invests in the Flagstar
Stable Value Fund, American Express collective trust funds, and mutual
funds.
o The Conservative Blend Fund is a pooled fund which invests in the
Flagstar Stable Value Fund, American Express collective trust funds, and
mutual funds.
o The Small Company Equity Fund is a pooled fund which invests in mutual
funds.
o The Flagstar Stock Fund is a pooled fund which invested in American
Express money market funds and Flagstar Companies, Inc. common stock.
The Flagstar stock held by the Plan at the time of the change in trustee
was transferred to this fund. As of April 1997, the Plan liquidated all
Flagstar Stock. This fund now invests solely in money market funds.
o The Templeton Foreign Fund is a mutual fund which invests in companies
outside of the United States.
o The American Express Trust Equity Index Fund II is a collective trust
fund which invests primarily in common stock.
Participants may change their investment options daily.
Participant Loans - Participants may borrow up to the lesser of 50% of the
vested portion of their account balance, or the amount of $50,000 less the
highest outstanding loan balance during the prior 12 month period. The
minimum loan amount is $1,000, and each employee can have only one loan
outstanding at any time. The Plan documents indicate that a reasonable
borrowing rate will be assessed, typically evidenced by the prime rate
charged by the Plan's trustee. The participant also bears any loan
administration costs incurred. Loans are repaid through payroll deductions
in equal installments with the loan terms ranging from 6 to 54 months.
Loan repayments cannot exceed 30% of the participant's salary. If an
employee who has a loan outstanding terminates employment, no benefits
will be paid from the Plan to the participant until the outstanding loan
balance and accrued interest is paid in full. Loans outstanding at
December 31, 1997 have a range of interest rates from 5.75% to 9%.
Payment of Benefits - On termination of service due to death, disability
or retirement, a participant may elect to receive either a lump sum amount
equal to the value of the participant's vested interest in his or her
account, or annual installments over a ten year period. For termination of
service due to other reasons, a participant may receive the value of the
vested interest in his or her account as a lump sum distribution.
-6-
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the Plan are prepared
under the accrual basis of accounting.
Investment Valuation and Income Recognition - The Plan's investments are
stated at fair value. Shares of mutual funds are valued at the quoted
market prices, which represent the net asset value of shares held by the
Plan at year end. Investments in the collective trust funds and the pooled
funds are stated at estimated fair values, which have been determined
based on the unit values of the funds. Unit values are determined by
dividing the fund's net assets at fair value by its units outstanding at
each valuation date. The guaranteed investment contracts and synthetic
investment contracts held by the Plan are fully benefit-responsive and are
valued at contract value. Contract value represents the aggregate amount
of accumulated contributions and investment income, less amounts used to
make benefit payments and administrative expenses. Investments in money
market funds are valued at cost plus accrued interest, which approximates
fair value. Participant notes receivable are valued at cost plus accrued
interest, which approximates fair value.
Purchases and sales of securities are recorded on a trade date basis.
Dividends are recorded on the ex-dividend date.
Administrative Expenses - Administrative expenses of the Plan are paid by
the Plan and allocated to participant accounts.
Payment of Benefits - Benefits are recorded when paid.
Cash and Cash Equivalents - The Plan considers all highly liquid
investments purchased with an original maturity of three months or less to
be cash equivalents. Cash equivalents typically represent money market
funds.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Reclassifications - Certain 1996 and 1995 amounts have been reclassified
to conform to the 1997 presentation.
-7-
<PAGE>
3. PLAN UNIT VALUATION
Effective July 1, 1996, the Plan, together with the Denny's, Inc. 401(k)
Plan, became a participant in a pooled investment trust agreement with
American Express Trust Company. The assets of the following investment
options are held in the pooled investment trust: Flagstar Stable Value
Fund, Aggressive Blend Fund, Moderate Blend Fund, Conservative Blend Fund,
Small Company Equity Fund, and the Flagstar Stock Fund. Individual
participant accounts are maintained on a unit value basis. In accordance
with the provisions of the Plan, the trustee maintains separate units of
participation in the Plan and related net asset value per unit for each
investment fund covered by the Plan. The number of units and related net
asset value per unit as of December 31, 1997 for each investment fund are
as follows:
<TABLE>
<CAPTION>
Flagstar Aggressive Moderate Conservative Small Flagstar
Stable Value Blend Blend Blend Company Stock
Fund Fund Fund Fund Equity Fund Fund
<S> <C> <C> <C> <C> <C> <C>
American Express Trust Money
Market Fund I $ 3,560,301 $ - $ - $ - $ - $ 292,604
American Express Trust
Income Fund I 7,500,297 - - - - -
American Express Emerging
Growth Fund II - 732,282 1,617,539 49,724 5,310,256 -
American Express Trust Equity
Index Fund II - 579,084 3,197,873 393,230 - -
IDS New Dimensions Fund - 624,926 1,150,042 - - -
Lazard Small Capital Fund - 723,445 1,598,063 49,129 5,247,717 -
Neuberger & Berman Focus Trust Fund - 595,456 1,096,005 - - -
Templeton Foreign Fund - 1,429,279 4,209,703 291,200 - -
Flagstar Stable Value Fund - 1,138,142 8,379,536 1,159,317 - -
Guaranteed investment contracts 50,951,851 - - - - -
------------ ----------- ----------- --------- ----------- --------
Total Market Value $ 62,012,449 $ 5,822,614 $21,248,761 $1,942,600 $ 10,557,973 $292,604
============ =========== =========== ========== ============ ========
Units Outstanding, December 31, 1997 1,743,188 154,472 774,603 47,380 300,615 70,210
Net Asset Value Per Unit at:
December 31, 1997 $ 10.8 $ 12.5 $ 12.0 $ 11.7 $ 12.8 $ 1.2
September 30, 1997 10.7 12.7 12.2 11.7 12.8 1.2
June 30, 1997 10.5 11.9 11.6 11.3 11.7 1.1
March 31, 1997 10.4 10.8 10.7 10.7 10.0 1.9
</TABLE>
-8-
<PAGE>
The number of units and related net asset value per unit as of December
31, 1996 for each investment fund are as follows:
<TABLE>
<CAPTION>
Flagstar Aggressive Moderate Conservative Small Flagstar
Stable Value Blend Blend Blend Company Stock
Fund Fund Fund Fund Equity Fund Fund
<S> <C> <C> <C> <C> <C> <C>
American Express Trust Money
Market Fund I $ 2,731,564 $ - $ - $ - $ - $ 62,988
American Express Trust
Income Fund I 11,539,479 - - - - -
American Express Emerging
Growth Fund II - 357,115 1,468,237 16,798 4,863,402 -
American Express Trust Equity -
Index Fund II - 277,226 2,849,476 136,652 - -
IDS New Dimensions Fund - 279,139 956,376 - - -
Lazard Small Capital Fund - 357,340 1,469,171 17,656 4,866,335 -
Neuberger & Berman Focus
Trust Fund - 281,873 965,745 - - -
Templeton Foreign Fund - 715,087 3,920,033 105,996 - -
Flagstar Stable Value Fund - 566,785 7,767,590 421,246 - -
Guaranteed investment contracts 71,131,343 - - - - -
Flagstar stock - - - - - 1,026,547
------------ ----------- ------------ --------- ----------- -----------
Total Market Value $ 85,402,386 $ 2,834,565 $ 19,396,628 $ 698,348 $ 9,729,737 $ 1,089,535
============ =========== ============ ========= =========== ===========
Units Outstanding, December 31,
1996 2,597,953 76,005 862,785 41,653 375,432 104,741
Net Asset Value Per Unit at:
December 31, 1997 $ 10.2 $ 10.8 $ 10.6 $ 10.5 $ 10.7 $ 3.1
September 30, 1997 10.1 10.3 10.2 10.1 10.4 6.4
July 1, 1996 (Initial Investment) 10.0 10.0 10.0 10.0 10.0 10.0
</TABLE>
4. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of collective trust funds managed by
American Express Trust Company ("American Express") or NationsBank.
