-----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, T2A4Ysu1bGZkxQJHb2NV8t6AmZJqkG9LMmi5yX0Z4r1NPfHeHPoQ84G/jsdjlpMh 3wJQrbuWP24iVtUrPxI6/g== 0000950168-98-002158.txt : 19980701 0000950168-98-002158.hdr.sgml : 19980701 ACCESSION NUMBER: 0000950168-98-002158 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980630 SROS: NONE 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-K/A SEC ACT: SEC FILE NUMBER: 000-18051 FILM NUMBER: 98658203 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-K/A 1 ADVANTICA RESTAURANT GROUP 10-K/A FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ............................................................................. FORM 10-K/A AMENDMENT NO. 1 ............................................................................. Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ADVANTICA RESTAURANT GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3487402 (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification no.) 203 EAST MAIN STREET SPARTANBURG, SOUTH CAROLINA 29319-9966 (Address of Principal Executive Offices) (864) 597-8000 (Registrant's telephone number, including area code) Explanatory Note: This Amendment No. 1 to the Annual Report on Form 10-K of the above-referenced registrant is being filed pursuant to Rule 15d-21 of the Commission solely to furnish the financial statements required by Form 11-K with respect to the Flagstar 401(k) Plan and the Denny's 401(k) Plan. The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Annual Report for 1997 on Form 10-K as set forth in the pages attached hereto: Part II, Item 8. Financial Statements and Supplemental Data. Part IV, Item 14. Exhibits, Financial Statement Schedules, and reports on Form 8-K. Exhibit 23.1. Consent of Deloitte & Touche LLP pursuant to Note to Required Information of Form 11-K. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. ADVANTICA RESTAURANT GROUP, INC. (Registrant) DATE: June 30, 1998 ------------------------------------------ BY: /s/ Rhonda J. Parish Executive Vice President, General Counsel and Secretary Part II, Item 8. Financial Statements and Supplemental Data of the Annual Report for 1997 on Form 10-K is hereby amended to include the following: FINANCIAL STATEMENTS OF FORM 11-K ANNUAL REPORT Filed pursuant to Rule 15d-21 promulgated under Section 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1997 Full title of the plans and the address of the plans, if different from that of the issuer named below: 1. FLAGSTAR 401(k) PLAN 2. DENNY'S 401(k) PLAN C/O DENNY'S, INC. 203 EAST MAIN STREET SPARTANBURG, SOUTH CAROLINA 29319-9966 Name of the issuer of the securities held pursuant to the plans and the address of its principal executive offices: FLAGSTAR COMPANIES, INC. 203 EAST MAIN STREET SPARTANBURG, SOUTH CAROLINA 29319-9966 Part IV, Item 14(a)(1) of the Annual Report on Form 10-K for the period ended December 31, 1997 is amended to insert the following financial statements required by Form 11-K, copies of which are filed herewith: 1. Flagstar 401(k) Plan Financial Statements at December 31, 1997 and 1996 and for Each of the Three Years in the Period ended December 31, 1997, Supplemental Schedules for the Year Ended December 31, 1997 and Independent Auditors' Report. 2. Denny's 401(k) Plan Financial Statements at December 31, 1997 and 1996 and for Each of the Three Years in the Period ended December 31, 1997, Supplemental Schedules for the Year Ended December 31, 1997 and Independent Auditors' Report. Part IV, Item 14(a)(3) and the Exhibit Index of the Annual Report on Form 10-K for the period ended December 31, 1997 are amended to insert the following exhibit required by Form 11-K in appropriate numerical order, a copy of which is filed herewith. Exhibit No. Description 23.1 Consent of Deloitte & Touche LLP pursuant to Note to Required Information of Form 11-K. - -------------------------------------------------------------------------------- Flagstar 401(k) Plan Financial Statements at December 31, 1997 and 1996 and for each of the Three Years in the Period Ended December 31, 1997, Supplemental Schedules for the Year Ended December 31, 1997, and Independent Auditors' Report FLAGSTAR 401(K) PLAN
TABLE OF CONTENTS - ----------------------------------------------------------------------------------------------------------------------- Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS: Statements of Net Assets Available for Benefits as of December 31, 1997 and 1996 2 Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 1997, 1996 and 1995 3 Notes to Financial Statements 4-15 SUPPLEMENTAL SCHEDULES: IRS Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes as of December 31, 1997 16 IRS Form 5500, Item 27d - Schedule of Reportable Transactions for the Year Ended December 31, 1997 17
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 Flagstar 401(k) Plan: We have audited the accompanying statements of net assets available for benefits of the Flagstar 401(k) Plan (the "Plan") as of December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1997 and 1996, and the changes in net assets available for benefits for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed in the foregoing Table of Contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These schedules are the responsibility of the Plan's management. Such schedules have been subjected to the auditing procedures applied in our audit of the basic 1997 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. Greenville, SC June 12, 1998 - 1 - FLAGSTAR 401(K) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1997 AND 1996 - ----------------------------------------------------------------------------------------------------------------------- 1997 1996 ASSETS: Investments, at fair value $ 38,261,922 $ 43,083,238 ------------ ------------ Receivables: Employer's contribution 14,215 - Participants' contributions 62,832 32,209 ------------ ------------ Total receivables 77,047 32,209 ------------ ------------ Cash and cash equivalents 40,572 1,014 ------------ ------------ TOTAL ASSETS 38,379,541 43,116,461 LESS - ACCRUED LIABILITIES - 20,199 ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS $ 38,379,541 $ 43,096,262 ============ ============
See notes to financial statements. -2- FLAGSTAR 401(K) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - ----------------------------------------------------------------------------------------------------------------------- 1997 1996 1995 ADDITIONS: Investment income: Net appreciation (depreciation) in fair value of investments $ 3,238,618 $ 2,049,081 $ (1,291,039) Interest and dividends 111,908 1,195,041 6,067,826 ----------- ----------- ------------ Total investment income 3,350,526 3,244,122 4,776,787 ----------- ----------- ------------ Contributions: Employer's 524,004 - 1,292,158 Participants' 2,514,255 1,736,294 2,841,109 ----------- ----------- ------------ Total contributions 3,038,259 1,736,294 4,133,267 ----------- ----------- ------------ TOTAL ADDITIONS 6,388,785 4,980,416 8,910,054 ----------- ----------- ------------ DEDUCTIONS: Benefits paid to participants 10,999,480 13,184,969 31,461,507 Administrative expenses 106,026 194,210 287,184 ----------- ----------- ------------ TOTAL DEDUCTIONS 11,105,506 13,379,179 31,748,691 ----------- ----------- ------------ NET DECREASE (4,716,721) (8,398,763) (22,838,637) NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR 43,096,262 51,495,025 74,333,662 ----------- ----------- ------------ NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $ 38,379,541 $ 43,096,262 $ 51,495,025 ============ ============ ============
