FORM 10-K/A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 39319-9966
--------------------------------------------------------------------------------
(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 Advantica 401(k) Plan.
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report for 1999 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.
Dated: June 26, 2000 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 1999 on Form 10-K is hereby amended to include the following:
FINANCIAL STATEMENTS
OF
FORM 11-K
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, 1999
Full title of the plans and the address of the plans, if different from that of
the issuer named below:
1. ADVANTICA SALARIED 401(K) PLAN
2. ADVANTICA HOURLY/HCE 401(K)PLAN
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 29, 1999 is amended to insert the following financial statements
required by Form 11-K, copies of which are filed herewith:
1. Advantica Salaried 401(k) Plan (formerly the Advantica 401(k) Plan)
Financial Statements at December 31, 1998 and 1998 and for Each of the
Three Years in the Period Ended December 31, 1999 and Independent
Auditors' Report.
2. Advantica Hourly/HCE 401(k) Plan Financial Statements for the Year
Ended December 31, 1999 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 29, 1999 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>
ADVANTICA SALARIED 401(K)
PLAN (FORMERLY THE ADVANTICA 401(K) PLAN)
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS
December 31, 1999 and 1998 and for Each of the Three
Years in the Period Ended December 31, 1999
<PAGE>
ADVANTICA SALARIED 401(K) PLAN
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 1999 and 1998 2
Statements of Changes in Net Assets Available for Benefits for
the Years Ended December 31, 1999, 1998 and 1997 3
Notes to Financial Statements 4-10
NOTE: Schedules required under the Employee Retirement Income Security Act
of 1974 are omitted because of the absence of conditions under which such
schedules are required.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee
Advantica Salaried 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Advantica Salaried 401(k) Plan (formerly the Advantica 401(k) Plan) (the
"Plan") as of December 31, 1999 and 1998, and the related statements of changes
in net assets available for benefits for each of the three years in the period
ended December 31, 1999. 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 auditing standards generally accepted
in the United States of America. 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,
1999 and 1998, and the changes in net assets available for benefits for each of
the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
June 9, 2000
- 1 -
<PAGE>
ADVANTICA SALARIED 401(K) PLAN
(FORMERLY THE ADVANTICA 401(K) PLAN)
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999 AND 1998
1999 1998
<S> <C> <C>
ASSETS:
Investments, at fair value (Notes 1, 2, 3 and 7) $50,855,367 $97,052,683
----------- -----------
Receivables:
Employer's contribution 35,663 168,905
Participants' contributions 108,964 447,287
----------- -----------
Total receivables 144,627 616,192
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $50,999,994 $97,668,875
=========== ===========
</TABLE>
See notes to financial statements.
- 2 -
<PAGE>
ADVANTICA SALARIED 401(K) PLAN
(FORMERLY THE ADVANTICA 401(K) PLAN)
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
ADDITIONS:
Investment income (Notes 1, 2, 3 and 7):
Plan interest in Advantica 401(k) Plans Master
Trust investment income $ 6,528,511 $ 0 $ 0
Net appreciation in fair value of investments 0 3,320,061 3,238,618
Interest and dividends 0 68,547 111,908
----------- ----------- -----------
Total investment income 6,528,511 3,388,608 3,350,526
----------- ----------- -----------
Contributions:
Employer's 966,985 622,036 524,004
Participants' 2,919,194 2,181,076 2,514,255
----------- ----------- -----------
Total contributions 3,886,179 2,803,112 3,038,259
----------- ----------- -----------
TOTAL ADDITIONS 10,414,690 6,191,720 6,388,785
----------- ----------- -----------
DEDUCTIONS:
Benefits paid to participants 10,264,085 15,432,911 10,999,480
Administrative expenses 183,842 140,690 106,026
----------- ----------- -----------
TOTAL DEDUCTIONS 10,447,927 15,573,601 11,105,506
----------- ----------- -----------
TRANSFERS (FROM) TO OTHER PLANS
(Note 1) (46,635,644) 68,671,215 0
----------- ----------- -----------
NET (DECREASE) INCREASE (46,668,881) 59,289,334 (4,716,721)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 97,668,875 38,379,541 43,096,262
----------- ----------- -----------
End of year $50,999,994 $97,668,875 $38,379,541
=========== =========== ===========
</TABLE>
See notes to financial statements.