American Express and NationsBank have each served as trustee as defined by
the Plan and, therefore, these transactions qualify as party-in-interest.
Fees paid to American Express for the year ended December 31, 1997
amounted to approximately $65,000. Fees paid to American Express and
NationsBank by the Plan amounted to approximately $16,000 and $105,000,
respectively, for the year ended December 31, 1996. Fees paid to
NationsBank amounted to approximately $190,000 for the year ended December
31, 1995.
5. TERMINATION
Although it has not expressed any intention to do so, the Company has the
right under the Plan to terminate the Plan subject to the provisions set
forth in ERISA. In the event of any termination of the Plan, each
participant automatically becomes fully vested to the extent of the
balance in the participant's separate account after reflection of the
fund's activity to the date of such termination.
-9-
<PAGE>
6. TAX STATUS
The Plan obtained its latest determination letter on September 20, 1995,
in which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The Plan has been amended since receiving the
determination letter. However, the plan administrator believes that the
Plan is designed and is currently being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, no
provision for income taxes has been included in the Plan's financial
statements.
7. INVESTMENTS
The following tables represent Plan investments as of December 31, 1997
and 1996 at fair value which equals or estimates carrying value:
<TABLE>
<CAPTION>
Description 1997 1996
<S> <C> <C>
Pooled funds, at estimated fair value:
Flagstar Stable Value Fund $ 18,840,377* $ 26,532,891*
Aggressive Blend Fund 1,927,971* 821,610
Moderate Blend Fund 9,316,926* 9,156,739*
Conservative Blend Fund 555,006 438,277
Small Company Equity Fund 3,861,105* 4,022,755*
Flagstar Stock Fund 82,707 326,268
--------- ---------
Total 34,584,092 41,298,540
Mutual funds, at quoted market price - Templeton
Foreign Fund 322,735 201,207
--------- ---------
Collective trust funds, at estimated fair value - American
Express Trust Equity Index Fund II 2,097,199* 447,117
--------- ---------
Loans to participants, at estimated fair value 1,257,896 1,136,374
--------- ---------
TOTAL INVESTMENTS $ 38,261,922 $ 43,083,238
============ ============
</TABLE>
* Represents plan investments which exceeded 5% of net assets available for
benefits as of December 31.
-10-
<PAGE>
8. FUND INFORMATION
Net appreciation (depreciation) in fair value of investments, interest and
dividends, employer's and participants' contributions and benefits paid to
participants by fund are as follow for the years ended December 31, 1997,
1996, and 1995. Effective with the change in trustee during 1996 to
American Express, the Plan's investments are valued on a daily basis;
net appreciation (depreciation) in fair value of investments includes
interest and dividends.
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net appreciation (depreciation) in fair value of investments:
Flagstar Stable Value Fund $ 1,212,244 $ 584,877 $ -
Aggressive Blend Fund 168,564 45,092 -
Moderate Blend Fund 1,131,329 545,376 -
Conservative Blend Fund 56,525 6,946 -
Small Company Equity Fund 603,595 290,492 -
Flagstar Stock Fund (214,848) (699,835) -
Templeton Foreign Fund (15,942) 7,706 -
American Express Trust Equity -
Index Fund II 297,151 34,295 -
Dreyfus Equity Fund - 782,617 (818,977)
Vanguard Explorer Fund - 507,999 673,893
Flagstar Companies, Inc. common stock - 26,555 (1,370,589)
Government Bond Fund - (81,062) 224,634
Interest Fund - (1,977) -
----------- ----------- ------------
Total $ 3,238,618 $ 2,049,081 $ (1,291,039)
=========== =========== ============
1997 1996 1995
Interest and dividends:
Flagstar Stable Value Fund $ - $ 8,646 $ -
Moderate Blend Fund - 8,469 -
Small Company Equity Fund - 1,983 -
Flagstar Stock Fund - (490) -
Templeton Foreign Fund 32,846 2,670 -
Interest Fund - 406,792 2,412,931
Government Bond Fund - 6,654 255,806
Dreyfus Equity Fund - 441,371 2,966,651
Vanguard Explorer Fund - 277,079 338,818
Flagstar Companies, Inc. common stock - 835 3,883
Loans to participants 79,062 41,032 89,737
----------- ----------- ------------
Total $ 111,908 $ 1,195,041 $ 6,067,826
=========== =========== ============
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Employer's contribution:
Flagstar Stable Value Fund $ 244,204 $ - $ -
Aggressive Blend Fund 47,842 - -
Moderate Blend Fund 117,421 - -
Conservative Blend Fund 12,770 - -
Small Company Equity Fund 57,001 - -
Flagstar Stock Fund 8,672 - -
Templeton Foreign Fund 7,013 - -
American Express Trust Equity Index Fund II 29,081 - -
Interest Fund - - 585,499
Government Bond Fund - - 137,369
Dreyfus Equity Fund - - 267,386
Vanguard Explorer Fund - - 138,742
Flagstar Companies, Inc. common stock - - 163,162
----------- ----------- ------------
Total $ 524,004 $ - $ 1,292,158
========= =========== ============
1997 1996 1995
Participants' contributions:
Flagstar Stable Value Fund $ 806,627 $ 370,317 $ -
Aggressive Blend Fund 450,044 25,784 -
Moderate Blend Fund 642,098 176,764 -
Conservative Blend Fund 97,373 6,407 -
Small Company Equity Fund 241,871 105,544 -
Flagstar Stock Fund 32,052 87,137 -
Templeton Foreign Fund 44,046 3,570 -
American Express Trust Equity -
Index Fund II 200,144 9,954 -
Interest Fund - 410,625 1,272,599
Government Bond Fund - 89,898 286,327
Dreyfus Equity Fund - 207,210 601,241
Vanguard Explorer Fund - 125,402 326,742
Flagstar Companies, Inc. common stock - 117,682 354,200
----------- ----------- ------------
Total $ 2,514,255 $ 1,736,294 $ 2,841,109
============ =========== ============
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
Benefits paid to participants:
<S> <C> <C> <C>
Flagstar Stable Value Fund $ 7,232,522 $ 1,951,307 $ -
Aggressive Blend Fund 215,457 785 -
Moderate Blend Fund 2,062,148 763,691 -
Conservative Blend Fund 10,097 8,210 -
