FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
.............................................................................
FORM 10-K/A
AMENDMENT NO. 2
.............................................................................
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
FLAGSTAR COMPANIES, 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. 2 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 1996
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.
FLAGSTAR COMPANIES, INC.
(Registrant)
DATE: June 30, 1997
------------------------------------------
BY: /s/ Rhonda J. Parish
Senior Vice President, General Counsel and Secretary
Part II, Item 8. Financial Statements and Supplemental Data of the
Annual Report for 1996 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, 1996
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, 1996 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, 1996
and 1995 and for Each of the Three Years in the Period ended
December 31, 1996, Supplemental Schedules for the Year Ended
December 31, 1996 and Independent Auditors' Report.
2. Denny's 401(k) Plan Financial Statements at December 31,
1996 and 1995 and for Each of the Three Years in the Period
ended December 31, 1996, Supplemental Schedules for the Year
Ended December 31, 1996 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, 1996 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, 1996 and 1995 and for
each of the Three Years in the Period Ended December 31,
1996, Supplemental Schedules for the Year Ended December 31,
1996, and Independent Auditors' Report.
- --------------------------------------------------------------------------------
FLAGSTAR 401(k) PLAN
TABLE OF CONTENTS
Pages
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits
as of December 31, 1996 and 1995 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 1996, 1995 and 1994 3
Notes to Financial Statements 4-13
SUPPLEMENTAL SCHEDULES:
IRS Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes
as of December 31, 1996 14
IRS Form 5500, Item 27d - Schedule of Reportable Transactions (Single and
Aggregate Transactions) for the Year Ended December 31, 1996 15-16
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
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, 1996 and 1995, and
the related statements of changes in net assets available for benefits for each
of the three years in the period ended December 31, 1996. 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,
1996 and 1995, and the changes in net assets available for benefits for each of
the three years in the period ended December 31, 1996 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 1996 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, SC
June 6, 1997
-1-
FLAGSTAR 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996 AND 1995
1996 1995
------------ -----------
ASSETS:
Investments $ 43,083,238 $ 49,223,805
------------ -----------
Receivables:
Employer's contribution --- 185,743
Participants' contributions 32,209 123,404
Accrued income --- 71,780
------------ -----------
Total receivables 32,209 380,927
------------ -----------
Cash and cash equivalents 1, 014 2,012,904
------------ -----------
TOTAL ASSETS 43,116,461 51,617,636
------------ -----------
LESS - ACCRUED LIABILITIES 20,199 122,611
------------ -----------
NET ASSETS AVAILABLE FOR BENEFITS $ 43,096,262 $51,495,025
============ ===========
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, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
ADDITIONS:
INVESTMENT INCOME:
Net appreciation (depreciation)
in fair value of investments $ 2,049,081 $ (1,291,039) $ (2,630,739)
Interest income 1,168,131 2,762,357 4,087,850
Dividend income 26,910 3,305,469 862,145
--------------- ---------------- -----------------
Investment income, net 3,244,122 4,776,787 2,319,256
--------------- ---------------- -----------------
CONTRIBUTIONS:
Employer --- 1,292,158 2,048,595
Participants 1,736,294 2,841,109 4,473,768
--------------- ---------------- ----------------
Total contributions 1,736,294 4,133,267 6,522,363
--------------- ---------------- ----------------
TOTAL ADDITIONS 4,980,416 8,910,054 8,841,619
DEDUCTIONS:
DISTRIBUTIONS TO PARTICIPANTS (13,184,969) (31,461,507) (11,983,361)
ADMINISTRATIVE EXPENSES (194,210) (287,184) (306,278)
---------------- ----------------- ------------------
TOTAL DEDUCTIONS (13,379,179) (31,748,691) (12,289,639)
---------------- ---------------- ----------------
NET DECREASE (8,398,763) (22,838,637) (3,448,020)
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 51,495,025 74,333,662 77,781,682
--------------- --------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 43,096,262 $ 51,495,025 $ 74,333,662
=============== ============== ==============
See notes to financial statements.
