FORM 10-K/A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-K/A
AMENDMENT NO. 1
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Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
ADVANTICA RESTAURANT GROUP, INC.
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(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
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(Address of Principal Executive Offices)
(864) 597-8000
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(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 Advantica 40l(k) Plan and the Denny's 40l(k) Plan.
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report for 1998 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.
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.
Date: June 28, 1999 By: /s/ Rhonda J. Parish
-------------------------------------
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 1998 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 30, 1998
Full title of the plans and the address of the plans, if different from that of
the issuer named below:
1. ADVANTICA 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:
ADVANTICA RESTAURANT GROUP, 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 30, 1998 is amended to insert the following financial statements
required by Form 11-K, copies of which are filed herewith:
1. Advantica 401(k) Plan Financial Statements at December 31, 1998 and
1997 and for Each of the Three Years in the Period Ended December 31,
1998, Supplemental Schedules for the Year Ended December 31, 1998 and
Independent Auditors' Report.
2. Denny's 401(k) Plan Financial Statements at December 31, 1998 and 1997
and for Each of the Three Years in the Period Ended December 31, 1998,
Supplemental Schedules for the Year Ended December 31, 1998 and
Independent Auditors' Report.
<PAGE>
ADVANTICA 401(k) PLAN
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 1998 and 1997 2
Statements of Changes in Net Assets Available for Benefits for the
Years Ended December 31, 1998, 1997 and 1996 3
Notes to Financial Statements 4-12
SUPPLEMENTAL SCHEDULES:
IRS Form 5500, Item 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1998 13
IRS Form 5500, Item 27d - Schedule of Reportable Transactions
for the Year Ended December 31, 1998 14
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
Advantica 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Advantica 401(k) Plan (the "Plan") as of December 31, 1998 and 1997, and
the related statements of changes in net assets available for benefits for each
of the three years in the period ended December 31, 1998. 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,
1998 and 1997, and the changes in net assets available for benefits for each of
the three years in the period ended December 31, 1998 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 1998 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.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
June 14, 1999
<PAGE>
ADVANTICA 401(k) PLAN
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
1998 1997
----------- -----------
<S> <C> <C>
ASSETS:
Investments, at fair value $97,052,683 $38,261,922
----------- -----------
Receivables:
Employer's contribution 168,905 14,215
Participants' contributions 447,287 62,832
----------- -----------
Total receivables 616,192 77,047
----------- -----------
Cash and cash equivalents --- 40,572
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $97,668,875 $38,379,541
=========== ===========
</TABLE>
See notes to financial statements.
-2-
<PAGE>
ADVANTICA 401(k) PLAN
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
ADDITIONS:
Investment income:
Net appreciation in fair value of investments $ 3,320,061 $ 3,238,618 $ 2,049,081
Interest and dividends 68,547 111,908 1,195,041
------------ ------------ ------------
Total investment income 3,388,608 3,350,526 3,244,122
------------ ------------ ------------
Contributions:
Employer's 622,036 524,004 0
Participants' 2,181,076 2,514,255 1,736,294
------------ ------------ ------------
Total contributions 2,803,112 3,038,259 1,736,294
------------ ------------ ------------
TOTAL ADDITIONS 6,191,720 6,388,785 4,980,416
------------ ------------ ------------
DEDUCTIONS:
Benefits paid to participants 15,432,911 10,999,480 13,184,969
Administrative expenses 140,690 106,026 194,210
------------ ------------ ------------
TOTAL DEDUCTIONS 15,573,601 11,105,506 13,379,179
------------ ------------ ------------
TRANSFER FROM DENNY'S 401(K) PLAN
(Note 1) 68,671,215 0 0
------------ ------------ ------------
NET INCREASE (DECREASE) 59,289,334 (4,716,721) (8,398,763)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 38,379,541 43,096,262 51,495,025
------------ ------------ ------------
End of year $ 97,668,875 $ 38,379,541 $ 43,096,262
============ ============ ============
</TABLE>
See notes to financial statements.
-3-
<PAGE>
ADVANTICA 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1. DESCRIPTION OF THE PLAN
The following description of the Advantica 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 401(k) Plan, is a qualified
deferred compensation plan, subject to the Employee Retirement Income
Security Act of 1974. Any non-highly compensated salaried employee of
Advantica Restaurant Group, Inc. ("Advantica"), Flagstar Systems, Inc.
("Spartan") and effective April 1, 1997, FRD Acquisition Co. ("FRD," a
wholly owned subsidiary of Advantica), (collectively, the "Company" and
"Plan Sponsors") who has attained age 21 and has completed 12 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 Advantica 401(k) Plan's plan committee
and 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.
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. 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.
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 to an entity outside of the
Advantica controlled group. 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.