See notes to financial statements. -3- FLAGSTAR 401(K) PLAN NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - -------------------------------------------------------------------------------- 1. DESCRIPTION OF THE PLAN The following description of the Flagstar 401(k) Plan ("the Plan") provides only general information. Participants should refer to the plan document for a more complete description of the Plan's provisions. General - The Plan, formerly the Flagstar Thrift Plan and, prior to that, the Thrift Plan for Noncontract Employees of TW Services, Inc., is a qualified deferred compensation plan, subject to the Employee Retirement Income Security Act of 1974. Any nonhighly compensated salaried employee of Advantica Restaurant Group, Inc. ("Advantica") and Flagstar Systems, Inc. ("Spartan", together, the "Company" and "Plan Sponsors") who has attained age 21 and has completed twelve months of service with the Company is eligible to participate in the Plan. Prior to May 6, 1994, any salaried employee of Canteen Corporation, prior to November 30, 1994, any salaried employee of TW Recreational Services, Inc. ("TWRS"), and prior to November 22, 1995 any salaried employee of Volume Services, Inc. ("VS") could participate in the Plan in accordance with the same eligibility requirements. The Flagstar 401(k) Plan Committee and the plan administrator control and manage the operation and administration of the Plan. NationsBank served as the Trustee of the Plan prior to July 1, 1996, when American Express Trust Company replaced NationsBank as trustee. Effective June 17, 1994 (the "Transition Date"), IM Vending Inc., Canteen Corporation and the subsidiaries of Canteen Corporation, (collectively, the "Canteen Group") were sold to an entity outside of the Advantica controlled group. Effective May 6, 1994, employees classified as Canteen Group employees were no longer eligible to become participants in the Plan. Effective as of the Transition Date and thereafter, the Canteen Group is not a Plan Sponsor or participating employer under the Plan and active employees of the Canteen Group as of the Transition Date were not permitted to make pre-tax deferral contributions under the Plan and were not eligible to receive employer contributions under the Plan. In accordance with the Plan provisions, Canteen Group employees were given the right to elect to receive a lump sum distribution of their entire Pre-Tax Account as of the Transition Date, receive distribution of the Pre-Tax Account when they separate from service with the Canteen Group, or postpone distribution of the account if their account balance did not exceed $3,500 as of the Transition Date. As of December 31, 1996 and 1995, Canteen Group employee participant account balances included in the net assets available for benefits of the Plan were approximately $435,000 and $9,261,000, respectively. There were no Canteen Group employee participant account balances included in net assets available for benefits as of December 31, 1997. Effective December 12, 1995 and December 31, 1995 ("Transition Dates"), TWRS and VS were sold to entities outside of the Advantica controlled group. Effective December 31, 1995, employees classified as VS employees were no longer eligible to become participants in the Plan. Effective as of the respective Transition Dates and thereafter, TWRS and VS are not Plan Sponsors or participating employers under the Plan and active employees of TWRS and VS as of the Transition Dates were not permitted to make pre-tax deferral contributions under the Plan and were not eligible to receive employer contributions under the Plan. -4- In accordance with the Plan provisions, TWRS and VS employees were given the right to elect to receive a lump sum distribution of their entire Pre-Tax Account as of the Transition Dates or receive distribution of their Pre-Tax Accounts when they separate from service with TWRS or VS. Effective April 1, 1997, non-highly compensated, salaried employees of FRD Acquisition Co. ("FRD," a wholly-owned subsidiary of Advantica) who met eligibility requirements became eligible to participate in the Plan and were allowed to roll over other defined contribution plan amounts to the Plan. As of December 31, 1997, approximately $500,000 had been transferred into the Plan by FRD employees. Contributions - Each year, participants' pre-tax contributions were limited to 10% of eligible compensation, or $9,500 in 1997 and 1996 and $9,240 in 1995, whichever is less. After-tax contributions were limited to 10% of each employee's eligible compensation, however, no after-tax contribution could be made by an employee in any month in which the employee made a pre-tax contribution. As of July 1, 1996, participants may contribute up to 15% of eligible compensation or the amount denoted above, whichever is less. Also as of July 1, 1996, participants may not make after-tax contributions to the plan. The Company at its discretion may have contributed an amount equal to 25% of each participating employee's after-tax contributions up to 6% of such employee's compensation. The Company may also have elected to make a bonus match of 75% for the first $500 per year of employee pre-tax contributions. As of January 1, 1997 each individual sponsoring employer may make matching contributions in amounts which they determine. Such contributions may be limited by applicable regulations. These Company contributions are made to the Plan monthly and are invested to mirror the employee election. In 1997, FRD matched 25% of the first 3% of base compensation that participants contributed to the plan. In 1997, all other participants received a match of 40% of the first 6% of base compensation that participants contributed to the plan. Participants may also contribute amounts representing distributions from other qualified defined benefit or contribution plans. Participant Accounts - A separate account is maintained for each participant. Each participant's account is credited with the participant's contribution and allocations of (a) the Company's contributions and (b) earnings, and is charged with an allocation of administrative expenses. Allocations are based on participant account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. Vesting - Participants who are employees of FRD are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company's matching and discretionary contribution portion of their accounts plus actual earnings thereon is based on years of continuous service. A participant is 100 percent vested after five years of credited service. All other participants are immediately vested in their contributions and employer contributions, plus actual earnings thereon. Investment Options - Prior to July 1, 1996, contributions to the Plan could be invested in 25% increments in any combination of five funds chosen by the participants: Interest Fund, Government Bond Fund, Dreyfus Equity Fund, Vanguard Explorer Fund, and Flagstar Companies Employee Stock Fund. Contributions were temporarily invested in short-term money market deposits and/or commercial paper until employee elections were executed. The Interest Fund consisted of insurance contracts that provided fixed interest rates on the fund investments. The Dreyfus Equity Fund and Vanguard Explorer Fund consisted of mutual funds that provided dividends and gains/losses as the market fluctuated. The Flagstar Companies Employee Stock Fund was invested in Flagstar Companies, Inc. common stock which also generated gains/losses as the market fluctuated, but in no event could more than 25% of the participating employees' contributions for any pay period be invested in the Company's common stock. Participants could change or transfer their investment options quarterly. A participating employee, however, could not transfer amounts to the Company stock fund to exceed 25% of his or her total investment in the Plan. -5- As of July 1, 1996, participants may direct employee contributions in one percent increments in any of eight investment options. Descriptions of the investment options are provided by the funds' managers. o The Flagstar Stable Value Fund is a pooled fund which invests primarily in bank, insurance, and stable value investment contracts. The guaranteed investment contracts held by the Plan at the time of the change in trustee were transferred to this fund. o The Aggressive Blend Fund is a pooled fund which invests in the Flagstar Stable Value Fund, American Express collective trust funds, and mutual funds. o The Moderate Blend Fund is a pooled fund which invests in the Flagstar Stable Value Fund, American Express collective trust funds, and mutual funds. o The Conservative Blend Fund is a pooled fund which invests in the Flagstar Stable Value Fund, American Express collective trust funds, and mutual funds. o The Small Company Equity Fund is a pooled fund which invests in mutual funds. o The Flagstar Stock Fund is a pooled fund which invested in American Express money market funds and Flagstar Companies, Inc. common stock. The Flagstar stock held by the Plan at the time of the change in trustee was transferred to this fund. As of April 1997, the Plan liquidated all Flagstar Stock. This fund now invests solely in money market funds. o The Templeton Foreign Fund is a mutual fund which invests in companies outside of the United States. o The American Express Trust Equity Index Fund II is a collective trust fund which invests primarily in common stock. Participants may change their investment options daily. Participant Loans - Participants may borrow up to the lesser of 50% of the vested portion of their account balance, or the amount of $50,000 less the highest outstanding loan balance during the prior 12 month period. The minimum loan amount is $1,000, and each employee can have only one loan outstanding at any time. The Plan documents indicate that a reasonable borrowing rate will be assessed, typically evidenced by the prime rate charged by the Plan's trustee. The participant