Small Company Equity Fund 961,973 409,551 -
Flagstar Stock Fund 41,160 44,064 -
Templeton Foreign Fund 28,262 - -
American Express Trust Equity
Index Fund II 243,251 - -
Participant loans 204,610 - -
Interest Fund - 5,629,568 19,533,346
Government Bond Fund - 747,232 2,647,382
Dreyfus Equity Fund - 2,021,838 5,399,386
Vanguard Explorer Fund - 1,155,839 2,964,831
Flagstar Companies, Inc. common stock - 452,884 916,562
----------- ----------- ------------
Total $ 10,999,480 $ 13,184,969 $ 31,461,507
============ ============ ============
</TABLE>
9. SUBSEQUENT EVENTS
FCI Financial Restructuring - On January 7, 1998 (the "Effective Date"),
Flagstar Companies, Inc. ("FCI"), parent company of the Plan Sponsors, and
its wholly-owned subsidiary, Flagstar Corporation ("Flagstar"), emerged
from proceedings under Chapter 11 of Title 11 of the United States Code
(the "Bankruptcy Code") pursuant to FCI and Flagstar's Amended Joint Plan
of Reorganization (the "Reorganization Plan") dated as of November 7,
1997. FCI's operating subsidiaries did not file bankruptcy petitions and
were not parties to the above mentioned Chapter 11 proceedings. In
addition, the Plan was not involved in and was unaffected by the
bankruptcy proceedings.
Material features of the Reorganization Plan as it became effective as of
January 7, 1998, are as follows:
(a) On the Effective Date, Flagstar merged with and into FCI, the
surviving corporation, and FCI changed its name to Advantica
Restaurant Group, Inc.
(b) The following securities of FCI and Flagstar were canceled,
extinguished and retired as of the Effective Date: (i) Flagstar's 10
7/8% Senior Notes due 2002 and 10 3/4% Senior Notes due 2001
(collectively, the "Old Senior Notes"), (ii) Flagstar's 11.25% Senior
Subordinated Debentures due 2004 and 11 3/8% Senior Subordinated
Debentures due 2003 (collectively, the "Senior Subordinated
Debentures"), (iii) Flagstar's 10% Convertible Junior Subordinated
Debentures due 2014 (the "10% Convertible Debentures"), (iv) FCI's
$2.25 Series A Cumulative Convertible Exchangeable Preferred Stock and
(v) FCI's $.50 par value common stock;
-13-
<PAGE>
(c) Advantica had 100 million authorized shares of common stock (of which
40 million were issued and outstanding on the Effective Date) and 25
million authorized shares of preferred stock (none of which are
currently outstanding). Pursuant to the Plan, 10% of the number of
shares of common stock issued and outstanding on the Effective Date,
on a fully diluted basis, is reserved for issuance under a new
management stock option program. Additionally, 4 million shares of
common stock are reserved for issuance upon the exercise of new
warrants expiring January 7, 2005 that were issued and outstanding on
the Effective Date and entitle the holders thereof to purchase in the
aggregate 4 million shares of common stock at an exercise price of
$14.60 per share (the "Warrants");
(d) Each holder of the Old Senior Notes received such holder's pro rata
portion of 100% of Advantica's 11 1/4% Senior Notes due 2008 in
exchange for 100% of the principal amount of such holders' Old Senior
Notes and accrued interest through the Effective Date;
(e) Each holder of the Senior Subordinated Debentures received each
holder's pro rata portion of shares of Common Stock equivalent to
95.5% of the common stock issued on the Effective Date;
(f) Each holder of the 10% Convertible Debentures received such holder's
pro rata portion of (i) shares of common stock equivalent to 4.5% of
the common stock issued on the Effective Date and (ii) 100% of the
Warrants issued on the Effective Date; and
(g) Advantica refinanced its prior credit facilities by entering into a
new credit agreement providing Advantica and certain of its
subsidiaries (including the Plan Sponsors) with a $200 million senior
secured revolving credit facility.
Disposition of Flagstar Enterprises, Inc. - On April 1, 1998, the Company
completed the sale of the stock of Flagstar Enterprises, Inc. ("FEI"), a
wholly-owned subsidiary of Spartan which operated the Company's Hardee's
restaurants, for $427 million, which includes the assumption by the
purchaser of $46 million of capital leases. Approximately $173.1 million
of the proceeds (together with $28.6 million already on deposit with
respect to certain Mortgage Financings as defined below) was applied to
in-substance defease the 10.25% Guaranteed Secured Bonds due 2000 (the
"Mortgage Financings") of Spardee's Realty, Inc., a wholly-owned
subsidiary of FEI, and Quincy's Realty, Inc., a wholly-owned subsidiary of
Quincy's Restaurants, Inc., with a book value of $198.9 million plus
accrued interest of $6.9 million at April 1, 1998. Such Mortgage
Financings were collateralized by certain assets of Spardee's Realty, Inc.
and Quincy's Realty, Inc. The Company replaced such collateral through the
purchase of a portfolio of United States Government and AAA rated
investment securities which were deposited with the collateral agent with
respect to such Mortgage Financings to satisfy principal and interest
payments under such Mortgage Financings through the stated maturity date
in the year 2000.
Effective April 1, 1998, the date of the sale, FEI employees were no
longer eligible to participate in the Plan. Additionally, FEI is no longer
a participating employer; therefore, FEI's active employees as of the sale
date are not permitted to make pre-tax deferral contributions under the
Plan and are not eligible to receive employer contributions under the
Plan. In accordance with the Plan provisions, FEI employees will be given
the right to elect a lump sum distribution of the pre-tax account when
they separate from service with FEI, or postpone distribution of the
account if their account balance did not exceed $5,000 as of the sale
date. As of April 1, 1998, FEI employee participant account balances
included in the net assets available for the Plan totaled approximately
$6.6 million.