- 3 -
<PAGE>
ADVANTICA SALARIED 401(K) PLAN
(FORMERLY THE ADVANTICA 401(K) PLAN)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. DESCRIPTION OF THE PLAN
The following description of the Advantica Salaried 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 Advantica 401(k) Plan, is a qualified
deferred compensation plan, subject to the Employee Retirement Income
Security Act of 1974 ("ERISA"). 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") who has attained age 21 and has completed 6 months of service
with the Company is eligible to participate in the Plan. The Advantica
401(k) Salaried Plan's plan committee and plan administrator control and
manage the operation and administration of the Plan. American Express
Trust Company ("American Express") serves as the Plan's trustee. Effective
January 1, 1999, the Retirement Committee of Advantica Restaurant Group,
Inc. approved an amendment to the Advantica 401(k) Plan. The amendment
provided that the Advantica 401(k) Plan would consist of two separate
plans under ERISA: the Advantica Hourly/HCE 401(k) Plan and the Advantica
Salaried 401(k) Plan. The Advantica 401(k) Plan was restated and renamed
the Advantica Salaried 401(k) Plan and assets in the amount of $46,635,644
for hourly and highly compensated participants were transferred to the
Advantica Hourly/HCE Plan.
On December 29, 1999, the Company completed the sale of the stock of El
Pollo Loco, Inc. ("EPL"), a wholly owned subsidiary, to American
Securities Capital Partners, L.P. Effective December 29, 1999, the date of
the sale, EPL employees were no longer eligible to participate in the
Plan. Additionally, EPL was no longer a participating employer; therefore,
EPL's active employees as of the sale date were not permitted to make
pre-tax deferral contributions under the Plan. In accordance with plan
provisions, EPL employees would be given the right to elect a lump-sum
distribution of their pre-tax account when they separated from service
with EPL, or to postpone distribution of the account if their account
balance did not exceed $5,000 as of the sale date. As of December 31,
1999, EPL employee participant account balances included in net assets
available for benefits for the Plan totaled $587,025. 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, continued as such under the merged plan. The net
assets of the Denny's 401(k) Plan totaling $68,671,215 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 had attained age 21 and who had completed 12
months of service with Denny's was eligible to participate in the Plan.
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
operated 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 were no longer eligible to participate in the Plan.
Additionally, Quincy's was no
- 4 -
<PAGE>
longer a participating employer; therefore, Quincy's active employees as
of the sale 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, Quincy's employees
would be given the right to elect a lump-sum distribution of the pre-tax
account when they separated from service with Quincy's, or to 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 benefits for the
Plan totaled approximately $1.5 million. 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 was
no longer a participating employer; therefore, FEI's active employees as
of the sale 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, FEI employees
would be given the right to elect a lump-sum distribution of the pre-tax
account when they separated from service with FEI, or to 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 benefits for the Plan
totaled approximately $6.6 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.
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.
INTEREST IN MASTER TRUST - Effective January 1, 1999, the Plan's
investments are in the Advantica 401(k) Plans Master Trust ("Master
Trust") which was established for the investment of assets of the
Advantica Salaried 401(k) Plan and the Advantica Hourly/HCE 401(k) Plan.
Each participating plan has an undivided interest in the Master Trust. The
assets of the Master Trust are held by American Express. Investment income
relating to the Master Trust is allocated to the individual plans based
upon average monthly balances invested by each plan. Administrative
expenses relating to the Master Trust are allocated to the individual
plans based on the amount invested by each plan on the date each expense
is paid.