-3-
FLAGSTAR 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
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 provisions.
a. 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 Flagstar Corporation (Flagstar, the "Company" and
the Plan's Administrator) and Flagstar Systems, Inc. (Spartan) 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 and, prior to November 30,
1994, any salaried employee of TW Recreational Services, Inc. (TWRS)
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 Flagstar Corporation 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 $435,255 and $9,260,544,
respectively.
Effective December 12, 1995 and December 31, 1995 ("Transition Dates"),
TW Recreational Services, Inc. (TWRS) and Volume Services, Inc. (VS)
were sold to entities outside of the Flagstar Corporation 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
-4-
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.
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.
b. Contributions - Each year, participants' pre-tax contributions were
limited to 10% of eligible compensation, or $9,500 in 1996, $9,240 in
1995, and $9,240 in 1994, 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 contribute an amount equal to 25% of
each participating employee's after-tax contributions, and 25% of
employee pre-tax contributions up to 6% of such employee's
compensation, plus 75% for the first $500 per year of employee pre-tax
contributions. These Company contributions are made to the Plan monthly
and are invested to mirror the employee election. In 1996, the Company
elected not to make contributions to the Plan.
c. 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.
d. Vesting - Participants are immediately vested in their contributions,
employer contributions, plus actual earnings thereon.
e. 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: Employee Interest Fund, Employee Government
Bond Fund, Employee Dreyfus Equity Fund, Employee Explorer Equity 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 Employee
Interest Fund consisted of insurance contracts that provided fixed
interest rates on the Fund investments. The Dreyfus Equity Fund and
Explorer Equity Fund were mutual equity 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
-5-
transfer amounts to the Company stock fund to exceed 25% of his or her
total investment in the Plan.
As of July 1, 1996, participants may direct employee contributions in
one percent increments in any of eight investment options. (a) 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. (b) The American Express Trust
Equity Index Fund II is a collective trust fund which invests primarily
in common stock. (c) The Conservative Blend Fund is a pooled fund which
invests in the Flagstar Stable Value Fund, American Express collective
trust funds and mutual funds. (d) The Moderate Blend Fund is a pooled
fund which invests in The Flagstar Stable Value Fund, American Express
collective trust funds, and mutual funds. (e) The Aggressive Blend Fund
is a pooled fund which invests in the Flagstar Stable Value Fund,
American Express collective trust funds, and mutual funds. (f) The
Small Company Equity Fund is a pooled fund which invests in mutual
funds. (g) The Templeton Foreign Fund is a mutual fund which invests in
companies outside of the United States. (h) The Flagstar Stock Fund is
a pooled fund which invests 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.
Participants may change their investment options daily.
f. 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, 1996 have a range of
interest rates from 5.75% to 9%.
g. 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Accounting - The financial statements of the Plan are prepared
under the accrual basis of accounting.
-6-
b. Investment Valuation and Income Recognition - The Plan's investments
are stated at fair value. Shares of registered mutual funds are valued
at the quoted market prices, which represent the net asset value of
shares held by the Plan at year end. Shares of collective trust funds
are valued at market prices determined in good faith by the fund
manager. Investments in the pooled accounts 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
which were held by the Plan as of December 31, 1995 and transferred to
the Flagstar Stable Value Fund, 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. Participant
notes receivable are valued at cost which approximates fair value.
Purchases and sales of securities are recorded on a trade date basis.
Dividends are recorded on the ex-dividend date.
c. Administrative Expenses - Administrative expenses of the Plan are paid
by the Plan and allocated to participant accounts.
d. Payment of Benefits - Benefits are recorded when paid.
e. 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.
f. 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.