also bears any loan administration costs incurred. Loans are repaid through payroll deductions in equal installments with the loan terms ranging from 6 to 54 months. Loan repayments cannot exceed 30% of the participant's salary. If an employee who has a loan outstanding terminates employment, no benefits will be paid from the Plan to the participant until the outstanding loan balance and accrued interest is paid in full. Loans outstanding at December 31, 1997 have a range of interest rates from 5.75% to 9%. Payment of Benefits - On termination of service due to death, disability or retirement, a participant may elect to receive either a lump sum amount equal to the value of the participant's vested interest in his or her account, or annual installments over a ten year period. For termination of service due to other reasons, a participant may receive the value of the vested interest in his or her account as a lump sum distribution. -6- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The financial statements of the Plan are prepared under the accrual basis of accounting. Investment Valuation and Income Recognition - The Plan's investments are stated at fair value. Shares of mutual funds are valued at the quoted market prices, which represent the net asset value of shares held by the Plan at year end. Investments in the collective trust funds and the pooled funds are stated at estimated fair values, which have been determined based on the unit values of the funds. Unit values are determined by dividing the fund's net assets at fair value by its units outstanding at each valuation date. The guaranteed investment contracts and synthetic investment contracts held by the Plan are fully benefit-responsive and are valued at contract value. Contract value represents the aggregate amount of accumulated contributions and investment income, less amounts used to make benefit payments and administrative expenses. Investments in money market funds are valued at cost plus accrued interest, which approximates fair value. Participant notes receivable are valued at cost plus accrued interest, which approximates fair value. Purchases and sales of securities are recorded on a trade date basis. Dividends are recorded on the ex-dividend date. Administrative Expenses - Administrative expenses of the Plan are paid by the Plan and allocated to participant accounts. Payment of Benefits - Benefits are recorded when paid. Cash and Cash Equivalents - The Plan considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents typically represent money market funds. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications - Certain 1996 and 1995 amounts have been reclassified to conform to the 1997 presentation. -7- 3. PLAN UNIT VALUATION Effective July 1, 1996, the Plan, together with the Denny's, Inc. 401(k) Plan, became a participant in a pooled investment trust agreement with American Express Trust Company. The assets of the following investment options are held in the pooled investment trust: Flagstar Stable Value Fund, Aggressive Blend Fund, Moderate Blend Fund, Conservative Blend Fund, Small Company Equity Fund, and the Flagstar Stock Fund. Individual participant accounts are maintained on a unit value basis. In accordance with the provisions of the Plan, the trustee maintains separate units of participation in the Plan and related net asset value per unit for each investment fund covered by the Plan. The number of units and related net asset value per unit as of December 31, 1997 for each investment fund are as follows:
Flagstar 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 $ - $ - $ - $ - $ 292,604 American Express Trust Income Fund I 7,500,297 - - - - - American Express Emerging Growth Fund II - 732,282 1,617,539 49,724 5,310,256 - American Express Trust Equity Index Fund II - 579,084 3,197,873 393,230 - - IDS New Dimensions Fund - 624,926 1,150,042 - - - Lazard Small Capital Fund - 723,445 1,598,063 49,129 5,247,717 - Neuberger & Berman Focus Trust Fund - 595,456 1,096,005 - - - Templeton Foreign Fund - 1,429,279 4,209,703 291,200 - - Flagstar Stable Value Fund - 1,138,142 8,379,536 1,159,317 - - Guaranteed investment contracts 50,951,851 - - - - - ------------ ----------- ----------- --------- ----------- -------- Total Market Value $ 62,012,449 $ 5,822,614 $21,248,761 $1,942,600 $ 10,557,973 $292,604 ============ =========== =========== ========== ============ ======== Units Outstanding, December 31, 1997 1,743,188 154,472 774,603 47,380 300,615 70,210 Net Asset Value Per Unit at: December 31, 1997 $ 10.8 $ 12.5 $ 12.0 $ 11.7 $ 12.8 $ 1.2 September 30, 1997 10.7 12.7 12.2 11.7 12.8 1.2 June 30, 1997 10.5 11.9 11.6 11.3 11.7 1.1 March 31, 1997 10.4 10.8 10.7 10.7 10.0 1.9
-8- The number of units and related net asset value per unit as of December 31, 1996 for each investment fund are as follows:
Flagstar 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 $ 2,731,564 $ - $ - $ - $ - $ 62,988 American Express Trust Income Fund I 11,539,479 - - - - - American Express Emerging Growth Fund II - 357,115 1,468,237 16,798 4,863,402 - American Express Trust Equity - Index Fund II - 277,226 2,849,476 136,652 - - IDS New Dimensions Fund - 279,139 956,376 - - - Lazard Small Capital Fund - 357,340 1,469,171 17,656 4,866,335 - Neuberger & Berman Focus Trust Fund - 281,873 965,745 - - - Templeton Foreign Fund - 715,087 3,920,033 105,996 - - Flagstar Stable Value Fund - 566,785 7,767,590 421,246 - - Guaranteed investment contracts 71,131,343 - - - - - Flagstar stock - - - - - 1,026,547 ------------ ----------- ------------ --------- ----------- ----------- Total Market Value $ 85,402,386 $ 2,834,565 $ 19,396,628 $ 698,348 $ 9,729,737 $ 1,089,535 ============ =========== ============ ========= =========== =========== Units Outstanding, December 31, 1996 2,597,953 76,005 862,785 41,653 375,432 104,741 Net Asset Value Per Unit at: December 31, 1997 $ 10.2 $ 10.8 $ 10.6 $ 10.5 $ 10.7 $ 3.1 September 30, 1997 10.1 10.3 10.2 10.1 10.4 6.4 July 1, 1996 (Initial Investment) 10.0 10.0 10.0 10.0 10.0 10.0
4. RELATED PARTY TRANSACTIONS Certain Plan investments are shares of collective trust funds managed by American Express Trust Company ("American Express") or NationsBank. American Express and NationsBank have each served as trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest. Fees paid to American Express for the year ended December 31, 1997 amounted to approximately $65,000. Fees paid to American Express and NationsBank by the Plan amounted to approximately $16,000 and $105,000, respectively, for the year ended December 31, 1996. Fees paid to NationsBank amounted to approximately $190,000 for the year ended December 31, 1995. 5. TERMINATION Although it has not expressed any intention to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions set forth in ERISA. In the event of any termination of the Plan, each participant automatically becomes fully vested to the extent of the balance in the participant's separate account after reflection of the fund's activity to the date of such termination. -9- 6. TAX STATUS The Plan obtained its latest determination letter on September 20, 1995, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended since receiving the determination letter. However, the plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. 7. INVESTMENTS The following tables represent Plan investments as of December 31, 1997 and 1996 at fair value which equals or estimates carrying value:
Description 1997 1996 Pooled funds, at estimated fair value: Flagstar Stable Value Fund $ 18,840,377* $ 26,532,891* Aggressive Blend Fund 1,927,971* 821,610 Moderate Blend Fund 9,316,926* 9,156,739* Conservative Blend Fund 555,006 438,277 Small Company Equity Fund 3,861,105* 4,022,755* Flagstar Stock Fund 82,707 326,268 --------- --------- Total 34,584,092 41,298,540 Mutual funds, at quoted market price - Templeton Foreign Fund 322,735 201,207 --------- --------- Collective trust funds, at estimated fair value - American Express Trust Equity Index Fund II 2,097,199* 447,117 --------- --------- Loans to participants, at estimated fair value 1,257,896 1,136,374 --------- --------- TOTAL INVESTMENTS $ 38,261,922 $ 43,083,238 ============ ============
* Represents plan investments which exceeded 5% of net assets available for benefits as of December 31. -10- 8. FUND INFORMATION Net appreciation (depreciation) in fair value of investments, interest and dividends, employer's and participants' contributions and benefits paid to participants by fund are as follow for the years ended December 31, 1997, 1996, and 1995. Effective with the change in trustee during 1996 to American Express, the Plan's investments are valued on a daily basis; net appreciation (depreciation) in fair value of investments includes interest and dividends.