CONTRIBUTIONS - Each year, participants may make pre-tax contributions of
up to 10% of eligible compensation. After-tax contributions of up to 10%
of each employee's eligible compensation may also be made; however, no
after-tax contribution may be made by an employee in any month in which
the employee made a pre-tax contribution. Participants may also contribute
amounts representing distributions from other qualified defined benefit or
contribution plans. The Company at its discretion may contribute an amount
equal to 25% of each participating employee's after-tax contributions, up
to 6% of such employee's compensation. Each individual sponsoring employer
may make additional matching contributions in amounts which they
determine. These Company contributions are made to the Plan monthly and
are invested to mirror the employee's election.
- 5 -
<PAGE>
In 1999, the following employer contribution formulas were 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. In 1998, the following
employer matching contribution formulas 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.
Contributions are subject to certain limitations.
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 each employee whose
initial date of employment is after December 31, 1998, 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 following terms provide for more accelerated vesting.
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%.
INVESTMENT OPTIONS - At December 31, 1999, participants could direct
employee contributions in one percent increments in any of eight
investment options. In April 2000, the trust agreement was amended to
provide 58 investment options. Participants may change their investment
options at any time via telephone.
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 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, 1999 have a range of interest rates from 6% 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.
- 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.
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, and changes therein, and
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION - The plan interest in
Advantica 401(k) Plans Master Trust is valued at estimated fair value.
If available, quoted market prices are used to value the underlying
investments. In instances wherein quoted market prices are not available,
the fair value of investments is estimated primarily by independent
investment brokerage firms and insurance companies. During 1998 and 1997,
shares of mutual funds were valued at the quoted market prices, which
represented the net asset value of shares held by the Plan at year end.
Investments in collective trust funds and pooled funds were stated at
estimated fair values, which were determined based on the unit values of
the funds. Unit values were determined by dividing the fund's net assets
at fair value by its units outstanding at each valuation date. The
guaranteed investment contracts held by the Plan were fully benefit-
responsive and were valued at contract value, which approximated fair
value. Contract value represented the aggregate amount of accumulated
contributions and investment income, less amounts used to make benefit
payments and administrative expenses. Investments in money market funds
and participant loans were valued at cost plus accrued interest, which
approximated 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.
PAYMENT OF BENEFITS - Benefits are recorded when paid.
RECLASSIFICATIONS - The Plan has adopted Statement of Position 99-3,
"Accounting for and Reporting of Certain Defined Contribution Plan
Investments and Other Disclosure Matters." As a result, the 1998 financial
statements have been revised to eliminate the by-fund and unit value
disclosures.
- 7 -
<PAGE>
3. MASTER TRUST
The following table presents the fair value of the underlying investments
of the Master Trust at December 31, 1999:
Collective trust funds, at estimated fair value:
American Express Trust Money Market Fund I $ 3,285,306
American Express Trust Income Fund I 4,414,964
American Express Emerging Growth Fund II 7,009,177
American Express Trust Equity Index Fund II 15,913,666
------------
Total 30,623,113
------------
Mutual funds, at quoted market price:
IDS New Dimensions Fund Y 1,628,533
Lazard Small Capital Fund 7,069,326
Neuberger & Berman Focus Trust Fund 1,630,140
Templeton Foreign Fund 7,022,888
------------
Total 17,350,887
------------
Guaranteed investment contracts 51,079,586
------------
Advantica Restaurant Group, Inc., common stock at
quoted market price 134,190
------------
Loans to participants, at estimated fair value 993,851
------------
Total investments $100,181,627
============
At December 31, 1999, the Plan's interest in the net assets of the Master
Trust was approximately 51%.
Investment income for the Master Trust is as follows:
Net appreciation in fair value of investments:
Collective trust funds $ 6,289,696
Mutual funds 3,037,798
Common stock (208,633)
------------
9,118,861
Interest and dividend income 3,154,648
------------
$12,273,509
============
4. RELATED PARTY TRANSACTIONS
Certain plan investments are shares of collective trust funds managed by
American Express. American Express serves 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, 1999, 1998
and 1997 amounted to approximately $80,000, $51,000 and $65,000,
respectively.
