-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G9cegi7Pse9AVvfZ1EB/x6BpcwmxcG4+tzZjJ/ntVldvlNJaqAEnAijncF8dgCZl x6Ld9ho7iMXpTCkDMF+r9w== 0000852772-99-000004.txt : 19990629 0000852772-99-000004.hdr.sgml : 19990629 ACCESSION NUMBER: 0000852772-99-000004 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981230 FILED AS OF DATE: 19990628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANTICA RESTAURANT GROUP INC CENTRAL INDEX KEY: 0000852772 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 133487402 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-18051 FILM NUMBER: 99653276 BUSINESS ADDRESS: STREET 1: 203 E MAIN ST CITY: SPARTANBURG STATE: SC ZIP: 29319 BUSINESS PHONE: 8645978000 MAIL ADDRESS: STREET 1: 203 EAST MAINE STREET CITY: SPARTANBURG STATE: SC ZIP: 29319 FORMER COMPANY: FORMER CONFORMED NAME: FLAGSTAR COMPANIES INC DATE OF NAME CHANGE: 19930722 FORMER COMPANY: FORMER CONFORMED NAME: TW HOLDINGS INC DATE OF NAME CHANGE: 19920703 10-K405/A 1 ADVANTICA RESTAURANT GROUP 10-K/A 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 29319-9966 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (864) 597-8000 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Explanatory Note: This Amendment No. 1 to the Annual Report on Form 10-K of the above-referenced registrant is being filed pursuant to Rule 15d-21 of the Commission solely to furnish the financial statements required by Form 11-K with respect to the Advantica 40l(k) Plan and the Denny's 40l(k) Plan. 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 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. 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. 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 ADVANTICA 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1998 AND 1997 1998 1997 ----------- ----------- 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 =========== ===========
See notes to financial statements. -2- ADVANTICA 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 1998 1997 1996 ------------ ------------ ------------ 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 ============ ============ ============
See notes to financial statements. -3- 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- 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- 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- 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:
Advantica Aggressive Moderate Conservative Small Advantica Stable Value Blend Blend Blend Company Stock Fund Fund Fund Fund Equity Fund Fund ----------- ----------- ----------- ----------- ----------- ----------- 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
-7- The number of units and related net asset value per unit as of December 31, 1997 for each investment fund are as follows:
Advantica Aggressive Moderate Conservative Small Flagstar Stable Value Blend Blend Blend Company Stock Fund Fund Fund Fund Equity Fund Fund ----------- ----------- ----------- ----------- ----------- ----------- 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
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- 7. INVESTMENTS The following tables represent Plan investments as of December 31, 1998 and 1997 at fair value which equals or estimates carrying value:
Description 1998 1997 ----------- ----------- 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 $38,261,922 =========== ===========
8. FUND INFORMATION Net appreciation in fair value of investments, interest and dividends, employer's and participants' contributions and benefits paid to participants by fund are as follow for the years ended December 31, 1998, 1997 and 1996. Effective with the change in trustee during 1996 to American Express, the Plan's investments are valued on a daily basis; net appreciation in fair value of investments includes interest and dividends.
1998 1997 1996 ------------ ----------- ------------- Net appreciation (depreciation) in fair value of investments: Advantica Stable Value Fund ($ 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 ============ =========== =============
-9-
1998 1997 1996 ---------- ---------- ----------- 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 ========== ========== ===========
-10-
1998 1997 1996 ----------- ----------- ----------- 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 =========== =========== ===========
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- 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- ADVANTICA 401(k) PLAN IRS FORM 5500, ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1998
Shares, Units or Current Description Par Value Cost Value --------- ----------- -------------- 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 =========== ==============
* Denotes party-in-interest. -13- ADVANTICA 401(K) PLAN IRS FORM 5500, ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1998 5% REPORT BY ASSET -- AGGREGATE
Current Value of Asset on Identity of Purchase Selling Cost of Transaction Party Involved Description of Asset Price Price Asset Date Net Gain - --------------- -------------------- -------- ------- ------- ----------- -------- 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
-14- 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. 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 DENNY'S 401(k) PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 1, 1998 AND DECEMBER 31, 1997
1998 1997 ----------- ----------- 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 =========== ===========
See notes to financial statements. -2- 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
1998 1997 1996 ------------ ------------ ------------ 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 ============ ============ ============
See notes to financial statements. -3- 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- 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- 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- 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:
Advantica Aggressive Moderate Conservative Small Flagstar Stable Value Blend Blend Blend Company Stock Fund Fund Fund Fund Equity Fund Fund ------------ ----------- ----------- ----------- ----------- ----------- 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
-7- 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:
Description 1998 1997 ----------- ----------- 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 =========== ===========
-8- 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.
1998 1997 1996 ----------- ----------- ----------- 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 =========== =========== ===========
-9-
1998 1997 1996 ----------- ----------- ----------- 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 =========== =========== ===========
-10- 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
Current Value of Asset on Identity of Purchase Selling Cost of Transaction Party Involved Description of Asset Price Price Asset Date Net Gain - -------------- -------------------- ---------- ---------- ---------- ---------- ---------- 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
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