1997 1996 1995 Net appreciation (depreciation) in fair value of investments: Flagstar Stable Value Fund $ 1,212,244 $ 584,877 $ - Aggressive Blend Fund 168,564 45,092 - Moderate Blend Fund 1,131,329 545,376 - Conservative Blend Fund 56,525 6,946 - Small Company Equity Fund 603,595 290,492 - Flagstar Stock Fund (214,848) (699,835) - Templeton Foreign Fund (15,942) 7,706 - American Express Trust Equity - Index Fund II 297,151 34,295 - Dreyfus Equity Fund - 782,617 (818,977) Vanguard Explorer Fund - 507,999 673,893 Flagstar Companies, Inc. common stock - 26,555 (1,370,589) Government Bond Fund - (81,062) 224,634 Interest Fund - (1,977) - ----------- ----------- ------------ Total $ 3,238,618 $ 2,049,081 $ (1,291,039) =========== =========== ============ 1997 1996 1995 Interest and dividends: Flagstar Stable Value Fund $ - $ 8,646 $ - Moderate Blend Fund - 8,469 - Small Company Equity Fund - 1,983 - Flagstar Stock Fund - (490) - Templeton Foreign Fund 32,846 2,670 - Interest Fund - 406,792 2,412,931 Government Bond Fund - 6,654 255,806 Dreyfus Equity Fund - 441,371 2,966,651 Vanguard Explorer Fund - 277,079 338,818 Flagstar Companies, Inc. common stock - 835 3,883 Loans to participants 79,062 41,032 89,737 ----------- ----------- ------------ Total $ 111,908 $ 1,195,041 $ 6,067,826 =========== =========== ============
-11-
1997 1996 1995 Employer's contribution: Flagstar Stable Value Fund $ 244,204 $ - $ - Aggressive Blend Fund 47,842 - - Moderate Blend Fund 117,421 - - Conservative Blend Fund 12,770 - - Small Company Equity Fund 57,001 - - Flagstar Stock Fund 8,672 - - Templeton Foreign Fund 7,013 - - American Express Trust Equity Index Fund II 29,081 - - Interest Fund - - 585,499 Government Bond Fund - - 137,369 Dreyfus Equity Fund - - 267,386 Vanguard Explorer Fund - - 138,742 Flagstar Companies, Inc. common stock - - 163,162 ----------- ----------- ------------ Total $ 524,004 $ - $ 1,292,158 ========= =========== ============ 1997 1996 1995 Participants' contributions: Flagstar Stable Value Fund $ 806,627 $ 370,317 $ - Aggressive Blend Fund 450,044 25,784 - Moderate Blend Fund 642,098 176,764 - Conservative Blend Fund 97,373 6,407 - Small Company Equity Fund 241,871 105,544 - Flagstar Stock Fund 32,052 87,137 - Templeton Foreign Fund 44,046 3,570 - American Express Trust Equity - Index Fund II 200,144 9,954 - Interest Fund - 410,625 1,272,599 Government Bond Fund - 89,898 286,327 Dreyfus Equity Fund - 207,210 601,241 Vanguard Explorer Fund - 125,402 326,742 Flagstar Companies, Inc. common stock - 117,682 354,200 ----------- ----------- ------------ Total $ 2,514,255 $ 1,736,294 $ 2,841,109 ============ =========== ============
-12-
1997 1996 1995 Benefits paid to participants: Flagstar Stable Value Fund $ 7,232,522 $ 1,951,307 $ - Aggressive Blend Fund 215,457 785 - Moderate Blend Fund 2,062,148 763,691 - Conservative Blend Fund 10,097 8,210 - Small Company Equity Fund 961,973 409,551 - Flagstar Stock Fund 41,160 44,064 - Templeton Foreign Fund 28,262 - - American Express Trust Equity Index Fund II 243,251 - - Participant loans 204,610 - - Interest Fund - 5,629,568 19,533,346 Government Bond Fund - 747,232 2,647,382 Dreyfus Equity Fund - 2,021,838 5,399,386 Vanguard Explorer Fund - 1,155,839 2,964,831 Flagstar Companies, Inc. common stock - 452,884 916,562 ----------- ----------- ------------ Total $ 10,999,480 $ 13,184,969 $ 31,461,507 ============ ============ ============
9. SUBSEQUENT EVENTS FCI Financial Restructuring - On January 7, 1998 (the "Effective Date"), Flagstar Companies, Inc. ("FCI"), parent company of the Plan Sponsors, and its wholly-owned subsidiary, Flagstar Corporation ("Flagstar"), emerged from proceedings under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") pursuant to FCI and Flagstar's Amended Joint Plan of Reorganization (the "Reorganization Plan") dated as of November 7, 1997. FCI's operating subsidiaries did not file bankruptcy petitions and were not parties to the above mentioned Chapter 11 proceedings. In addition, the Plan was not involved in and was unaffected by the bankruptcy proceedings. Material features of the Reorganization Plan as it became effective as of January 7, 1998, are as follows: (a) On the Effective Date, Flagstar merged with and into FCI, the surviving corporation, and FCI changed its name to Advantica Restaurant Group, Inc. (b) The following securities of FCI and Flagstar were canceled, extinguished and retired as of the Effective Date: (i) Flagstar's 10 7/8% Senior Notes due 2002 and 10 3/4% Senior Notes due 2001 (collectively, the "Old Senior Notes"), (ii) Flagstar's 11.25% Senior Subordinated Debentures due 2004 and 11 3/8% Senior Subordinated Debentures due 2003 (collectively, the "Senior Subordinated Debentures"), (iii) Flagstar's 10% Convertible Junior Subordinated Debentures due 2014 (the "10% Convertible Debentures"), (iv) FCI's $2.25 Series A Cumulative Convertible Exchangeable Preferred Stock and (v) FCI's $.50 par value common stock; -13- (c) Advantica had 100 million authorized shares of common stock (of which 40 million were issued and outstanding on the Effective Date) and 25 million authorized shares of preferred stock (none of which are currently outstanding). Pursuant to the Plan, 10% of the number of shares of common stock issued and outstanding on the Effective Date, on a fully diluted basis, is reserved for issuance under a new management stock option program. Additionally, 4 million shares of common stock are reserved for issuance upon the exercise of new warrants expiring January 7, 2005 that were issued and outstanding on the Effective Date and entitle the holders thereof to purchase in the aggregate 4 million shares of common stock at an exercise price of $14.60 per share (the "Warrants"); (d) Each holder of the Old Senior Notes received such holder's pro rata portion of 100% of Advantica's 11 1/4% Senior Notes due 2008 in exchange for 100% of the principal amount of such holders' Old Senior Notes and accrued interest through the Effective Date; (e) Each holder of the Senior Subordinated Debentures received each holder's pro rata portion of shares of Common Stock equivalent to 95.5% of the common stock issued on the Effective Date; (f) Each holder of the 10% Convertible Debentures received such holder's pro rata portion of (i) shares of common stock equivalent to 4.5% of the common stock issued on the Effective Date and (ii) 100% of the Warrants issued on the Effective Date; and (g) Advantica refinanced its prior credit facilities by entering into a new credit agreement providing Advantica and certain of its subsidiaries (including the Plan Sponsors) with a $200 million senior secured revolving credit facility. Disposition of Flagstar Enterprises, Inc. - On April 1, 1998, the Company completed the sale of the stock of Flagstar Enterprises, Inc. ("FEI"), a wholly-owned subsidiary of Spartan which operated the Company's Hardee's restaurants, for $427 million, which includes the assumption by the purchaser of $46 million of capital leases. Approximately $173.1 million of the proceeds (together with $28.6 million already on deposit with respect to certain Mortgage Financings as defined below) was applied to in-substance defease the 10.25% Guaranteed Secured Bonds due 2000 (the "Mortgage Financings") of Spardee's Realty, Inc., a wholly-owned subsidiary of FEI, and Quincy's Realty, Inc., a wholly-owned subsidiary of Quincy's Restaurants, Inc., with a book value of $198.9 million plus accrued interest of $6.9 million at April 1, 1998. Such Mortgage Financings were collateralized by certain assets of Spardee's Realty, Inc. and Quincy's Realty, Inc. The Company replaced such collateral through the purchase of a portfolio of United States Government and AAA rated investment securities which were deposited with the collateral agent with respect to such Mortgage Financings to satisfy principal and interest payments under such Mortgage Financings through the stated maturity date in the year 2000. Effective April 1, 1998, the date of the sale, FEI employees were no longer eligible to participate in the Plan. Additionally, FEI is no longer