In connection with the sales of Quincy's and FEI, approximately 1,400
employees were terminated from participating in the Plan. The decrease in
plan participation resulted in a partial termination of the Plan within the
meaning of Internal Revenue Code Section 411(d)(3). Affected participants
were fully vested in their accrued benefits under the Plan.
-4-
<PAGE>
Effective April 1, 1997, non-highly compensated, salaried employees of FRD
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.
PLAN MERGER - Effective December 1, 1998, the Denny's 401(k) Plan was
merged into the Plan. The terms and conditions of the Denny's 401(k) Plan
and the Plan in effect separately prior to the merger, continue as such
under the merged plan. The net assets of the Denny's 401(k) Plan were
transferred into the Plan at the close of business December 1, 1998. Any
United States employee of Denny's, Inc. and El Pollo Loco (together
"Denny's") and their domestic subsidiaries who has attained age 21 and who
has completed 12 months of service with Denny's is eligible to participate
in the Plan.
CONTRIBUTIONS - Each year, participants' pre-tax contributions were limited
to 10% of eligible compensation, or $10,000 in 1998 and $9,500 in 1997 and
1996, 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's election. In 1998, the
following employer matching contribution formulae were used: 40% of
employee pre-tax contributions, up to 6% of compensation for Advantica and
Spartan employees; 25% of employee pre-tax contributions, up to 6% of
compensation for FRD employees; and 100% of employee pre-tax contributions,
up to 3% of compensation for Denny's employees. In 1997, the following
employer matching contribution formulae were used: 40% of employee pre-tax
contributions, up to 6% of compensation for Advantica and Spartan employees
and 25% of employee pre-tax contributions up to 3% of compensation for FRD
employees. 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 - All 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. For employees of FRD, a
participant is 100% vested after five years of continuous service. For
employees of Advantica and Spartan, participants are immediately vested in
their contributions and employer contributions, plus actual earnings
thereon. For employees of Denny's who were initially employed by Denny's
subsequent to December 31, 1987 and prior to January 1, 1999, a participant
is 100% vested after five years of continuous service. For employees of
Denny's who were initially employed by Denny's prior to December 31, 1987,
a participant vests according to the following schedule: less than one
year, 0%; less than two years, 10%; less than 3 years, 20%; less than 4
years, 30%; less than 5 years, 40%; and five years or more, 100%.
-5-
<PAGE>
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.
Effective 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 Advantica Stable Value Fund (formerly 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
Advantica Stable Value Fund, American Express collective trust funds
and mutual funds.
o The Moderate Blend Fund is a pooled fund which invests in the
Advantica Stable Value Fund, American Express collective trust funds
and mutual funds.
o The Conservative Blend Fund is a pooled fund which invests in the
Advantica 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. As of
April 1997, the Company liquidated all Flagstar stock and the fund
invested solely in money market funds. Effective July 1, 1998, this
investment option was terminated and the participants' balances were
transferred to the Advantica Stock Fund. The Advantica Stock Fund was
established effective July 1, 1998 for the purpose of investing in
Advantica common stock.
o The Advantica Stock Fund, established effective July 1, 1998, invests
in Advantica common stock.
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.
-6-
<PAGE>
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
Plan's provisions do not allow for Denny's employees to originate loans.
The minimum loan amount is $1,000, and each participant may 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, 1998
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 10-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.
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 - 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 loans 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,
liabilities, and changes therein, and disclosures of contingent assets and
liabilities. Actual results could differ from those estimates.