3. PLAN UNIT VALUATION
Effective July 1, 1996, the Plan became a participant in a pooled
investment trust agreement with American Express Trust Company together
with the Denny's 401(k) Plan. The assets of the following investment
options are held in the pooled investment trust: Flagstar Stable Value
Fund, Conservative Blend Fund, Moderate Blend Fund, Small Company Equity
Fund, Flagstar Stock Fund and the Aggressive Blend 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
-7-
the Plan. The number of units and related net
asset value per unit as of December 31, 1996 for each investment fund are
as follows:
Flagstar Conservative Moderate Small Flagstar Aggressive
Stable Value Blend Blend Company Stock Blend
Fund Fund Fund Equity Fund 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 --- 16,798 1,468,237 4,863,402 --- 357,115
American Express Trust Equity
Index Fund II --- 136,652 2,849,476 --- --- 277,226
IDS New Dimensions Fund --- --- 956,376 --- --- 279,139
Lazard Small Capital Fund --- 17,656 1,469,171 4,866,335 --- 357,340
Neuberger & Berman Focus Trust Fund --- --- 965,745 --- --- 281,873
Templeton Foreign Fund --- 105,996 3,920,033 --- --- 715,087
Flagstar Stable Value Fund --- 421,246 7,767,590 --- --- 566,785
Guaranteed Investment Contracts 71,131,343 --- --- --- --- ---
Flagstar Stock Fund --- --- --- --- 1,026,547 ---
--------------------------------------------------------------------------------------
Total Market Value $ 85,402,386 $ 698,348 $ 19,396,628 $ 9,729,737 $ 1,089,535 $ 2,834,565
============ ============ ============ ============ =========== ===========
Units Outstanding, December 31, 1996 2,597,953 41,653 862,785 375,432 104,741 76,005
Net Asset Value Per Unit at:
December 31, 1996 $10.2 $10.5 $10.6 $10.7 $3.1 $10.8
September 30, 1996 10.1 10.1 10.2 10.4 6.4 10.3
July 1, 1996 (Initial Investment) 10.0 10.0 10.0 10.0 10.0 10.0
4. RELATED PARTY TRANSACTIONS
Certain Plan investments held during the plan year and at plan year end are
shares of collective trust funds managed by American Express Trust Company
("American Express") or NationsBank. American Express and NationsBank each
served as trustee during the plan year as defined by the Plan and,
therefore, these transactions qualify as party-in-interest. 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 and $48,000 for
the years ended December 31, 1995 and 1994, respectively.
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.
-8-
6. NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS
The net appreciation (depreciation) including investments bought, sold, and
held, by type of investment, during the years ended December 31, 1996,
1995, and 1994 is summarized as follows:
1996 1995 1994
-------------- ---------------- -----------------
Flagstar Companies, Inc. Common Stock $ 26,555 $ (1,370,589) $ (858,863)
Government Bond Fund (81,062) 224,634 (467,398)
Interest Fund - Insurance Contracts (1,977) -- 68,729
Vanguard Explorer Equity Fund 507,999 673,893 (227,383)
Dreyfus Equity Fund 782,617 (818,977) (1,145,824)
Flagstar Stable Value Fund 584,877 -- --
Aggressive Blend Fund 45,092 -- --
Moderate Blend Fund 545,376 -- --
Conservative Blend Fund 6,946 -- --
Flagstar Stock Fund (699,835) -- --
Small Company Equity Fund 290,492 -- --
Templeton Foreign Fund 7,706 -- --
American Express Trust Equity Index Fund II 34,295 -- --
-----------------------------------------------------
$ 2,049,081 $ (1,291,039) $ (2,630,739)
============= ============== ==============
7. 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.
-9-
8. INVESTMENTS
The following tables represent Plan investments as of December 31, 1996 and
1995:
1996 Fair
Description Value (2)
Pooled Funds:
Flagstar Stable Value Fund $ 26,532,891 (1)
Aggressive Blend Fund 821,610
Moderate Blend Fund 9,156,739 (1)
Conservative Blend Fund 438,277
Small Company Equity Blend Fund 4,022,755 (1)
Flagstar Stock Fund 326,268
------------
Total 41,298,540
Collective Trust Funds:
American Express Trust Equity Index Fund II 447,117
------------
Mutual Funds:
Templeton Foreign Fund 201,207
Loans to Participants 1,136,374
TOTAL INVESTMENTS $ 43,083,238
============
(1) Represents plan investments which exceeded 5% of net assets available for
benefits as of December 31, 1996.
(2) Fair value equals carrying value.