a participating employer; therefore, FEI's active employees as of the sale date are not permitted to make pre-tax deferral contributions under the Plan and are not eligible to receive employer contributions under the Plan. In accordance with the Plan provisions, FEI employees will be given the right to elect a lump sum distribution of the pre-tax account when they separate from service with FEI, or postpone distribution of the account if their account balance did not exceed $5,000 as of the sale date. As of April 1, 1998, FEI employee participant account balances included in the net assets available for the Plan totaled approximately $6.6 million. -14- Disposition of Quincy's Restaurants - On June 10, 1998, the Company completed the sale of the stock of Quincy's Restaurants, Inc. ("Quincy's"), a wholly-owned subsidiary of Spartan which operates its Quincy's Family Steakhouse division, to Buckley Acquisition Corporation ("BAC") for $85.7 million, which includes the assumption by BAC of $4.2 million in capital leases. Effective June 10, 1998, the date of the sale, Quincy's employees are no longer eligible to participate in the Plan. Additionally, Quincy's is no longer a participating employer; therefore, Quincy's active employees as of the sale date are not permitted to make pre-tax deferral contributions under the Plan and are not eligible to receive employer contributions under the Plan. In accordance with the Plan provisions, Quincy's employees will be given the right to elect a lump sum distribution of the pre-tax account when they separate from service with Quincy's, or postpone distribution of the account if their account balance did not exceed $5,000 as of the sale date. As of June 10, 1998, Quincy's employee participant account balances included in the net assets available for the Plan totaled approximately $1.5 million. ********** -15- FLAGSTAR 401(K) PLAN
IRS FORM 5500, ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1997 - ----------------------------------------------------------------------------------------------------------------------- Shares, Units Current Description or Par Value Cost Value Pooled funds: * Flagstar Stable Value Fund 1,743,188 $ 17,479,208 $ 18,840,377 * Aggressive Blend Fund 154,472 1,775,552 1,927,971 * Moderate Blend Fund 774,603 7,907,959 9,316,926 * Conservative Blend Fund 47,380 518,759 555,006 * Small Company Equity Blend Fund 300,615 3,094,533 3,861,105 * Flagstar Stock Fund 70,210 600,620 82,707 ---------- ----------- Total 31,376,631 34,584,092 Collective trust funds: * American Express Trust Equity Index Fund II 81,029 1,820,143 2,097,199 ---------- ----------- Mutual funds: Templeton Foreign Fund 32,436 336,992 322,735 ---------- ----------- * Loans to participants 1,257,896 1,257,896 1,257,896 ---------- ----------- TOTAL INVESTMENTS $ 34,791,662 $ 38,261,922 ============ ============
* Denotes party-in-interest -16- FLAGSTAR 401(K) PLAN
IRS FORM 5500 ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------------------------------------------------------------------------- 5% Report By Asset-Aggregate 1/1/97 through 12/31/97 Current Value Identity of Purchase Selling Cost of of Asset on Party Involved Description of Asset Price Price Asset Transaction Date Net Gain American Express Stable Value Fund 193 Sales $ 10,178,897 $ 9,776,800 $ 10,178,897 $ 402,097 48 Purchases $ 1,273,474 1,273,474 1,273,474 American Express Small Company Equity Blend Fund 119 Sales 1,460,903 1,361,055 1,460,903 99,848 91 Purchases 695,570 695,570 695,570 American Express Moderate Blend Fund 134 Sales 2,489,199 2,245,007 2,489,199 244,192 91 Purchases 1,517,863 1,517,863 1,517,863 American Express Aggresive Blend Fund 49 Sales 751,827 691,015 751,827 60,812 133 Purchases 1,689,621 1,689,621 1,689,621
-17- - -------------------------------------------------------------------------------- Denny's 401(k) Plan Financial Statements at December 31, 1997 and 1996 and for each of the Three Years in the Period Ended December 31, 1997, Supplemental Schedules for the Year Ended December 31, 1997 and Independent Auditors' Report DENNY'S 401(K) PLAN
TABLE OF CONTENTS - -------------------------------------------------------------------------------- Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS: Statements of Net Assets Available for Benefits as of December 31, 1997 and 1996 2 Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 1997, 1996 and 1995 3 Notes to Financial Statements 4-14 SUPPLEMENTAL SCHEDULES: IRS Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes as of December 31, 1997 15 IRS Form 5500, Item 27d - Schedule of Reportable Transactions for the Year Ended December 31, 1997 16 NOTE: Schedules required under the Employee Retirement Income Security Act of 1974, other than the schedules listed above, are omitted because of the absence of conditions under which such schedules are required.
INDEPENDENT AUDITORS' REPORT To the Administrative Committee Denny's 401(k) Plan: We have audited the accompanying statements of net assets available for benefits of the Denny's 401(k) Plan (the "Plan") as of December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1997 and 1996, and the changes in net assets available for benefits for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed in the foregoing Table of Contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These schedules are the responsibility of the Plan's management. Such schedules have been subjected to the auditing procedures applied in our audit of the basic 1997 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. Greenville, SC June 12, 1998 -1- DENNY'S 401(K) PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1997 AND 1996 - -------------------------------------------------------------------------------- 1997 1996 ASSETS: Investments, at fair value $ 71,066,446 $ 70,022,567 ------------ ------------ Receivables: Employer's contribution 70,575 - Participants' contributions 169,635 156,789 ------------ ------------ Total receivables 240,210 156,789 ------------ ------------ Cash and cash equivalents 21,443 - ------------ ----------- TOTAL ASSETS 71,328,099 70,179,356 LESS - ACCRUED LIABILITIES - 145,446 ------------ ------------ NET ASSETS AVAILABLE FOR BENEFITS $ 71,328,099 $ 70,033,910 ============ ============ See notes to financial statements. -2- DENNY'S 401(K) PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - --------------------------------------------------------------------------------
1997 1996 1995 ADDITIONS: Investment income: Net appreciation (depreciation) in fair value of investments $ 5,426,873 $ 2,038,290 $ (2,145,771) Interest and dividends 77,456 2,099,417 7,314,494 ----------- ----------- ------------ Total investment income 5,504,329 4,137,707 5,168,723 ----------- ----------- ------------ Contributions: Employer's 1,832,437 - 2,588,995 Participants' 5,168,529 5,840,702 7,073,490 ----------- ----------- ------------ Total contributions 7,000,966 5,840,702 9,662,485 ----------- ----------- ------------ TOTAL ADDITIONS 12,505,295 9,978,409 14,831,208 ----------- ----------- ------------ DEDUCTIONS: Benefits paid to participants 10,984,351 24,037,303 17,837,071 Administrative expenses 226,755 302,833 425,402 ----------- ----------- ------------ TOTAL DEDUCTIONS 11,211,106 24,340,136 18,262,473 ----------- ----------- ------------ NET INCREASE (DECREASE) 1,294,189 (14,361,727) (3,431,265) NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR 70,033,910 84,395,637 87,826,902 ----------- ----------- ------------ NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $ 71,328,099 $ 70,033,910 $ 84,395,637 ============ ============ ============