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: Advantica Stable Value
Fund, Aggressive Blend Fund, Moderate Blend Fund, Conservative Blend Fund,
Small Company Equity Fund and the Advantica 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, 1998 for each investment fund are
as follows:
<TABLE>
<CAPTION>
Advantica Aggressive Moderate Conservative Small Advantica
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 $ 1,339,424 $ 0 $ 0 $ 0 $ 0 $ 9,584
American Express Trust
Income Fund I 3,698,171 0 0 0 0 0
American Express Emerging
Growth Fund II 0 705,752 1,391,470 44,840 4,251,910 0
American Express Trust Equity
Index Fund II 0 534,733 2,635,572 339,749 0 0
IDS New Dimensions Fund 0 538,846 885,285 0 0 0
Lazard Small Capital Fund 0 698,057 1,376,292 44,352 4,205,520 0
Neuberger & Berman Focus
Trust Fund 0 539,237 885,954 0 0 0
Templeton Foreign Fund 0 1,347,678 3,542,676 256,878 0 0
Advantica Stable Value Fund 0 1,079,693 7,095,568 1,028,987 0 0
Advantica Restaurant Group,
common stock 0 0 0 0 0 161,544
Guaranteed investment contracts 48,074,120 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
Total market value $53,111,715 $ 5,443,996 $17,812,817 $ 1,714,806 $ 8,457,430 $ 171,128
=========== =========== =========== =========== =========== ===========
Units outstanding, December 31, 1998 4,631,846 411,684 1,381,546 135,476 685,465 28,304
=========== =========== =========== =========== =========== ===========
Net asset value per unit at:
December 31, 1998 $ 11.5 $ 13.2 $ 12.9 $ 12.7 $ 12.3 $ 6.0
September 30, 1998 11.3 11.5 11.6 11.8 10.9 4.8
June 30, 1998 11.1 13.5 12.9 12.4 13.8 10.0
March 31, 1998 11.0 13.7 13.0 12.4 14.1 N/A
</TABLE>
-7-
<PAGE>
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>
Advantica 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 $ 0 $ 0 $ 0 $ 0 $ 292,604
American Express Trust
Income Fund I 7,500,297 0 0 0 0 0
American Express Emerging
Growth Fund II 0 732,282 1,617,539 49,724 5,310,256 0
American Express Trust Equity
Index Fund II 0 579,084 3,197,873 393,230 0 0
IDS New Dimensions Fund 0 624,926 1,150,042 0 0 0
Lazard Small Capital Fund 0 723,445 1,598,063 49,129 5,247,717 0
Neuberger & Berman Focus
Trust Fund 0 595,456 1,096,005 0 0 0
Templeton Foreign Fund 0 1,429,279 4,209,703 291,200 0 0
Flagstar Stable Value Fund 0 1,138,142 8,379,536 1,159,317 0 0
Guaranteed investment contracts 50,951,851 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
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>
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 years ended December 31, 1998 and
1997 amounted to approximately $51,000 and $65,000, respectively. 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.
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.
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.
-8-
<PAGE>
7. INVESTMENTS
The following tables represent Plan investments as of December 31, 1998 and
1997 at fair value which equals or estimates carrying value:
<TABLE>
<CAPTION>
Description 1998 1997
----------- -----------
<S> <C> <C>
Pooled funds, at estimated fair value:
Advantica Stable Value Fund $53,111,715 $18,840,377
Aggressive Blend Fund 5,443,996 1,927,971
Moderate Blend Fund 17,812,817 9,316,926
Conservative Blend Fund 1,714,806 555,006
Small Company Equity Fund 8,457,430 3,861,105
Flagstar Stock Fund 0 82,707
Advantica Stock Fund 171,128 0
----------- -----------
Total 86,711,892 34,584,092
Mutual funds, at quoted market price - Templeton
Foreign Fund 816,824 322,735
----------- -----------
Collective trust funds, at estimated fair value - American
Express Trust Equity Index Fund II 8,933,534 2,097,199
----------- -----------
Loans to participants, at estimated fair value 590,433 1,257,896
----------- -----------
Total investments $97,052,683 $38,261,922
=========== ===========
</TABLE>
8. FUND INFORMATION
Net appreciation in fair value of investments, interest and dividends,
employer's and participants' contributions and benefits paid to
participants by fund are as follow for the years ended December 31, 1998,
1997 and 1996. Effective with the change in trustee during 1996 to American
Express, the Plan's investments are valued on a daily basis; net
appreciation in fair value of investments includes interest and dividends.
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- -------------
<S> <C> <C> <C>
Net appreciation (depreciation) in fair value of
investments:
Advantica Stable Value Fund ($ 140,301) $ 1,212,244 $ 584,877
Aggressive Blend Fund 81,281 168,564 45,092
Moderate Blend Fund 544,551 1,131,329 545,376
Conservative Blend Fund 193,454 56,525 6,946
Small Company Equity Fund 93,857 603,595 290,492
Flagstar Stock Fund 0 (214,848) (699,835)
Advantica Stock Fund 941 0 0
Templeton Foreign Fund (111,490) (15,942) 7,706
American Express Trust Equity Index
Fund II 2,657,768 297,151 34,295
Dreyfus Equity Fund 0 0 782,617
Vanguard Explorer Fund 0 0 507,999
Flagstar Companies, Inc. common stock 0 0 26,555
Government Bond Fund 0 0 (81,062)
Interest Fund 0 0 (1,977)