-14-
<PAGE>
Disposition of Quincy's Restaurants - On June 10, 1998, the Company
completed the sale of the stock of Quincy's Restaurants, Inc.
("Quincy's"), a wholly-owned subsidiary of Spartan which operates its
Quincy's Family Steakhouse division, to Buckley Acquisition Corporation
("BAC") for $85.7 million, which includes the assumption by BAC of $4.2
million in capital leases.
Effective June 10, 1998, the date of the sale, Quincy's employees are no
longer eligible to participate in the Plan. Additionally, Quincy's is no
longer a participating employer; therefore, Quincy's active employees as
of the sale date are not permitted to make pre-tax deferral contributions
under the Plan and are not eligible to receive employer contributions
under the Plan. In accordance with the Plan provisions, Quincy's employees
will be given the right to elect a lump sum distribution of the pre-tax
account when they separate from service with Quincy's, or postpone
distribution of the account if their account balance did not exceed $5,000
as of the sale date. As of June 10, 1998, Quincy's employee participant
account balances included in the net assets available for the Plan totaled
approximately $1.5 million.
**********
-15-
<PAGE>
FLAGSTAR 401(K) PLAN
<TABLE>
<CAPTION>
IRS FORM 5500, ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------
Shares, Units Current
Description or Par Value Cost Value
<S> <C> <C> <C>
Pooled funds:
* Flagstar Stable Value Fund 1,743,188 $ 17,479,208 $ 18,840,377
* Aggressive Blend Fund 154,472 1,775,552 1,927,971
* Moderate Blend Fund 774,603 7,907,959 9,316,926
* Conservative Blend Fund 47,380 518,759 555,006
* Small Company Equity Blend Fund 300,615 3,094,533 3,861,105
* Flagstar Stock Fund 70,210 600,620 82,707
---------- -----------
Total 31,376,631 34,584,092
Collective trust funds:
* American Express Trust Equity Index Fund II 81,029 1,820,143 2,097,199
---------- -----------
Mutual funds:
Templeton Foreign Fund 32,436 336,992 322,735
---------- -----------
* Loans to participants 1,257,896 1,257,896 1,257,896
---------- -----------
TOTAL INVESTMENTS $ 34,791,662 $ 38,261,922
============ ============
</TABLE>
* Denotes party-in-interest
-16-
<PAGE>
FLAGSTAR 401(K) PLAN
<TABLE>
<CAPTION>
IRS FORM 5500
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
5% Report By Asset-Aggregate
1/1/97 through 12/31/97
Current Value
Identity of Purchase Selling Cost of of Asset on
Party Involved Description of Asset Price Price Asset Transaction Date Net Gain
<S> <C> <C> <C> <C> <C>
American Express Stable Value Fund
193 Sales $ 10,178,897 $ 9,776,800 $ 10,178,897 $ 402,097
48 Purchases $ 1,273,474 1,273,474 1,273,474
American Express Small Company Equity Blend Fund
119 Sales 1,460,903 1,361,055 1,460,903 99,848
91 Purchases 695,570 695,570 695,570
American Express Moderate Blend Fund
134 Sales 2,489,199 2,245,007 2,489,199 244,192
91 Purchases 1,517,863 1,517,863 1,517,863
American Express Aggresive Blend Fund
49 Sales 751,827 691,015 751,827 60,812
133 Purchases 1,689,621 1,689,621 1,689,621
</TABLE>
-17-
<PAGE>
- --------------------------------------------------------------------------------
Denny's 401(k) Plan
Financial Statements at December 31, 1997 and 1996 and for each of the Three
Years in the Period Ended December 31, 1997, Supplemental Schedules for the
Year Ended December 31, 1997 and Independent Auditors' Report
<PAGE>
DENNY'S 401(K) PLAN
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of December 31, 1997 and 1996 2
Statements of Changes in Net Assets Available for Benefits for the Years Ended
December 31, 1997, 1996 and 1995 3
Notes to Financial Statements 4-14
SUPPLEMENTAL SCHEDULES:
IRS Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes as of
December 31, 1997 15
IRS Form 5500, Item 27d - Schedule of Reportable Transactions for the Year Ended
December 31, 1997 16
NOTE: Schedules required under the Employee Retirement Income Security Act
of 1974, other than the schedules listed above, are omitted because of
the absence of conditions under which such schedules are required.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee
Denny's 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Denny's 401(k) Plan (the "Plan") as of December 31, 1997 and 1996, and
the related statements of changes in net assets available for benefits for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1997 and 1996, and the changes in net assets available for benefits for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in the
foregoing Table of Contents are presented for the purpose of additional analysis
and are not a required part of the basic financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to the auditing procedures
applied in our audit of the basic 1997 financial statements and, in our opinion,
are fairly stated in all material respects when considered in relation to the
basic financial statements taken as a whole.
Greenville, SC
June 12, 1998
-1-
<PAGE>
DENNY'S 401(K) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1997 1996
ASSETS:
Investments, at fair value $ 71,066,446 $ 70,022,567
------------ ------------
Receivables:
Employer's contribution 70,575 -
Participants' contributions 169,635 156,789
------------ ------------
Total receivables 240,210 156,789
------------ ------------
Cash and cash equivalents 21,443 -
------------ -----------
TOTAL ASSETS 71,328,099 70,179,356
LESS - ACCRUED LIABILITIES - 145,446
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 71,328,099 $ 70,033,910
============ ============
See notes to financial statements.
-2-
<PAGE>
DENNY'S 401(K) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
ADDITIONS:
Investment income:
Net appreciation (depreciation) in fair value of
investments $ 5,426,873 $ 2,038,290 $ (2,145,771)
Interest and dividends 77,456 2,099,417 7,314,494
----------- ----------- ------------
Total investment income 5,504,329 4,137,707 5,168,723
----------- ----------- ------------
Contributions:
Employer's 1,832,437 - 2,588,995
Participants' 5,168,529 5,840,702 7,073,490
----------- ----------- ------------
Total contributions 7,000,966 5,840,702 9,662,485
----------- ----------- ------------
TOTAL ADDITIONS 12,505,295 9,978,409 14,831,208
----------- ----------- ------------
DEDUCTIONS:
Benefits paid to participants 10,984,351 24,037,303 17,837,071
Administrative expenses 226,755 302,833 425,402
----------- ----------- ------------
TOTAL DEDUCTIONS 11,211,106 24,340,136 18,262,473
----------- ----------- ------------
NET INCREASE (DECREASE) 1,294,189 (14,361,727) (3,431,265)
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 70,033,910 84,395,637 87,826,902
----------- ----------- ------------
NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 71,328,099 $ 70,033,910 $ 84,395,637
============ ============ ============
</TABLE>
See notes to financial statements.