- 8 -
<PAGE>
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 and restated 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 table represents the Plan's investments as of December 31,
1999 and 1998:
<TABLE>
<CAPTION>
Description 1999 1998
<S> <C> <C> <C>
Plan interest in Advantica 401(k) Plans Master Trust $50,854,464 $ 0
Pooled funds, at estimated fair value:
Advantica Stable Value Fund 0 53,111,715
Aggressive Blend Fund 0 5,443,996
Moderate Blend Fund 0 17,812,817
Conservative Blend Fund 0 1,714,806
Small Company Equity Fund 0 8,457,430
Advantica Stock Fund 0 171,128
----------- -----------
Total 50,854,464 86,711,892
----------- -----------
Mutual funds, at quoted market price - Templeton Foreign
Fund 0 816,824
----------- -----------
Collective trust funds, at estimated fair value - American
Express Trust Equity Index Fund II 0 8,933,534
----------- -----------
Loans to participants, at estimated fair value 0 590,433
----------- -----------
Total investments $50,854,464 $97,052,683
=========== ===========
</TABLE>
- 9 -
<PAGE>
During 1998 and 1997, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year)
appreciated in value as follows:
1998 1997
Pooled funds $ 773,783 $2,957,409
Mutual funds (111,490) (15,942)
Collective trust funds 2,657,768 297,151
---------- ----------
$3,320,061 $3,238,618
========== ==========
The following table presents the fair value of the underlying investments
of the Plan at December 31, 1998:
Collective trust funds, at estimated fair value:
American Express Trust Money Market Fund I $ 1,579,513
American Express Trust Income Fund I 4,334,728
American Express Emerging Growth Fund II 6,381,208
American Express Trust Equity Index Fund II 12,436,781
-----------
Total 24,732,230
-----------
Mutual funds, at quoted market price:
IDS New Dimensions Fund Y 1,420,840
Lazard Small Capital Fund 6,424,354
Neuberger & Berman Focus Trust Fund 1,421,898
Templeton Foreign Fund 5,953,149
-----------
Total 15,220,241
-----------
Guaranteed investment contracts 56,349,003
-----------
Advantica Restaurant Group, Inc., common stock at
quoted market price 160,776
-----------
Loans to participants, at estimated fair value 590,433
-----------
Total investments $97,052,683
===========
8. SUBSEQUENT EVENTS
On February 17, 2000, the Company announced that its future direction will
focus primarily on its Denny's brand, including efforts to move toward a
more franchise-based operation. In addition, the Company announced that it
had retained the firm of Donaldson, Lufkin & Jenrette Securities
Corporation to begin immediately exploring strategic alternatives for FRD,
the subsidiary which owns the Coco's and Carrows brands, including a
possible sale or recapitalization.
********
- 10 -
<PAGE>
ADVANTICA HOURLY/HCE
401(K) PLAN
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS
Year Ended December 31, 1999
<PAGE>
ADVANTICA HOURLY/HCE 401(K) PLAN
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statement of Net Assets Available for Benefits as of
December 31, 1999 2
Statement of Changes in Net Assets Available for Benefits for
the Year Ended December 31, 1999 3
Notes to Financial Statements 4-7
NOTE: Schedules required under the Employee Retirement Income Security Act
of 1974 are omitted because of the absence of conditions under which such
schedules are required.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee
Advantica Hourly/HCE 401(k) Plan:
We have audited the accompanying statement of net assets available for benefits
of the Advantica Hourly/HCE 401(k) Plan (the "Plan") as of December 31, 1999,
and the related statement of changes in net assets available for benefits for
the year then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides 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,
1999, and the changes in net assets available for benefits for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
June 9, 2000
- 1 -
<PAGE>
ADVANTICA HOURLY/HCE 401(K) PLAN
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999
<S> <C>
ASSETS:
Investments, at fair value - plan interest in Advantica 401(k) Plans
Master Trust (Notes 1, 2 and 3) $49,327,162
Receivables:
Employer's contribution 35,331
Participants' contributions 99,172
-----------
Total receivables 134,503
-----------
NET ASSETS AVAILABLE FOR BENEFITS $49,461,665
===========
</TABLE>
See notes to financial statements.