------------ ----------- -------------
Total $ 3,320,061 $ 3,238,618 $ 2,049,081
============ =========== =============
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Interest and dividends:
Advantica Stable Value Fund $ 0 $ 0 $ 8,646
Aggressive Blend Fund 12 0 0
Moderate Blend Fund 0 0 8,469
Small Company Equity Fund 0 0 1,983
Flagstar Stock Fund 0 0 (490)
Templeton Foreign Fund 13,482 32,846 2,670
Interest Fund 0 0 406,792
Government Bond Fund 0 0 6,654
Dreyfus Equity Fund 0 0 441,371
Vanguard Explorer Fund 0 0 277,079
Flagstar Companies, Inc. common stock 0 0 835
Loans to participants 55,053 79,062 41,032
---------- ---------- -----------
Total $ 68,547 $ 111,908 $ 1,195,041
========== ========== ===========
Employer's contributions (net of forfeitures):
Advantica Stable Value Fund $ 337,259 $ 244,204 $ 0
Aggressive Blend Fund 68,159 47,842 0
Moderate Blend Fund 101,119 117,421 0
Conservative Blend Fund 14,992 12,770 0
Small Company Equity Fund 48,351 57,001 0
Flagstar Stock Fund 0 8,672 0
Advantica Stock Fund 1,355 0 0
Templeton Foreign Fund 8,694 7,013 0
American Express Trust Equity Index
Fund II 42,107 29,081 0
---------- ---------- -----------
Total $ 622,036 $ 524,004 $ 0
========== ========== ===========
Participants' contributions:
Advantica Stable Value Fund $ 856,433 $ 806,627 $ 370,317
Aggressive Blend Fund 425,884 450,044 25,784
Moderate Blend Fund 400,117 642,098 176,764
Conservative Blend Fund 61,955 97,373 6,407
Small Company Equity Fund 186,465 241,871 105,544
Flagstar Stock Fund 0 32,052 87,137
Advantica Stock Fund 3,500 0 0
Templeton Foreign Fund 48,354 44,046 3,570
American Express Trust Equity Index
Fund II 198,368 200,144 9,954
Interest Fund 0 0 410,625
Government Bond Fund 0 0 89,898
Dreyfus Equity Fund 0 0 207,210
Vanguard Explorer Fund 0 0 125,402
Flagstar Companies, Inc. common stock 0 0 117,682
---------- ---------- -----------
Total $2,181,076 $2,514,255 $ 1,736,294
========== ========== ===========
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Benefits paid to participants:
Advantica Stable Value Fund $ 7,439,743 $ 7,232,522 $ 1,951,307
Aggressive Blend Fund 670,350 215,457 785
Moderate Blend Fund 3,553,606 2,062,148 763,691
Conservative Blend Fund 544,791 10,097 8,210
Small Company Equity Fund 1,389,473 961,973 409,551
Flagstar Stock Fund 19,792 41,160 44,064
Advantica Stock Fund 9,584 0 0
Templeton Foreign Fund 102,869 28,262 0
American Express Trust Equity Index
Fund II 1,022,597 243,251 0
Participant loans 680,106 204,610 0
Interest Fund 0 0 5,629,568
Government Bond Fund 0 0 747,232
Dreyfus Equity Fund 0 0 2,021,838
Vanguard Explorer Fund 0 0 1,155,839
Flagstar Companies, Inc. common stock 0 0 452,884
----------- ----------- -----------
Total $15,432,911 $10,999,480 $13,184,969
=========== =========== ===========
Transfer from Denny's 401(k) Plan:
Advantica Stable Value Fund $41,711,760 $ 0 $ 0
Aggressive Blend Fund 3,783,634 0 0
Moderate Blend Fund 11,651,169 0 0
Conservative Blend Fund 1,009,862 0 0
Small Company Equity Fund 5,837,718 0 0
Advantica Stock Fund 119,153 0 0
Templeton Foreign Fund 755,457 0 0
American Express Trust Equity Index
Fund II 3,802,462 0 0
----------- ----------- -----------
Total $68,671,215 $ 0 $ 0
=========== =========== ===========
</TABLE>
9. SUBSEQUENT EVENTS
During January 1999, the Retirement Committee of Advantica Restaurant
Group, Inc. approved an amendment to the Plan effective January 1, 1999.
The amendment provides that the Advantica 401(k) Plan will consist of two
separate plans under ERISA: the Advantica Hourly/HCE 401(k) Plan and the
Advantica Salaried 401(k) Plan. All highly compensated employees shall be
eligible to participate in the Advantica Hourly/HCE 401(k) Plan, but solely
for the purposes of making employee pre-tax contributions and rollover
contributions, and not for purposes of sharing in employer matching
contributions. Loans shall be available to participants in the Advantica
Salaried 401(k) Plan on a reasonably equivalent basis and in accordance
with written procedures. Loans shall not be available under the Advantica
Hourly/HCE 401(k) Plan.
-11-
<PAGE>
Effective January 1, 1999, the following amendments will be incorporated
into the Plan: (1) each employee shall be eligible to participate as of the
first day of the payroll period on or after the date on which the employee
both attains age 21 and completes 6 months of service with the Company; (2)
for each employee whose initial date of employment is after December 31,
1998, vesting in the Company's matching and discretionary contribution
portion of their accounts plus actual earnings thereon will be 100% vested
after 5 years of continuous service unless the terms described in Note 1
provide for greater vesting; and (3) in 1999, the following employer
matching contribution formulae will be used: 40% of employee pre-tax
contributions, up to 6% of compensation for Advantica, Spartan and FRD
employees; and 100% of employee pre-tax contributions, up to 3% of
compensation for Denny's employees.