-3-
<PAGE>
DENNY'S 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS,
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The following description of the Denny's 401(k) Plan (the "Plan") provides
only general information. Participants should refer to the plan document
for a more complete description of the Plan's provisions.
General - The Plan, formerly the Denny's, Inc. Profit Sharing Retirement
Plan, is a qualified deferred compensation plan, subject to the Employee
Retirement Income Security Act of 1974. Any United States employee of
Denny's, Inc. and El Pollo Loco (together , "the Company" and "Plan
Sponsors") and their domestic subsidiaries who has attained age 21 and who
has completed twelve months of service with the Company is eligible to
participate in the Plan. The Denny's 401(k) Plan Committee and the plan
administrator control and manage the operation and administration of the
Plan. NationsBank served as the trustee of the Plan prior to July 1, 1996,
when American Express Trust replaced NationsBank as trustee.
Effective September 26, 1996, (the "PTF Transition Date"), Portion-Trol
Foods, Inc. ("PTF") was sold to an entity outside of Denny's, Inc.
Effective September 26, 1996, employees classified as PTF employees were
no longer eligible to become participants in the Plan. Effective as of the
PTF Transition Date and thereafter, PTF is not a Plan Sponsor or
participating employer under the Plan and active employees of PTF as of
the PTF Transition Date were not permitted to make pre-tax deferral
contributions under the Plan and were not eligible to receive employer
contributions under the Plan. In accordance with the Plan provisions, PTF
employees were given the right to elect to receive a lump sum distribution
of their entire Pre-Tax Account as of the PTF Transition Date, receive
distribution of the Pre-Tax Account when they separate from service with
PTF, or postpone distribution of the account. Distributions related to PTF
employees for the plan year ended December 31, 1996 totaled approximately
$2,272,000.
Effective July 26, 1996, (the "MBP Transition Date"), Mother Butler Pies
("MBP") was sold to an entity outside of Denny's, Inc. Effective July 26,
1996, employees classified as MBP employees were no longer eligible to
become participants in the Plan. Effective as of the MBP Transition Date
and thereafter, MBP is not a Plan Sponsor or participating employer under
the Plan and active employees of MBP as of the MBP Transition Date were
not permitted to make pre-tax deferral contributions under the Plan and
were not eligible to receive employer contributions under the Plan. In
accordance with the Plan provisions, MBP employees were given the right to
elect to receive a lump sum distribution of their entire Pre-Tax Account
as of the MBP Transition Date, receive distribution of the Pre-Tax Account
when they separate from service with MBP, or postpone distribution of the
account. Distributions related to MBP employees for the plan year ended
December 31, 1996 totaled approximately $249,000.
-4-
<PAGE>
Effective September 1, 1995 (the "PFC Transition Date"), Proficient Food
Company and its subsidiary, DFC Trucking Company, (collectively, the "PFC
Group") were sold to an entity outside of Denny's, Inc. Effective
September 1, 1995, employees classified as PFC Group employees were no
longer eligible to become participants in the Plan. Effective as of the
PFC Transition Date and thereafter, the PFC Group is not a Plan Sponsor or
participating employer under the Plan and active employees of the PFC
Group as of the PFC Transition Date were not permitted to make pre-tax
deferral contributions under the Plan and were not eligible to receive
employer contributions under the Plan. In accordance with the Plan
provisions, PFC Group employees were given the right to elect to receive a
lump sum distribution of their entire Pre-Tax Account as of the PFC
Transition Date, receive distribution of the Pre-Tax Account when they
separate from service with the PFC Group, or postpone distribution of the
account. Distributions related to PFC employees for the plan year ended
December 31, 1995 totaled approximately $5,925,000.
Contributions - Each year, participants' pre-tax contributions are limited
to 15% of eligible compensation, or $9,500 in 1997 and 1996 and $9,240 in
1995, whichever is less. The Company, at its discretion, may match
employee contributions up to the first 3% of each employee's salary at the
rate of $1.00 for each employee dollar contributed (net of forfeitures).
These Company contributions are made to the Plan monthly and are invested
to mirror the employees' elections. In 1997 the Company elected to make
contributions to the Plan in accordance with the matching formula.
Participants may also contribute amounts representing distributions from
other qualified defined-benefit or contribution plans.
Participant Accounts - A separate account is maintained for each
participant. Each participant's account is credited with the participant's
contribution and allocations of (a) the Company's contributions and (b)
earnings, and is charged with an allocation of administrative expenses.
Allocations are based on participant account balances. The benefit to
which a participant is entitled is the benefit that can be provided from
the participant's vested account.
Vesting - Participants are immediately vested in their contributions plus
actual earnings thereon. Vesting in the Company's matching and
discretionary contribution portion of their accounts plus actual earnings
thereon is based on years of continuous service. A participant is 100%
vested after five years of credited service.
Investment Options - Prior to July 1, 1996, contributions to the Plan
could be invested in any combination of four funds chosen by the
participants: Interest Fund, Dreyfus Equity Fund, Vanguard Explorer Fund,
and Flagstar Companies Employee Stock Fund. Contributions were temporarily
invested in short-term money market deposits and/or commercial paper until
employee elections were executed. The Interest Fund consisted of insurance
contracts that provided fixed interest rates on the fund investments. The
Dreyfus Equity Fund and Vanguard Explorer Fund consisted of mutual funds
that provided dividends and gains/losses as the market fluctuated. The
Flagstar Companies Employee Stock Fund was invested in Flagstar Companies,
Inc. common stock which also generated gains/losses as the market
fluctuated, but in no event could more than 25% of the participating
employees' contributions for any pay period be invested in the Company's
common stock. Participants could change or transfer their investment
options quarterly. A participating employee, however, could not transfer
amounts to the Flagstar Companies Stock Fund to exceed 25% of his or her
total investment in the Plan.
-5-
<PAGE>
As of July 1, 1996, participants may direct their contributions in one
percent increments to any of eight investment options. Descriptions of the
investment options are provided by the funds' managers.
o The Flagstar Stable Value Fund is a pooled fund which invests
primarily in bank, insurance and stable value investment contracts.