-10-
Description 1995 Carrying Value
Flagstar Companies, Inc. Common Stock $ 1,067,209
------------
United States Government Notes and Bonds:
7.00% due April 15, 1999 525,310
6.75% due May 31, 1997 510,310
7.875% due July 15, 1996 304,032
8.00% due August 15, 1999 217,312
8.00% due January 15, 1997 205,468
7.875% due January 15, 1998 315,234
6.375% due July 15, 1999 259,022
6.00% due November 30, 1997 253,673
5.125% due March 31, 1998 249,570
5.50% due April 15, 2000 252,070
--------------
3,092,001
NationsBank Short - Intermediate Government Fund 223,298
--------------
Total 3,315,299
-------------
Mutual Funds:
Dreyfus Equity Fund 9,959,891 (2)
Vanguard Explorer Equity Fund 4,343,104 (2)
Total 14,302,995
Interest Fund:
Insurance Contracts:
Great West Life Assurance Co.
9.20% due April 30, 1996 2,030,464
New York Life Ins. Co.
7.35% due May 7, 1997 7,594,256 (2)
Principal Mutual Life Insurance Co.
9.00% due April 30, 1996 899,007
Principal Mutual Life Insurance Co.
9.72% due April 30, 1996 8,496,315 (2)
-------------
19,020,042
Synthetic Insurance Contract:
People's Security Life Insurance
5.9346% due April 30, 1998
US Govt. and Agency Issuances 5,029,228
Asset Backed Securities 3,382,384
Cash and Cash Equivalents 1,145,362
Wrapper Contract 312,278
---------------
9,869,252
Total 28,889,294
Loans To Participants 1,649,008 (1)
---------------
TOTAL INVESTMENTS $ 49,223,805
===============
(1) Represents estimated fair value of loans to participants.
(2) Represents Plan investments which exceeded 5% of net assets available for
benefits as of December 31, 1995.
-11-
9. FUND INFORMATION
Participant contributions, employer contributions, distributions to
participants and investment income/dividends by fund are as follow for the
years ended December 31, 1996, 1995, and 1994.
1996 1995 1994
PARTICIPANT CONTRIBUTIONS:
Flagstar Stable Value Fund $370,317 $ -- $ --
Aggressive Blend Fund 25,784 -- --
Moderate Blend Fund 176,764 -- --
Conservative Blend Fund 6,407 -- --
Flagstar Stock Fund 87,137 -- --
Small Company Equity Fund 105,544 -- --
Templeton Foreign Fund 3,570 -- --
American Express Trust Equity Index Fund II 9,954 -- --
Interest Fund 410,625 1,272,599 1,947,920
Government Bond Fund 89,898 286,327 505,080
Dreyfus Equity Fund 207,210 601,241 931,059
Vanguard Explorer Fund 125,402 326,742 506,638
Flagstar Companies, Inc. common stock 117,682 354,200 583,071
----------- ------------ ------------
Total $ 1,736,294 $ 2,841,109 $ 4,473,768
=========== ============ ============
EMPLOYER CONTRIBUTIONS:
Interest Fund $ -- $ 585,499 $ 904,939
Government Bond Fund -- 137,369 241,004
Dreyfus Equity Fund -- 267,386 436,794
Vanguard Explorer Fund -- 138,742 195,736
Flagstar Companies, Inc. common stock -- 163,162 270,122
----------- ----------- ------------
Total $ -- $ 1,292,158 $ 2,048,595
=========== =========== ============
DISTRIBUTIONS TO PARTICIPANTS:
Flagstar Stable Value Fund $ 1,951,307 $ -- $ --
Aggressive Blend Fund 785 -- --
Moderate Blend Fund 763,691 -- --
Conservative Blend Fund 8,210 -- --
Flagstar Stock Fund 44,064 -- --
Small Company Equity Fund 409,551 -- --
Interest Fund 5,629,568 19,533,346 7,486,326
Government Bond Fund 747,232 2,647,382 992,150
Dreyfus Equity Fund 2,021,838 5,399,386 2,206,113
Vanguard Explorer Fund 1,155,839 2,964,831 783,351
Flagstar Companies, Inc. common stock 452,884 916,562 515,421
----------- ------------ --------------
Total $13,184,969 $ 31,461,507 $11,983,361
=========== ============ ===========
INVESTMENT INCOME/DIVIDENDS:
Flagstar Stable Value Fund $ 8,646 $ -- $ --
Moderate Blend Fund 8,469 -- --
Flagstar Stock Fund (490) -- --
Small Company Equity Fund 1,983 -- --
Templeton Foreign Fund 2,670 -- --
Interest Fund 406,792 2,412,931 3,729,942