********
-12-
<PAGE>
ADVANTICA 401(k) PLAN
IRS FORM 5500, ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Shares,
Units or Current
Description Par Value Cost Value
--------- ----------- --------------
<S> <C> <C> <C>
POOLED FUNDS:
* Advantica Stable Value Fund 4,631,846 $51,423,842 $ 53,111,715
* Aggressive Blend Fund 411,684 5,160,662 5,443,996
* Moderate Blend Fund 1,381,546 16,323,334 17,812,817
* Conservative Blend Fund 135,476 1,665,114 1,714,806
* Small Company Equity Blend Fund 685,465 7,758,648 8,457,430
* Advantica Stock Fund 28,304 189,124 171,128
----------- --------------
Total 82,520,724 86,711,892
----------- --------------
COLLECTIVE TRUST FUNDS -
* American Express Trust Equity Index Fund II 268,565 7,990,791 8,933,534
----------- --------------
MUTUAL FUNDS - Templeton Foreign Fund 97,094 851,974 816,824
----------- --------------
* LOANS TO PARTICIPANTS 590,433 590,433 590,433
----------- --------------
TOTAL INVESTMENTS $91,953,922 $ 97,052,683
=========== ==============
</TABLE>
* Denotes party-in-interest.
-13-
<PAGE>
ADVANTICA 401(K) PLAN
IRS FORM 5500, ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
5% REPORT BY ASSET -- AGGREGATE
<TABLE>
<CAPTION>
Current
Value of
Asset on
Identity of Purchase Selling Cost of Transaction
Party Involved Description of Asset Price Price Asset Date Net Gain
- --------------- -------------------- -------- ------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
American Express Advantica Stable Value Fund
178 Sales $ 0 $8,418,781 $7,595,580 $8,418,781 $ 823,201
51 Purchases 1,050,897 0 1,050,897 1,050,897 0
American Express Small Company Equity Blend Fund
140 Sales 0 1,702,088 1,390,097 1,702,088 311,991
65 Purchases 351,029 0 351,029 351,029 0
American Express Moderate Blend Fund
162 Sales 0 4,163,813 3,384,399 4,163,813 779,414
55 Purchases 434,510 0 434,510 434,510 0
American Express Aggressive Blend Fund
83 Sales 0 1,297,528 988,695 1,297,528 308,833
113 Purchases 1,656,848 0 1,656,848 1,656,848 0
</TABLE>
-14-
<PAGE>
DENNY'S 401(k) PLAN
TABLE OF CONTENTS
PAGE(S)
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 1, 1998 and December 31, 1997 2
Statements of Changes in Net Assets Available for Benefits
for the Period from January 1, 1998 Through December 1, 1998,
and for the Years Ended December 31, 1997 and 1996 3
Notes to Financial Statements 4-10
SUPPLEMENTAL SCHEDULES:
IRS Form 5500, Item 27d - Schedule of Reportable Transactions for the
Period from January 1, 1998 through December 1, 1998 11
NOTE: Schedules required under the Employee Retirement Income Security Act of
1974, other than the schedule listed above, are omitted because of the
absence of conditions under which such schedules are required.
<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 1, 1998 and December 31,
1997, and the related statements of changes in net assets available for benefits
for the period from January 1, 1998 through December 1, 1998 and each of the two
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 1,
1998 and December 31, 1997, and the changes in net assets available for benefits
for the period from January 1, 1998 through December 1, 1998 and each of the two
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 schedule listed in the
foregoing Table of Contents is presented for the purpose of additional analysis
and is not a required part of the basic financial statements, but is
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. This schedule is the responsibility of the Plan's
management. Such schedule has been subjected to the auditing procedures applied
in our audit of the basic 1998 financial statements and, in our opinion, is
fairly stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
As further discussed in Note 1 to the financial statements, on December 1, 1998,
the Plan was merged into the Advantica 401(k) Plan.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
June 14, 1999
<PAGE>
DENNY'S 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 1, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS:
Investments, at fair value $ 0 $71,066,446
----------- -----------
Receivables:
Employer's contribution 0 70,575
Participants' contributions 0 169,635
----------- -----------
Total receivables 0 240,210
----------- -----------
Cash and cash equivalents 0 21,443
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $ 0 $71,328,099
=========== ===========
</TABLE>
See notes to financial statements.