The guaranteed investment contracts held by the Plan at the time of
the change in trustee were transferred to this fund.
o The Aggressive Blend Fund is a pooled fund which invests in the
Flagstar Stable Value Fund, American Express collective trust funds,
and mutual funds.
o The Moderate Blend Fund is a pooled fund which invests in the
Flagstar Stable Value Fund, American Express collective trust funds,
and mutual funds.
o The Conservative Blend Fund is a pooled fund which invests in the
Flagstar Stable Value Fund, American Express collective trust funds,
and mutual funds.
o The Small Company Equity Fund is a pooled fund which invests in
mutual funds.
o The Flagstar Stock Fund is a pooled fund which invested in American
Express money market funds and Flagstar Company common stock. The
Flagstar stock held by the Plan at the time of the change in trustee
was transferred to this fund. As of April 1997, the Company
liquidated all Flagstar stock. This fund now invests solely in money
market funds.
o The Templeton Foreign Fund is a mutual fund which invests in
companies outside of the United States.
o The American Express Trust Equity Index Fund II is a collective
trust fund which invests primarily in common stock.
Participants may change their investment options daily.
Payment of Benefits - On termination of service due to death, disability
or retirement, a participant may elect to receive either a lump sum amount
equal to the value of the participant's vested interest in his or her
account, or annual installments over a ten year period. For termination of
service due to other reasons, a participant may receive the value of the
vested interest in his or her account as a lump sum distribution.
Forfeited Accounts - Forfeitures are used to reduce Company contributions.
During 1997, employer contributions were reduced by $256,755 from
forfeited nonvested accounts.
-6-
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The financial statements of the Plan are prepared
using the accrual basis of accounting.
Investment Valuation and Income Recognition - The Plan's investments are
stated at fair value. Shares of mutual funds are valued at the quoted
market prices which represent the net asset value of shares held by the
Plan at year end. Investments in the collective trust funds and the pooled
funds are stated at estimated fair values, which have been determined
based on the unit values of the funds. Unit values are determined by
dividing the fund's net assets at fair value by its units outstanding at
each valuation date. The guaranteed investment contracts and synthetic
investment contracts held by the Plan are fully benefit-responsive and are
valued at contract value. Contract value represents the aggregate amount
of accumulated contributions and investment income, less amounts used to
make benefit payments and administrative expenses. Investments in money
market funds are valued at cost plus accrued interest, which approximates
fair value.
Purchases and sales of securities are recorded on a trade date basis.
Dividends are recorded on the ex-dividend date.
Administrative Expenses - Administrative expenses of the Plan are paid by
the Plan and allocated to participant accounts.
Payment of Benefits - Benefits are recorded when paid.
Cash and Cash Equivalents - The Plan considers all highly liquid
investments purchased with an original maturity of three months or less to
be cash equivalents. Cash equivalents typically represent money market
funds.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Reclassifications - Certain 1996 and 1995 amounts have been reclassified
to conform to the 1997 presentation.
-7-
<PAGE>
3. PLAN UNIT VALUATION
Effective July 1, 1996, the Plan together with the Flagstar 401(k) Plan
became a participant in a pooled investment trust agreement with American
Express Trust Company. The assets of the following investment options are
held in the pooled investment trust: Flagstar Stable Value Fund,
Aggressive Blend Fund, Moderate Blend Fund, Conservative Blend Fund, Small
Company Equity Fund, and the Flagstar Stock Fund. Individual participant
accounts are maintained on a unit value basis. In accordance with the
provisions of the Plan, the trustee maintains separate units of
participation in the Plan and related net asset value per unit for each
investment fund covered by the Plan. The number of units and related net
asset value per unit as of December 31, 1997 for each investment fund are
as follows:
<TABLE>
<CAPTION>
Flagstar Aggressive Moderate Conservative Small Flagstar
Stable Value Blend Blend Blend Company Stock
Fund Fund Fund Fund Equity Fund Fund
<S> <C> <C> <C> <C> <C> <C>
American Express Trust Money
Market Fund I $ 3,560,301 $ - $ - $ - $ - $292,604
American Express Trust
Income Fund I 7,500,297 - - - - -
American Express Emerging
Growth Fund II - 732,282 1,617,539 49,724 5,310,256 -
American Express Trust Equity
Index Fund II - 579,084 3,197,873 393,230 - -
IDS New Dimensions Fund - 624,926 1,150,042 - - -
Lazard Small Capital Fund - 723,445 1,598,063 49,129 5,247,717 -
Neuberger & Berman Focus Trust Fund - 595,456 1,096,005 - - -
Templeton Foreign Fund - 1,429,279 4,209,703 291,200 - -
Flagstar Stable Value Fund - 1,138,142 8,379,536 1,159,317 - -
Guaranteed investment contracts 50,951,851 - - - - -
------------ ----------- ----------- --------- ----------- --------
Total Market Value $ 62,012,449 $ 5,822,614 $21,248,761 $1,942,600 $ 10,557,973 $292,604
============ =========== =========== ========== ============ ========
Units outstanding,
December 31, 1997 4,006,620 312,046 992,005 118,456 521,400 178,180
Net asset value per unit at:
December 31, 1997 $ 10.8 $ 12.5 $ 12.0 $ 11.7 $ 12.8 $ 1.2
September 30, 1997 10.7 12.7 12.2 11.7 12.8 1.2
June 30, 1997 10.5 11.9 11.6 11.3 11.7 1.1
March 31, 1997 10.4 10.8 10.7 10.7 10.0 1.9
</TABLE>
-8-
<PAGE>
The number of units and related net asset value per unit as of December
31, 1996 for each investment fund are as follows:
<TABLE>
<CAPTION>
Flagstar Aggressive Moderate Conservative Small Flagstar
Stable Value Blend Blend Blend Company Stock
Fund Fund Fund Fund Equity Fund Fund
<S> <C> <C> <C> <C> <C> <C>
American Express Trust Money
Market Fund I $ 2,731,564 $ - $ - $ - $ - $ 62,988
American Express Trust
Income Fund I 11,539,479 - - - - -
American Express Emerging
Growth Fund II - 357,115 1,468,237 16,798 4,863,402 -
American Express Trust Equity
Index Fund II - 277,226 2,849,476 136,652 - -
IDS New Dimensions Fund - 279,139 956,376 - - -
Lazard Small Capital Fund - 357,340 1,469,171 17,656 4,866,335 -
Neuberger & Berman Focus
Trust Fund - 281,873 965,745 - - -
Templeton Foreign Fund - 715,087 3,920,033 105,996 - -
Flagstar Stable Value Fund - 566,785 7,767,590 421,246 - -
Guaranteed investment
contracts 71,131,343 - - - - -
Flagstar stock - - - - - 1,026,547
------------ ----------- ------------ --------- ----------- -----------
Total market value $85,402,386 $2,834,565 $19,396,628 $698,348 $9,729,737 $1,089,535
============ =========== ============ ========= =========== ===========
Units outstanding,
December 31, 1996 4,903,908 187,912 971,445 24,717 532,491 243,574
Net asset value per unit at:
December 31, 1996 $ 10.2 $ 10.8 $ 10.6 $ 10.5 $ 10.7 $ 3.1
September 30, 1996 10.1 10.3 10.2 10.1 10.4 6.4
July 1, 1996 (initial
investment) 10.0 10.0 10.0 10.0 10.0 10.0
</TABLE>
4. RELATED PARTY TRANSACTIONS
Certain plan investments are shares of collective trust funds managed by
American Express Trust Company ("American Express") or NationsBank.