See notes to financial statements. -3- DENNY'S 401(K) PLAN NOTES TO FINANCIAL STATEMENTS, FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 - -------------------------------------------------------------------------------- 1. DESCRIPTION OF PLAN The following description of the Denny's 401(k) Plan (the "Plan") provides only general information. Participants should refer to the plan document for a more complete description of the Plan's provisions. General - The Plan, formerly the Denny's, Inc. Profit Sharing Retirement Plan, is a qualified deferred compensation plan, subject to the Employee Retirement Income Security Act of 1974. Any United States employee of Denny's, Inc. and El Pollo Loco (together , "the Company" and "Plan Sponsors") and their domestic subsidiaries who has attained age 21 and who has completed twelve months of service with the Company is eligible to participate in the Plan. The Denny's 401(k) Plan Committee and the plan administrator control and manage the operation and administration of the Plan. NationsBank served as the trustee of the Plan prior to July 1, 1996, when American Express Trust replaced NationsBank as trustee. Effective September 26, 1996, (the "PTF Transition Date"), Portion-Trol Foods, Inc. ("PTF") was sold to an entity outside of Denny's, Inc. Effective September 26, 1996, employees classified as PTF employees were no longer eligible to become participants in the Plan. Effective as of the PTF Transition Date and thereafter, PTF is not a Plan Sponsor or participating employer under the Plan and active employees of PTF as of the PTF Transition Date were not permitted to make pre-tax deferral contributions under the Plan and were not eligible to receive employer contributions under the Plan. In accordance with the Plan provisions, PTF employees were given the right to elect to receive a lump sum distribution of their entire Pre-Tax Account as of the PTF Transition Date, receive distribution of the Pre-Tax Account when they separate from service with PTF, or postpone distribution of the account. Distributions related to PTF employees for the plan year ended December 31, 1996 totaled approximately $2,272,000. Effective July 26, 1996, (the "MBP Transition Date"), Mother Butler Pies ("MBP") was sold to an entity outside of Denny's, Inc. Effective July 26, 1996, employees classified as MBP employees were no longer eligible to become participants in the Plan. Effective as of the MBP Transition Date and thereafter, MBP is not a Plan Sponsor or participating employer under the Plan and active employees of MBP as of the MBP Transition Date were not permitted to make pre-tax deferral contributions under the Plan and were not eligible to receive employer contributions under the Plan. In accordance with the Plan provisions, MBP employees were given the right to elect to receive a lump sum distribution of their entire Pre-Tax Account as of the MBP Transition Date, receive distribution of the Pre-Tax Account when they separate from service with MBP, or postpone distribution of the account. Distributions related to MBP employees for the plan year ended December 31, 1996 totaled approximately $249,000. -4- Effective September 1, 1995 (the "PFC Transition Date"), Proficient Food Company and its subsidiary, DFC Trucking Company, (collectively, the "PFC Group") were sold to an entity outside of Denny's, Inc. Effective September 1, 1995, employees classified as PFC Group employees were no longer eligible to become participants in the Plan. Effective as of the PFC Transition Date and thereafter, the PFC Group is not a Plan Sponsor or participating employer under the Plan and active employees of the PFC Group as of the PFC Transition Date were not permitted to make pre-tax deferral contributions under the Plan and were not eligible to receive employer contributions under the Plan. In accordance with the Plan provisions, PFC Group employees were given the right to elect to receive a lump sum distribution of their entire Pre-Tax Account as of the PFC Transition Date, receive distribution of the Pre-Tax Account when they separate from service with the PFC Group, or postpone distribution of the account. Distributions related to PFC employees for the plan year ended December 31, 1995 totaled approximately $5,925,000. Contributions - Each year, participants' pre-tax contributions are limited to 15% of eligible compensation, or $9,500 in 1997 and 1996 and $9,240 in 1995, whichever is less. The Company, at its discretion, may match employee contributions up to the first 3% of each employee's salary at the rate of $1.00 for each employee dollar contributed (net of forfeitures). These Company contributions are made to the Plan monthly and are invested to mirror the employees' elections. In 1997 the Company elected to make contributions to the Plan in accordance with the matching formula. Participants may also contribute amounts representing distributions from other qualified defined-benefit or contribution plans. Participant Accounts - A separate account is maintained for each participant. Each participant's account is credited with the participant's contribution and allocations of (a) the Company's contributions and (b) earnings, and is charged with an allocation of administrative expenses. Allocations are based on participant account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. Vesting - Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company's matching and discretionary contribution portion of their accounts plus actual earnings thereon is based on years of continuous service. A participant is 100% vested after five years of credited service. Investment Options - Prior to July 1, 1996, contributions to the Plan could be invested in any combination of four funds chosen by the participants: Interest Fund, Dreyfus Equity Fund, Vanguard Explorer Fund, and Flagstar Companies Employee Stock Fund. Contributions were temporarily invested in short-term money market deposits and/or commercial paper until employee elections were executed. The Interest Fund consisted of insurance contracts that provided fixed interest rates on the fund investments. The Dreyfus Equity Fund and Vanguard Explorer Fund consisted of mutual funds that provided dividends and gains/losses as the market fluctuated. The Flagstar Companies Employee Stock Fund was invested in Flagstar Companies, Inc. common stock which also generated gains/losses as the market fluctuated, but in no event could more than 25% of the participating employees' contributions for any pay period be invested in the Company's common stock. Participants could change or transfer their investment options quarterly. A participating employee, however, could not transfer amounts to the Flagstar Companies Stock Fund to exceed 25% of his or her total investment in the Plan. -5- As of July 1, 1996, participants may direct their contributions in one percent increments to any of eight investment options. Descriptions of the investment options are provided by the funds' managers. o The Flagstar Stable Value Fund is a pooled fund which invests primarily in bank, insurance and stable value investment contracts. The guaranteed investment contracts held by the Plan at the time of the change in trustee were transferred to this fund. o The Aggressive Blend Fund is a pooled fund which invests in the Flagstar Stable Value Fund, American Express collective trust funds, and mutual funds. o The Moderate Blend Fund is a pooled fund which invests in the Flagstar Stable Value Fund, American Express collective trust funds, and mutual funds. o The Conservative Blend Fund is a pooled fund which invests in the Flagstar Stable Value Fund, American Express collective trust funds, and mutual funds. o The Small Company Equity Fund is a pooled fund which invests in mutual funds. o The Flagstar Stock Fund is a pooled fund which invested in American Express money market funds and Flagstar Company common stock. The Flagstar stock held by the Plan at the time of the change in trustee was transferred to this fund. As of April 1997, the Company liquidated all Flagstar stock. This fund now invests solely in money market funds. o The Templeton Foreign Fund is a mutual fund which invests in companies outside of the United States. o The American Express Trust Equity Index Fund II is a collective trust fund which invests primarily in common stock. Participants may change their investment options daily. Payment of Benefits - On termination of service due to death, disability or retirement, a participant may elect to receive either a lump