-2-
<PAGE>
DENNY'S 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
PERIOD FROM JANUARY 1, 1998 THROUGH DECEMBER 1, 1998 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
ADDITIONS:
Investment income:
Net appreciation in fair value of investments $ 2,919,858 $ 5,426,873 $ 2,038,290
Interest and dividends 72,579 77,456 2,099,417
------------ ------------ ------------
Total investment income 2,992,437 5,504,329 4,137,707
------------ ------------ ------------
Contributions:
Employer's 1,492,495 1,832,437 0
Participants' 4,143,303 5,168,529 5,840,702
------------ ------------ ------------
Total contributions 5,635,798 7,000,966 5,840,702
------------ ------------ ------------
TOTAL ADDITIONS 8,628,235 12,505,295 9,978,409
------------ ------------ ------------
DEDUCTIONS:
Benefits paid to participants 11,045,109 10,984,351 24,037,303
Administrative expenses 240,010 226,755 302,833
------------ ------------ ------------
TOTAL DEDUCTIONS 11,285,119 11,211,106 24,340,136
------------ ------------ ------------
TRANSFER TO ADVANTICA 401(k) PLAN
(Note 1) (68,671,215) 0 0
------------ ------------ ------------
NET (DECREASE) INCREASE (71,328,099) 1,294,189 (14,361,727)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 71,328,099 70,033,910 84,395,637
------------ ------------ ------------
End of year $ 0 $ 71,328,099 $ 70,033,910
============ ============ ============
</TABLE>
See notes to financial statements.
-3-
<PAGE>
DENNY'S 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM JANUARY 1, 1998 THROUGH DECEMBER 1, 1998 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
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, was 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 had attained age 21 and who
had completed 12 months of service with the Company was eligible to
participate in the Plan. The Plan's plan committee and plan administrator
controlled and managed 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 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.
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.
PLAN MERGER - Effective December 1, 1998, the Plan was merged with the
Advantica 401(k) Plan, formerly the Flagstar 401(k) Plan. All participants
in the Plan on the effective merger date became participants in the
Advantica 401(k) Plan. As of the date of the merger, the surviving
Advantica 401(k) Plan shall provide each participant with a benefit and
vesting equal to the participant's benefit and vesting immediately prior to
the merger. Expenses which may have been incurred but not yet paid by the
Plan will be paid by the Advantica 401(k) Plan.
-4-
<PAGE>
CONTRIBUTIONS - Each year, participants' pre-tax contributions were limited
to 15% of eligible compensation, or $10,000 in 1998 and $9,500 in 1997 and
1996, whichever was less. The Company, at its discretion, could 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 were made to the plan monthly and were invested
to mirror the employees' elections. In 1998 and 1997, the Company elected
to make contributions to the Plan in accordance with the matching formula.
Participants could also contribute amounts representing distributions from
other qualified defined-benefit or contribution plans.
PARTICIPANT ACCOUNTS - A separate account was maintained for each
participant. Each participant's account was credited with the participant's
contribution and allocations of (a) the Company's contributions and (b)
earnings, and was charged with an allocation of administrative expenses.
Allocations were based on participant account balances. The benefit to
which a participant was entitled was the benefit that can be provided from
the participant's vested account.
VESTING - Participants were 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 was based on years of continuous service. A participant was 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.
Effective July 1, 1996, participants could direct their contributions in
one percent increments to any of eight investment options. Descriptions of
the investment options were provided by the funds' managers.
o The Advantica Stable Value Fund (formerly the Flagstar Stable Value
Fund) was a pooled fund which invested primarily in bank, insurance
and stable value investment contracts.
o The Aggressive Blend Fund was a pooled fund which invested in the
Advantica Stable Value Fund, American Express collective trust funds
and mutual funds.
o The Moderate Blend Fund was a pooled fund which invested in the
Advantica Stable Value Fund, American Express collective trust funds
and mutual funds.
o The Conservative Blend Fund was a pooled fund which invested in the
Advantica Stable Value Fund, American Express collective trust funds
and mutual funds.
o The Small Company Equity Fund was a pooled fund which invested in
mutual funds.
-5-
<PAGE>
o The Flagstar Stock Fund was a pooled fund which invested in American
Express money market funds and Flagstar Company common stock. As of
April 1997, the Company liquidated all Flagstar stock and the fund
invested solely in money market funds. Effective July 1, 1998,
this investment option was terminated and the participants' balances
were transferred to the Advantica Stock Fund for the investment in
Advantica common stock.
o The Advantica Stock Fund - This fund became effective July 1, 1998,
and was an investment option in the Plan which invested in Advantica
common stock.
o The Templeton Foreign Fund was a mutual fund which invested in
companies outside of the United States.
o The American Express Trust Equity Index Fund II was a collective trust
fund which invested primarily in common stock.
Participants could 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 could receive the value of the
vested interest in his or her account as a lump-sum distribution.