American Express and NationsBank have each served as trustee as defined by
the Plan and, therefore, these transactions qualify as party-in-interest.
Fees paid to American Express for the year ended December 31, 1997
amounted to approximately $152,000. Fees paid to American Express and
NationsBank by the Plan amounted to approximately $38,000 and $128,000,
respectively, for the year ended December 31, 1996. Fees paid to
NationsBank amounted to approximately $111,000 for the year ended December
31, 1995.
5. TERMINATION
Although it has not expressed any intention to do so, the Company has the
right under the Plan to terminate the Plan subject to the provisions set
forth in ERISA. In the event of any termination of the Plan, each
participant automatically becomes fully vested to the extent of the
balance in the participant's separate account after reflection of the
fund's activity to the date of such termination.
-9-
<PAGE>
6. TAX STATUS
The Plan obtained its latest determination letter on December 21, 1995, in
which the Internal Revenue Service stated that the Plan, as then designed,
was in compliance with the applicable requirements of the Internal Revenue
Code. The Plan has been amended since receiving the determination letter.
However, the plan administrator believes that the Plan is designed and is
currently being operated in compliance with the applicable requirements of
the Internal Revenue Code. Therefore, no provision for income taxes has
been included in the Plan's financial statements.
7. INVESTMENTS
The following tables represent Plan investments as of December 31, 1997
and 1996 at fair value which equals or estimates carrying value:
<TABLE>
<CAPTION>
Description 1997 1996
<S> <C> <C>
Pooled funds, at estimated fair value:
Flagstar Stable Value Fund $ 43,172,072* $ 49,952,140*
Aggressive Blend Fund 3,894,643* 2,031,332
Moderate Blend Fund 11,931,835* 10,309,956*
Conservative Blend Fund 1,387,594 260,069
Small Company Equity Fund 6,696,868* 5,705,700*
Flagstar Stock Fund 209,897 758,734
----------- ------------
Total 67,292,909 69,017,931
Mutual funds, at quoted market price - Templeton Foreign Fund 780,418 262,507
Collective trust funds, at estimated fair value - American
Express Trust Equity Index Fund II 2,993,119 742,129
----------- ------------
TOTAL INVESTMENTS $ 71,066,446 $ 70,022,567
============ ============
</TABLE>
* Represents plan investments which exceeded 5% of net assets available for
benefits as of December 31.
-10-
<PAGE>
8. FUND INFORMATION
Net appreciation (depreciation) in fair value of investments, interest and
dividends, employer's and participants' contributions and benefits paid to
participants by fund are as follow for the years ended December 31, 1997,
1996, and 1995. Effective with the change in trustee during 1996 to
American Express, the Plan's investments are valued on a daily basis;
net appreciation (depreciation) in fair value includes interest and
dividends.
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net appreciation (depreciation) in fair value of
investments:
Flagstar Stable Value Fund $ 2,598,452 $ 1,170,405 $ -
Aggressive Blend Fund 415,002 110,768 -
Moderate Blend Fund 1,398,316 548,871 -
Conservative Blend Fund 81,854 9,283 -
Small Company Equity Fund 1,070,292 360,114 -
Flagstar Stock Fund (549,217) (1,432,527) -
Templeton Foreign Fund (59,963) 9,197 -
American Express Trust Equity Index
Fund II 472,137 58,715 -
Dreyfus Equity Fund - 659,440 (1,033,152)
Vanguard Explorer Fund - 514,246 (1,808,666)
Flagstar Companies, Inc. common stock - 29,778 696,047
----------- ----------- -------------
Total $ 5,426,873 $ 2,038,290 $ (2,145,771)
=========== =========== ============
1997 1996 1995
Interest and dividends:
Flagstar Stable Value Fund $ - $ 234,326 $ -
Moderate Blend Fund - 22,174 -
Small Company Equity Fund - 3,800 -
Flagstar Stock Fund - 6,736 -
Templeton Foreign Fund 77,456 6,172 -
Interest Fund - 1,077,948 3,956,720
Dreyfus Equity Fund - 424,642 2,923,676
Vanguard Explorer Fund - 322,095 429,931
Flagstar Companies, Inc. common stock - 1,524 4,167
----------- ----------- -----------
Total $ 77,456 $ 2,099,417 $ 7,314,494
======== =========== ===========
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Employer's contributions (net of forfeitures):
Flagstar Stable Value Fund $ 949,428 $ - $ -
Aggressive Blend Fund 130,645 - -
Moderate Blend Fund 382,852 - -
Conservative Blend Fund 23,454 - -
Small Company Equity Fund 215,587 - -
Flagstar Stock Fund 41,466 - -
Templeton Foreign Fund 20,580 - -
American Express Trust Equity Index Fund II 68,425 - -
Interest Fund - - 1,474,583
Dreyfus Equity Fund - - 498,950
Vanguard Explorer Fund - - 291,872
Flagstar Companies, Inc. common stock - - 323,590
----------- ------------ -----------
Total $ 1,832,437 $ - $ 2,588,995
=========== ============ ===========
1997 1996 1995
Participants' contributions:
Flagstar Stable Value Fund $ 2,490,189 $ 1,313,859 $ -
Aggressive Blend Fund 411,148 70,616 -
Moderate Blend Fund 1,128,390 606,224 -
Conservative Blend Fund 85,064 9,584 -
Small Company Equity Fund 665,718 375,875 -
Flagstar Stock Fund 117,611 322,911 -
Templeton Foreign Fund 60,744 7,120 -
American Express Trust Equity Index Fund II 209,665 23,979 -
Interest Fund - 1,641,457 3,916,630
Dreyfus Equity Fund - 655,850 1,398,303
Vanguard Explorer Fund - 419,831 849,906
Flagstar Companies, Inc. common stock - 393,396 908,651
----------- ----------- -----------
Total $ 5,168,529 $ 5,840,702 $ 7,073,490
=========== =========== ===========
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Benefits paid to participants:
Flagstar Stable Value Fund $ 7,345,109 $ 5,749,424 $ -
Aggressive Blend Fund 356,774 40,262 -
Moderate Blend Fund 1,895,045 884,465 -
Conservative Blend Fund 44,810 47,535 -
Small Company Equity Fund 1,045,036 507,830 -
Flagstar Stock Fund 73,628 125,701 -
Templeton Foreign Fund 18,959 23,558 -
American Express Trust Equity
Index Fund II 204,990 52,966 -
Interest Fund - 12,929,498 14,124,263
Dreyfus Equity Fund - 1,990,906 1,996,036
Vanguard Explorer Fund - 1,260,088 1,148,212
Flagstar Companies, Inc. common stock - 425,070 568,560
------------ ------------ ------------
Total $ 10,984,351 $ 24,037,303 $ 17,837,071
============ ============ ============
</TABLE>
9. SUBSEQUENT EVENTS
FCI Financial Restructuring - On January 7, 1998 (the "Effective Date"),
Flagstar Companies, Inc. ("FCI"), parent company of the Plan Sponsors, and
its wholly-owned subsidiary, Flagstar Corporation ("Flagstar"), emerged
from proceedings under Chapter 11 of Title 11 of the United States Code
(the "Bankruptcy Code") pursuant to FCI and Flagstar's Amended Joint Plan
of Reorganization (the "Reorganization Plan") dated as of November 7,
1997. FCI's operating subsidiaries did not file bankruptcy petitions and
were not parties to the above mentioned Chapter 11 proceedings. In
addition, the Plan was not involved in and was unaffected by the
bankruptcy proceedings.