sum amount equal to the value of the participant's vested interest in his or her account, or annual installments over a ten year period. For termination of service due to other reasons, a participant may receive the value of the vested interest in his or her account as a lump sum distribution. Forfeited Accounts - Forfeitures are used to reduce Company contributions. During 1997, employer contributions were reduced by $256,755 from forfeited nonvested accounts. -6- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The financial statements of the Plan are prepared using the accrual basis of accounting. Investment Valuation and Income Recognition - The Plan's investments are stated at fair value. Shares of mutual funds are valued at the quoted market prices which represent the net asset value of shares held by the Plan at year end. Investments in the collective trust funds and the pooled funds are stated at estimated fair values, which have been determined based on the unit values of the funds. Unit values are determined by dividing the fund's net assets at fair value by its units outstanding at each valuation date. The guaranteed investment contracts and synthetic investment contracts held by the Plan are fully benefit-responsive and are valued at contract value. Contract value represents the aggregate amount of accumulated contributions and investment income, less amounts used to make benefit payments and administrative expenses. Investments in money market funds are valued at cost plus accrued interest, which approximates fair value. Purchases and sales of securities are recorded on a trade date basis. Dividends are recorded on the ex-dividend date. Administrative Expenses - Administrative expenses of the Plan are paid by the Plan and allocated to participant accounts. Payment of Benefits - Benefits are recorded when paid. Cash and Cash Equivalents - The Plan considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents typically represent money market funds. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications - Certain 1996 and 1995 amounts have been reclassified to conform to the 1997 presentation. -7- 3. PLAN UNIT VALUATION Effective July 1, 1996, the Plan together with the Flagstar 401(k) Plan became a participant in a pooled investment trust agreement with American Express Trust Company. The assets of the following investment options are held in the pooled investment trust: Flagstar Stable Value Fund, Aggressive Blend Fund, Moderate Blend Fund, Conservative Blend Fund, Small Company Equity Fund, and the Flagstar Stock Fund. Individual participant accounts are maintained on a unit value basis. In accordance with the provisions of the Plan, the trustee maintains separate units of participation in the Plan and related net asset value per unit for each investment fund covered by the Plan. The number of units and related net asset value per unit as of December 31, 1997 for each investment fund are as follows:
Flagstar 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 $ - $ - $ - $ - $292,604 American Express Trust Income Fund I 7,500,297 - - - - - American Express Emerging Growth Fund II - 732,282 1,617,539 49,724 5,310,256 - American Express Trust Equity Index Fund II - 579,084 3,197,873 393,230 - - IDS New Dimensions Fund - 624,926 1,150,042 - - - Lazard Small Capital Fund - 723,445 1,598,063 49,129 5,247,717 - Neuberger & Berman Focus Trust Fund - 595,456 1,096,005 - - - Templeton Foreign Fund - 1,429,279 4,209,703 291,200 - - Flagstar Stable Value Fund - 1,138,142 8,379,536 1,159,317 - - Guaranteed investment contracts 50,951,851 - - - - - ------------ ----------- ----------- --------- ----------- -------- Total Market Value $ 62,012,449 $ 5,822,614 $21,248,761 $1,942,600 $ 10,557,973 $292,604 ============ =========== =========== ========== ============ ======== Units outstanding, December 31, 1997 4,006,620 312,046 992,005 118,456 521,400 178,180 Net asset value per unit at: December 31, 1997 $ 10.8 $ 12.5 $ 12.0 $ 11.7 $ 12.8 $ 1.2 September 30, 1997 10.7 12.7 12.2 11.7 12.8 1.2 June 30, 1997 10.5 11.9 11.6 11.3 11.7 1.1 March 31, 1997 10.4 10.8 10.7 10.7 10.0 1.9
-8- The number of units and related net asset value per unit as of December 31, 1996 for each investment fund are as follows:
Flagstar 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 $ 2,731,564 $ - $ - $ - $ - $ 62,988 American Express Trust Income Fund I 11,539,479 - - - - - American Express Emerging Growth Fund II - 357,115 1,468,237 16,798 4,863,402 - American Express Trust Equity Index Fund II - 277,226 2,849,476 136,652 - - IDS New Dimensions Fund - 279,139 956,376 - - - Lazard Small Capital Fund - 357,340 1,469,171 17,656 4,866,335 - Neuberger & Berman Focus Trust Fund - 281,873 965,745 - - - Templeton Foreign Fund - 715,087 3,920,033 105,996 - - Flagstar Stable Value Fund - 566,785 7,767,590 421,246 - - Guaranteed investment contracts 71,131,343 - - - - - Flagstar stock - - - - - 1,026,547 ------------ ----------- ------------ --------- ----------- ----------- Total market value $85,402,386 $2,834,565 $19,396,628 $698,348 $9,729,737 $1,089,535 ============ =========== ============ ========= =========== =========== Units outstanding, December 31, 1996 4,903,908 187,912 971,445 24,717 532,491 243,574 Net asset value per unit at: December 31, 1996 $ 10.2 $ 10.8 $ 10.6 $ 10.5 $ 10.7 $ 3.1 September 30, 1996 10.1 10.3 10.2 10.1 10.4 6.4 July 1, 1996 (initial investment) 10.0 10.0 10.0 10.0 10.0 10.0
4. RELATED PARTY TRANSACTIONS Certain plan investments are shares of collective trust funds managed by American Express Trust Company ("American Express") or NationsBank. American Express and NationsBank have each served as trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest. Fees paid to American Express for the year ended December 31, 1997 amounted to approximately $152,000. Fees paid to American Express and NationsBank by the Plan amounted to approximately $38,000 and $128,000, respectively, for the year ended December 31, 1996. Fees paid to NationsBank amounted to approximately $111,000 for the year ended December 31, 1995. 5. TERMINATION Although it has not expressed any intention to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions set forth in ERISA. In the event of any termination of the Plan, each participant automatically becomes fully vested to the extent of the balance in the participant's separate account after reflection of the fund's activity to the date of such termination. -9- 6. TAX STATUS The Plan obtained its latest determination letter on December 21, 1995, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended since receiving the determination letter. However, the plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. 7. INVESTMENTS The following tables represent Plan investments as of December 31, 1997 and 1996 at fair value which equals or estimates carrying value:
Description 1997 1996 Pooled funds, at estimated fair value: Flagstar Stable Value Fund $ 43,172,072* $ 49,952,140* Aggressive Blend Fund 3,894,643* 2,031,332 Moderate Blend Fund 11,931,835* 10,309,956* Conservative Blend Fund 1,387,594 260,069 Small Company Equity Fund 6,696,868* 5,705,700* Flagstar Stock Fund 209,897 758,734 ----------- ------------ Total 67,292,909 69,017,931 Mutual funds, at quoted market price - Templeton Foreign Fund 780,418 262,507 Collective trust funds, at estimated fair value - American Express Trust Equity Index Fund II 2,993,119 742,129 ----------- ------------ TOTAL INVESTMENTS $ 71,066,446 $ 70,022,567 ============ ============
* Represents plan investments which exceeded 5% of net assets available for benefits as of December 31. -10- 8. FUND INFORMATION Net appreciation (depreciation) in fair value of investments, interest and dividends, employer's and participants' contributions and benefits paid to participants by fund are as follow for the years ended December 31, 1997, 1996, and 1995. Effective with the change in trustee during 1996 to American Express, the Plan's investments are valued on a daily basis; net appreciation (depreciation) in fair value includes interest and dividends.