FORFEITED ACCOUNTS - Forfeitures were used to reduce Company contributions.
During 1998 and 1997, employer contributions were reduced by $187,517 and
$256,755, respectively, from forfeited nonvested accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan have been
prepared using the accrual basis of accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION - Shares of mutual funds are
valued at the quoted market prices which represent the net asset value of
shares held by the Plan at each valuation date. 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.
-6-
<PAGE>
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,
liabilities, and changes therein, and disclosures of contingent assets and
liabilities. Actual results could differ from those estimates.
3. PLAN UNIT VALUATION
Effective July 1, 1996, the Plan together with the Advantica 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: Advantica Stable Value Fund,
Aggressive Blend Fund, Moderate Blend Fund, Conservative Blend Fund, Small
Company Equity Fund, Flagstar Stock Fund and the Advantica 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. Effective December 1, 1998, the
assets of the Plan were merged into the Advantica 401(k) 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>
Advantica 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 $ 0 $ 0 $ 0 $ 0 $ 292,604
American Express Trust
Income Fund I 7,500,297 0 0 0 0 0
American Express Emerging
Growth Fund II 0 732,282 1,617,539 49,724 5,310,256 0
American Express Trust Equity
Index Fund II 0 579,084 3,197,873 393,230 0 0
IDS New Dimensions Fund 0 624,926 1,150,042 0 0 0
Lazard Small Capital Fund 0 723,445 1,598,063 49,129 5,247,717 0
Neuberger & Berman Focus
Trust Fund 0 595,456 1,096,005 0 0 0
Templeton Foreign Fund 0 1,429,279 4,209,703 291,200 0 0
Advantica Stable Value Fund 0 1,138,142 8,379,536 1,159,317 0 0
Guaranteed investment contracts 50,951,851 0 0 0 0 0
------------ ----------- ----------- ----------- ----------- -----------
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>
-7-
<PAGE>
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 period from January 1, 1998 through
December 1, 1998 and the year ended December 31, 1997 amounted to
approximately $137,000 and $152,000, respectively. 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.
5. PLAN TERMINATION
As further discussed in Note 1, effective December 1, 1998, the Plan has
been merged into the Advantica 401(k) Plan.
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 ("IRC"). The Plan has been amended since receiving the determination
letter. However, the plan administrator believes that the Plan was designed
and was being operated in compliance with the applicable requirements of
the IRC. 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 1, 1998 and
December 31, 1997 at fair value which equals or estimates carrying value:
<TABLE>
<CAPTION>
Description 1998 1997
----------- -----------
<S> <C> <C>
Pooled funds, at estimated fair value:
Advantica Stable Value Fund $ 0 $43,172,072
Aggressive Blend Fund 0 3,894,643
Moderate Blend Fund 0 11,931,835
Conservative Blend Fund 0 1,387,594
Small Company Equity Fund 0 6,696,868
Flagstar Stock Fund 0 209,897
----------- -----------
Total 0 67,292,909
Mutual funds, at quoted market price - Templeton Foreign Fund 0 780,418
Collective trust funds, at estimated fair value - American
Express Trust Equity Index Fund II 0 2,993,119
----------- -----------
Total investments $ 0 $71,066,446
=========== ===========
</TABLE>
-8-
<PAGE>
8. FUND INFORMATION
Net appreciation 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 period from January 1, 1998
through December 1, 1998, and the years ended December 31, 1997, and 1996.
Effective with the change in trustee during 1996 to American Express, the
Plan's investments were valued on a daily basis, net appreciation in fair
value includes interest and dividends.