- 2 -
<PAGE>
ADVANTICA HOURLY/HCE 401(K) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1999
ADDITIONS:
Investment income:
Plan interest in Advantica 401(k) Plans
Master Trust investment income (Notes 1 and 3) $ 5,744,998
-----------
Contributions:
Employer's 894,551
Participants' 2,760,970
-----------
Total contributions 3,655,521
-----------
TOTAL ADDITIONS 9,400,519
-----------
DEDUCTIONS:
Benefits paid to participants 6,392,156
Administrative expenses 182,342
-----------
TOTAL DEDUCTIONS 6,574,498
-----------
TRANSFER FROM ADVANTICA SALARIED 401(K) PLAN (Note 1) 46,635,644
-----------
NET INCREASE 49,461,665
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 0
-----------
End of year $49,461,665
===========
See notes to financial statements.
- 3 -
<PAGE>
ADVANTICA HOURLY/HCE 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
1. DESCRIPTION OF THE PLAN
The following description of the Advantica Hourly/HCE 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 is a qualified deferred compensation plan, subject to
the Employee Retirement Income Security Act of 1974 ("ERISA"). Any hourly
employee or highly compensated employee of Advantica Restaurant Group,
Inc. ("Advantica"), Flagstar Systems, Inc. ("Spartan") and FRD Acquisition
Co. ("FRD," a wholly owned subsidiary of Advantica), (collectively, the
"Company") who has attained age 21 and has completed 6 months of service
with the Company is eligible to participate in the Plan. The Advantica
Hourly/HCE 401(k) Plan's plan committee and plan administrator control and
manage the operation and administration of the Plan. American Express
Trust Company ("American Express") serves as the Plan's trustee.
Effective January 1, 1999, the Retirement Committee of Advantica approved
an amendment to the Advantica 401(k) Plan. The amendment provided that the
Advantica 401(k) Plan would consist of two separate plans under ERISA: the
Advantica Hourly/HCE 401(k) Plan and the Advantica Salaried 401(k) Plan.
The Advantica 401(k) Plan was restated and renamed the Advantica Salaried
401(k) Plan and assets for certain employees were transferred to the
Advantica Hourly/HCE Plan. On December 29, 1999, the Company completed the
sale of the stock of El Pollo Loco, Inc. ("EPL"), a wholly owned
subsidiary, to American Securities Capital Partners, L.P. Effective
December 29, 1999, the date of the sale, EPL employees are no longer
eligible to participate in the Plan. Additionally, EPL is no longer a
participating employer; therefore, EPL's active employees as of the sale
date are not permitted to make pre-tax deferral contributions under the
Plan. In accordance with plan provisions, EPL employees will be given the
right to elect a lump-sum distribution of their pre-tax account when they
separate from service with EPL, or postpone distribution of the account if
their account balance exceeded $5,000 as of the sale date. As of December
31, 1999, EPL employee participant account balances included in net assets
available for benefits for the Plan totaled $1,701,311.
INTEREST IN MASTER TRUST - The Plan's investments are in the Advantica
401(k) Plans Master Trust ("Master Trust") which was established
January 1, 1999 for the investment of assets of the Plan and the Advantica
Salaried 401(k) Plan. Each participating plan has an undivided interest in
the Master Trust. The assets of the Master Trust are held by American
Express. Investment income relating to the Master Trust are allocated to
the individual plans based upon average monthly balances invested by each
plan. Administrative expenses relating to the Master Trust are allocated
to the individual plans based on the amount invested by each plan on the
date each expense is paid.