1997 1996 1995 Net appreciation (depreciation) in fair value of investments: Flagstar Stable Value Fund $ 2,598,452 $ 1,170,405 $ - Aggressive Blend Fund 415,002 110,768 - Moderate Blend Fund 1,398,316 548,871 - Conservative Blend Fund 81,854 9,283 - Small Company Equity Fund 1,070,292 360,114 - Flagstar Stock Fund (549,217) (1,432,527) - Templeton Foreign Fund (59,963) 9,197 - American Express Trust Equity Index Fund II 472,137 58,715 - Dreyfus Equity Fund - 659,440 (1,033,152) Vanguard Explorer Fund - 514,246 (1,808,666) Flagstar Companies, Inc. common stock - 29,778 696,047 ----------- ----------- ------------- Total $ 5,426,873 $ 2,038,290 $ (2,145,771) =========== =========== ============ 1997 1996 1995 Interest and dividends: Flagstar Stable Value Fund $ - $ 234,326 $ - Moderate Blend Fund - 22,174 - Small Company Equity Fund - 3,800 - Flagstar Stock Fund - 6,736 - Templeton Foreign Fund 77,456 6,172 - Interest Fund - 1,077,948 3,956,720 Dreyfus Equity Fund - 424,642 2,923,676 Vanguard Explorer Fund - 322,095 429,931 Flagstar Companies, Inc. common stock - 1,524 4,167 ----------- ----------- ----------- Total $ 77,456 $ 2,099,417 $ 7,314,494 ======== =========== ===========
-11-
1997 1996 1995 Employer's contributions (net of forfeitures): Flagstar Stable Value Fund $ 949,428 $ - $ - Aggressive Blend Fund 130,645 - - Moderate Blend Fund 382,852 - - Conservative Blend Fund 23,454 - - Small Company Equity Fund 215,587 - - Flagstar Stock Fund 41,466 - - Templeton Foreign Fund 20,580 - - American Express Trust Equity Index Fund II 68,425 - - Interest Fund - - 1,474,583 Dreyfus Equity Fund - - 498,950 Vanguard Explorer Fund - - 291,872 Flagstar Companies, Inc. common stock - - 323,590 ----------- ------------ ----------- Total $ 1,832,437 $ - $ 2,588,995 =========== ============ =========== 1997 1996 1995 Participants' contributions: Flagstar Stable Value Fund $ 2,490,189 $ 1,313,859 $ - Aggressive Blend Fund 411,148 70,616 - Moderate Blend Fund 1,128,390 606,224 - Conservative Blend Fund 85,064 9,584 - Small Company Equity Fund 665,718 375,875 - Flagstar Stock Fund 117,611 322,911 - Templeton Foreign Fund 60,744 7,120 - American Express Trust Equity Index Fund II 209,665 23,979 - Interest Fund - 1,641,457 3,916,630 Dreyfus Equity Fund - 655,850 1,398,303 Vanguard Explorer Fund - 419,831 849,906 Flagstar Companies, Inc. common stock - 393,396 908,651 ----------- ----------- ----------- Total $ 5,168,529 $ 5,840,702 $ 7,073,490 =========== =========== ===========
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1997 1996 1995 Benefits paid to participants: Flagstar Stable Value Fund $ 7,345,109 $ 5,749,424 $ - Aggressive Blend Fund 356,774 40,262 - Moderate Blend Fund 1,895,045 884,465 - Conservative Blend Fund 44,810 47,535 - Small Company Equity Fund 1,045,036 507,830 - Flagstar Stock Fund 73,628 125,701 - Templeton Foreign Fund 18,959 23,558 - American Express Trust Equity Index Fund II 204,990 52,966 - Interest Fund - 12,929,498 14,124,263 Dreyfus Equity Fund - 1,990,906 1,996,036 Vanguard Explorer Fund - 1,260,088 1,148,212 Flagstar Companies, Inc. common stock - 425,070 568,560 ------------ ------------ ------------ Total $ 10,984,351 $ 24,037,303 $ 17,837,071 ============ ============ ============
9. SUBSEQUENT EVENTS FCI Financial Restructuring - On January 7, 1998 (the "Effective Date"), Flagstar Companies, Inc. ("FCI"), parent company of the Plan Sponsors, and its wholly-owned subsidiary, Flagstar Corporation ("Flagstar"), emerged from proceedings under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") pursuant to FCI and Flagstar's Amended Joint Plan of Reorganization (the "Reorganization Plan") dated as of November 7, 1997. FCI's operating subsidiaries did not file bankruptcy petitions and were not parties to the above mentioned Chapter 11 proceedings. In addition, the Plan was not involved in and was unaffected by the bankruptcy proceedings. Material features of the Reorganization Plan as it became effective as of January 7, 1998, are as follows: (a) On the Effective Date, Flagstar merged with and into FCI, the surviving corporation, and FCI changed its name to Advantica Restaurant Group, Inc. ("Advantica"). (b) The following securities of FCI and Flagstar were canceled, extinguished and retired as of the Effective Date: (i) Flagstar's 10 7/8% Senior Notes due 2002 and 10 3/4% Senior Notes due 2001 (collectively, the "Old Senior Notes"), (ii) Flagstar's 11.25% Senior Subordinated Debentures due 2004 and 11 3/8% Senior Subordinated Debentures due 2003 (collectively, the "Senior Subordinated Debentures"), (iii) Flagstar's 10% Convertible Junior Subordinated Debentures due 2014 (the "10% Convertible Debentures"), (iv) FCI's $2.25 Series A Cumulative Convertible Exchangeable Preferred Stock and (v) FCI's $.50 par value common stock; -13- (c) Advantica had 100 million authorized shares of common stock (of which 40 million were issued and outstanding on the Effective Date) and 25 million authorized shares of preferred stock (none of which are currently outstanding). Pursuant to the Plan, 10% of the number of shares of common stock issued and outstanding on the Effective Date, on a fully diluted basis, is reserved for issuance under a new management stock option program. Additionally, 4 million shares of common stock are reserved for issuance upon the exercise of new warrants expiring January 7, 2005 that were issued and outstanding on the Effective Date and entitle the holders thereof to purchase in the aggregate 4 million shares of common stock at an exercise price of $14.60 per share (the "Warrants"); (d) Each holder of the Old Senior Notes received such holder's pro rata portion of 100% of Advantica's 11 1/4% Senior Notes due 2008 in exchange for 100% of the principal amount of such holders' Old Senior Notes and accrued interest through the Effective Date; (e) Each holder of the Senior Subordinated Debentures received each holder's pro rata portion of shares of common stock equivalent to 95.5% of the common stock issued on the Effective Date; (f) Each holder of the 10% Convertible Debentures received such holder's pro rata portion of (i) shares of common stock equivalent to 4.5% of the common stock issued on the Effective Date and (ii) 100% of the Warrants issued on the Effective Date; and (g) Advantica refinanced its prior credit facilities by entering into a new credit agreement providing Advantica and certain of its subsidiaries (including the Plan Sponsor) with a $200 million senior secured revolving credit facility. ********** -14- DENNY'S 401(K) PLAN IRS FORM 5500, ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1997 - --------------------------------------------------------------------------------
Shares, Units Current Description or Par Value Cost Value Pooled funds: * Flagstar Stable Value Fund 4,006,620 $ 40,169,592 $ 43,172,072 * Aggressive Blend Fund 312,046 3,415,363 3,894,643 * Moderate Blend Fund 992,005 10,258,874 11,931,835 * Conservative Blend Fund 118,456 1,311,910 1,387,594 * Small Company Equity Fund 521,400 5,400,371 6,696,868 * Flagstar Stock Fund 178,180 1,327,008 209,897 ----------- ----------- Total 61,883,118 67,292,909 ----------- ----------- Mutual funds: Templeton Foreign Fund 78,434 834,684 780,418 Collective trust funds: * American Express Trust Equity Index Fund II 115,645 2,624,813 2,993,119 ----------- ----------- TOTAL INVESTMENTS $ 65,342,615 $ 71,066,446 ============ ============
* Denotes party-in-interest -15- DENNY'S 401(K) PLAN IRS FORM 5500 ITEM 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1997 - -------------------------------------------------------------------------------- 5% Report By Asset-Aggregate 1/1/97 through 12/31/97
Current Value Identity of Purchase Selling Cost of of Asset on Party Involved Description of Asset Price Price Asset Transaction Date Net Gain American Express Stable Value Fund 194 Sales $ 11,548,774 $ 11,044,167 $ 11,548,774 $ 504,607 52 Purchases $ 2,170,560 2,170,560 2,170,560 American Express Moderate Blend Fund 151 Sales 2,488,914 2,201,352 2,488,914 287,562 93 Purchases 2,783,786 2,783,786 2,783,786 American Express American Express Trust Equity Index Fund II 55 Sales 1,247,754 1,090,831 1,247,754 156,923 160 Purchases 3,025,244 3,025,244 3,025,244
-16- EX-23 2 EXHIBIT 23.1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statement of Advantica Restaurant Group, Inc. (formerly Flagstar Companies, Inc.) on Form S-8 dated May 18, 1998 of our reports dated June 12, 1998, appearing in this Form 10-K/A of Advantica Restaurant Group, Inc., for the year ended December 31, 1997. Greenville, SC June 30, 1998 -----END PRIVACY-ENHANCED MESSAGE-----