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net appreciation (depreciation) in fair value
of investments:
Advantica Stable Value Fund $ 2,338,367 $ 2,598,452 $ 1,170,405
Aggressive Blend Fund 26,038 415,002 110,768
Moderate Blend Fund 526,999 1,398,316 548,871
Conservative Blend Fund 89,355 81,854 9,283
Small Company Equity Fund (680,081) 1,070,292 360,114
Flagstar Stock Fund (67,316) (549,217) (1,432,527)
Advantica Stock Fund 3,617 0 0
Templeton Foreign Fund (95,066) (59,963) 9,197
American Express Trust Equity Index
Fund II 777,945 472,137 58,715
Dreyfus Equity Fund 0 0 659,440
Vanguard Explorer Fund 0 0 514,246
Flagstar Companies, Inc. common stock 0 0 29,778
----------- ----------- -----------
Total $ 2,919,858 $ 5,426,873 $ 2,038,290
=========== =========== ===========
Interest and dividends:
Advantica Stable Value Fund $ 0 $ 0 $ 234,326
Moderate Blend Fund 0 0 22,174
Small Company Equity Fund 0 0 3,800
Flagstar Stock Fund 0 0 6,736
Templeton Foreign Fund 72,579 77,456 6,172
Interest Fund 0 0 1,077,948
Dreyfus Equity Fund 0 0 424,642
Vanguard Explorer Fund 0 0 322,095
Flagstar Companies, Inc. common stock 0 0 1,524
----------- ----------- -----------
Total $72,579 $77,456 $2,099,417
=========== =========== ===========
Employer's contributions (net of forfeitures):
Advantica Stable Value Fund $ 704,141 $ 949,428 $ 0
Aggressive Blend Fund 159,689 130,645 0
Moderate Blend Fund 294,252 382,852 0
Conservative Blend Fund 28,698 23,454 0
Small Company Equity Fund 167,075 215,587 0
Flagstar Stock Fund (443) 41,466 0
Advantica Stock Fund 408 0 0
Templeton Foreign Fund 22,367 20,580 0
American Express Trust Equity Index Fund II 116,308 68,425 0
----------- ---------- ----------
Total $ 1,492,495 $ 1,832,437 $ 0
=========== =========== ===========
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Participants' contributions:
Advantica Stable Value Fund $ 1,696,985 $ 2,490,189 $ 1,313,859
Aggressive Blend Fund 475,984 411,148 70,616
Moderate Blend Fund 881,820 1,128,390 606,224
Conservative Blend Fund 87,803 85,064 9,584
Small Company Equity Fund 549,932 665,718 375,875
Flagstar Stock Fund 0 117,611 322,911
Advantica Stock Fund 2,302 0 0
Templeton Foreign Fund 71,973 60,744 7,120
American Express Trust Equity Index
Fund II 376,504 209,665 23,979
Interest Fund 0 0 1,641,457
Dreyfus Equity Fund 0 0 655,850
Vanguard Explorer Fund 0 0 419,831
Flagstar Companies, Inc. common stock 0 0 393,396
----------- ----------- -----------
Total $ 4,143,303 $ 5,168,529 $ 5,840,702
=========== =========== ===========
Benefits paid to participants:
Advantica Stable Value Fund $ 6,311,475 $ 7,345,109 $ 5,749,424
Aggressive Blend Fund 766,546 356,774 40,262
Moderate Blend Fund 1,941,588 1,895,045 884,465
Conservative Blend Fund 579,243 44,810 47,535
Small Company Equity Fund 874,139 1,045,036 507,830
Flagstar Stock Fund 19,018 73,628 125,701
Advantica Stock Fund 8,979 0 0
Templeton Foreign Fund 94,546 18,959 23,558
American Express Trust Equity
Index Fund II 449,575 204,990 52,966
Interest Fund 0 0 12,929,498
Dreyfus Equity Fund 0 0 1,990,906
Vanguard Explorer Fund 0 0 1,260,088
Flagstar Companies, Inc. common stock 0 0 425,070
----------- ----------- -----------
Total $11,045,109 $10,984,351 $24,037,303
=========== =========== ===========
Transfer to Advantica 401(k) Plan:
Advantica Stable Value Fund $41,711,760 $ 0 $ 0
Aggressive Blend Fund 3,783,634 0 0
Moderate Blend Fund 11,651,169 0 0
Conservative Blend Fund 1,009,862 0 0
Small Company Equity Fund 5,837,718 0 0
Templeton Foreign Fund 755,457 0 0
American Express Trust Equity Index
Fund II 3,802,462 0 0
Advantica Stock Fund 119,153 0 0
----------- ----------- -----------
Total $68,671,215 $ 0 $ 0
=========== =========== ===========
</TABLE>
-10-
<PAGE>
DENNY'S 401(K) PLAN
IRS FORM 5500, ITEM 27(D) - SCHEDULE OF REPORTABLE TRANSACTIONS
PERIOD FROM JANUARY 1, 1998 THROUGH DECEMBER 1, 1998
5% REPORT BY ASSET - AGGREGATE
<TABLE>
<CAPTION>
Current
Value of
Asset on
Identity of Purchase Selling Cost of Transaction
Party Involved Description of Asset Price Price Asset Date Net Gain
- -------------- -------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
American Express Advantica Stable Value Fund
155 Sales $ 0 $8,491,215 $7,673,891 $8,491,215 $ 817,324
71 Purchases 3,470,116 0 3,470,116 3,470,116 0
American Express Moderate Blend Fund
143 Sales 0 2,606,910 2,181,069 2,606,910 425,841
75 Purchases 1,513,379 0 1,513,379 1,513,379 0
American Express American Express Trust Equity
Index Fund II
72 Sales 0 2,173,827 1,711,517 2,173,827 462,310
138 Purchases 3,905,436 0 3,905,436 3,905,436 0
</TABLE>
-11-
<PAGE>