- 4 -
<PAGE>
CONTRIBUTIONS - Participants may make pre-tax contributions of up to 15%
of eligible compensation. Participants may also contribute amounts
representing distributions from other qualified defined benefit or defined
contribution plans. The Company, at its discretion, may contribute an
amount equal to 25% of each participating hourly employee's contributions
up to 6% of such employee's compensation. Each individual sponsoring
employer may make additional matching contributions in amounts which they
determine. These Company contributions are made to the Plan monthly and
are invested to mirror the hourly employee's election. In 1999, the
following employer contribution formulas were used: 40% of employee
pre-tax contributions, up to 6% of compensation for Advantica, Spartan,
and FRD hourly employees; and 100% of employee pre-tax contributions, up
to 3% of compensation for Denny's employees. Highly compensated employees
are not eligible for the employer match. Contributions are subject to
certain limitations.
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 (for
hourly employees) 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 each hourly employee
whose initial date of employment is after December 31, 1998, the Company's
matching and discretionary contribution portion of their account plus
actual earnings thereon will be 100% vested after five years of continuous
service unless the following terms provide for more accelerated vesting.
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
three years, 20%; less than four years, 30%; less than five years, 40%;
and five years or more, 100%.
INVESTMENT OPTIONS - At December 31, 1999, participants could direct
employee contributions in one percent increments in any of eight
investment options. In April 2000, the trust agreement was amended to
provide 58 investment options. Participants may change their investment
options at any time via telephone.
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.
- 5 -
<PAGE>
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, and changes therein, and
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION - The plan interest in
Advantica 401(k) Plans Master Trust is valued at estimated fair value.
If available, quoted market prices are used to value the underlying
investments. In instances wherein quoted market prices are not available,
the fair value of investments is estimated primarily by independent
investment brokerage firms and insurance companies. 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.
PAYMENT OF BENEFITS - Benefits are recorded when paid.
3. MASTER TRUST
The following table presents the fair value of the underlying investments
of the Master Trust at December 31, 1999:
Collective trust funds, at estimated fair value:
American Express Trust Money Market Fund I $ 3,285,306
American Express Trust Income Fund I 4,414,964
American Express Emerging Growth Fund II 7,009,177
American Express Trust Equity Index Fund II 15,913,666
------------
Total 30,623,113
------------
Mutual funds, at quoted market price:
IDS New Dimensions Fund Y 1,628,533
Lazard Small Capital Fund 7,069,326
Neuberger & Berman Focus Trust Fund 1,630,140
Templeton Foreign Fund 7,022,888
------------
Total 17,350,887
------------
Guaranteed investment contracts 51,079,586
------------
Advantica Restaurant Group, Inc., common stock at
quoted market price 134,190
------------
Loans to participants, at estimated fair value 993,851
------------
Total investments $100,181,627
============
At December 31, 1999, the Plan's interest in the net assets of the Master
Trust was approximately 49%.
- 6 -
<PAGE>
Investment income for the Master Trust is as follows:
Net appreciation in fair value of investments:
Collective trust funds $ 6,289,696
Mutual funds 3,037,798
Common stock (208,633)
-----------
9,118,861
Interest and dividend income 3,154,648
-----------
$12,273,509
===========
4. RELATED PARTY TRANSACTIONS
Certain plan investments are shares of collective trust funds managed by
American Express. American Express serves 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, 1999
amounted to approximately $78,000.
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 has not yet applied for a determination letter. The Company
believes that the Plan is currently designed and 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. SUBSEQUENT EVENTS
On February 17, 2000, the Company announced that its future direction will
focus primarily on its Denny's brand, including efforts to move toward a
more franchise-based operation. In addition, the Company announced that it
had retained the firm of Donaldson, Lufkin & Jenrette Securities
Corporation to begin immediately exploring strategic alternatives for FRD,
the subsidiary which owns the Coco's and Carrows brands, including a
possible sale or recapitalization.
********
- 7 -
<PAGE>