Material features of the Reorganization Plan as it became effective as of
January 7, 1998, are as follows:
(a) On the Effective Date, Flagstar merged with and into FCI, the
surviving corporation, and FCI changed its name to Advantica
Restaurant Group, Inc. ("Advantica").
(b) The following securities of FCI and Flagstar were canceled,
extinguished and retired as of the Effective Date: (i) Flagstar's
10 7/8% Senior Notes due 2002 and 10 3/4% Senior Notes due 2001
(collectively, the "Old Senior Notes"), (ii) Flagstar's 11.25% Senior
Subordinated Debentures due 2004 and 11 3/8% Senior Subordinated
Debentures due 2003 (collectively, the "Senior Subordinated
Debentures"), (iii) Flagstar's 10% Convertible Junior Subordinated
Debentures due 2014 (the "10% Convertible Debentures"), (iv)
FCI's $2.25 Series A Cumulative Convertible Exchangeable Preferred
Stock and (v) FCI's $.50 par value common stock;
-13-
<PAGE>
(c) Advantica had 100 million authorized shares of common stock (of which
40 million were issued and outstanding on the Effective Date) and 25
million authorized shares of preferred stock (none of which are
currently outstanding). Pursuant to the Plan, 10% of the number of
shares of common stock issued and outstanding on the Effective Date,
on a fully diluted basis, is reserved for issuance under a new
management stock option program. Additionally, 4 million shares of
common stock are reserved for issuance upon the exercise of new
warrants expiring January 7, 2005 that were issued and outstanding on
the Effective Date and entitle the holders thereof to purchase in the
aggregate 4 million shares of common stock at an exercise price of
$14.60 per share (the "Warrants");
(d) Each holder of the Old Senior Notes received such holder's pro rata
portion of 100% of Advantica's 11 1/4% Senior Notes due 2008 in
exchange for 100% of the principal amount of such holders' Old Senior
Notes and accrued interest through the Effective Date;
(e) Each holder of the Senior Subordinated Debentures received each
holder's pro rata portion of shares of common stock equivalent to
95.5% of the common stock issued on the Effective Date;
(f) Each holder of the 10% Convertible Debentures received such holder's
pro rata portion of (i) shares of common stock equivalent to 4.5% of
the common stock issued on the Effective Date and (ii) 100% of the
Warrants issued on the Effective Date; and
(g) Advantica refinanced its prior credit facilities by entering into a
new credit agreement providing Advantica and certain of its
subsidiaries (including the Plan Sponsor) with a $200 million senior
secured revolving credit facility.
**********
-14-
<PAGE>
DENNY'S 401(K) PLAN
IRS FORM 5500, ITEM 27a - SCHEDULE OF ASSETS HELD FOR
INVESTMENT PURPOSES AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares, Units Current
Description or Par Value Cost Value
Pooled funds:
<S> <C> <C> <C>
* Flagstar Stable Value Fund 4,006,620 $ 40,169,592 $ 43,172,072
* Aggressive Blend Fund 312,046 3,415,363 3,894,643
* Moderate Blend Fund 992,005 10,258,874 11,931,835
* Conservative Blend Fund 118,456 1,311,910 1,387,594
* Small Company Equity Fund 521,400 5,400,371 6,696,868
* Flagstar Stock Fund 178,180 1,327,008 209,897
----------- -----------
Total 61,883,118 67,292,909
----------- -----------
Mutual funds:
Templeton Foreign Fund 78,434 834,684 780,418
Collective trust funds:
* American Express Trust Equity Index Fund II 115,645 2,624,813 2,993,119
----------- -----------
TOTAL INVESTMENTS $ 65,342,615 $ 71,066,446
============ ============
</TABLE>
* Denotes party-in-interest
-15-
<PAGE>
DENNY'S 401(K) PLAN
IRS FORM 5500
ITEM 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
5% Report By Asset-Aggregate
1/1/97 through 12/31/97
<TABLE>
<CAPTION>
Current Value
Identity of Purchase Selling Cost of of Asset on
Party Involved Description of Asset Price Price Asset Transaction Date Net Gain
<S> <C> <C> <C> <C> <C> <C>
American Express Stable Value Fund
194 Sales $ 11,548,774 $ 11,044,167 $ 11,548,774 $ 504,607
52 Purchases $ 2,170,560 2,170,560 2,170,560
American Express Moderate Blend Fund
151 Sales 2,488,914 2,201,352 2,488,914 287,562
93 Purchases 2,783,786 2,783,786 2,783,786
American Express American Express Trust Equity
Index Fund II
55 Sales 1,247,754 1,090,831 1,247,754 156,923
160 Purchases 3,025,244 3,025,244 3,025,244
</TABLE>
-16-
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
Advantica Restaurant Group, Inc. (formerly Flagstar Companies, Inc.) on Form S-8
dated May 18, 1998 of our reports dated June 12, 1998, appearing in this Form
10-K/A of Advantica Restaurant Group, Inc., for the year ended December 31,
1997.
Greenville, SC
June 30, 1998