Government Bond Fund 6,654 255,806 313,414
Dreyfus Equity Fund 441,371 2,966,651 545,106
Vanguard Explorer Fund 277,079 338,818 326,985
Flagstar Companies, Inc. common stock 835 3,883 5,475
Loans to Participants 41,032 89,737 29,073
----------- ----------- ------------
Total $ 1,195,041 $ 6,067,826 $ 4,949,995
=========== =========== ============
-12-
10. SUBSEQUENT EVENTS
FCI FINANCIAL RESTRUCTURING (UNAUDITED) -- On March 17, 1997, Flagstar
Companies, Inc. ("FCI"), reached an agreement in principle on the
terms of a financial restructuring plan with an ad hoc committee
representing holders of both its 11 3/8% Senior Subordinated Debentures due
2003 and 11.25% Senior Subordinated Debentures due 2004. In conjunction
with such plan, FCI has decided to pursue a restructuring of its debt and
preferred stock through "prepackaged" bankruptcy filings to be made under
Chapter 11 of the Bankruptcy Code by FCI and its wholly-owned subsidiary,
Flagstar (the Plan sponsor). FCI's operating subsidiaries would not be a
party to any such filings under the Bankruptcy Code.
In addition, on March 6, 1997, FCI's Credit Agreement was amended to
provide for less restrictive financial covenants for measurement periods
ending on April 2, 1997 and July 2, 1997, as well as to provide FCI
flexibility to forego scheduled interest payments due in March, May and
June 1997 under the 10 3/4% Senior Notes, the 10 7/8% Senior Notes, the
11 3/8% Senior Subordinated Debentures, the 11.25% Senior Subordinated
Debentures, and the 10% Junior Subordinated Debentures without triggering a
default under the agreement, unless any such debt is declared to be due and
payable as a result of the failure to pay any such interest.
On March 17, 1997, Flagstar elected not to make the $7.1 million interest
payment due and payable as of that date to holders of its 11 3/8% Senior
Subordinated Debentures. In addition, on May 1, 1997, Flagstar elected not
to make the $40.6 million and $5.0 million interest payments due and
payable as of that date to holders of its 11.25% Senior Subordinated
Debentures and its 10% Convertible Junior Subordinated Debentures,
respectively. As a result of these nonpayments, and as a result of a
continuation of such nonpayments for 30 days following their respective due
dates, Flagstar is in default under the indentures governing such
debentures, and the holders of 25% of such debentures or the trustees
therefor may declare such debt to be due and payable. If such debt is
declared to be due and payable this will create an event of default
relative to the 10 3/4 % Senior Notes due 2001 and the 10 7/8% Senior Notes
due 2002, entitling 30% of the holders of such indebtedness or the trustee
therefor to declare such indebtedness also to be due and payable.
FLAGSTAR STOCK FUND -- On March 17, 1997, the Flagstar Retirement Committee
directed the Flagstar Retirement and Savings Department to immediately
discontinue investments in the Flagstar Stock Fund. They additionally
directed that when sufficient time had passed to allow the public to
understand the restructuring plan, the Flagstar stock should be liquidated.
In March and April of 1997, all Flagstar stock held by the Plan was
liquidated. Participants could elect to keep their proceeds in the Flagstar
Stock Fund which now invests in money market funds or transfer the money
into another investment option.
-13-
FLAGSTAR 401(k) PLAN
IRS FORM 5500, ITEM 27a - SCHEDULE OF ASSETS HELD FOR
INVESTMENT PURPOSES AS OF DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Shares, Units Current
Description or Par Value Cost Value
- --------------------------------- ------------- ----------- -------------
Pooled Funds:
Flagstar Stable Value Fund 2,597,953 $25,982,535 $26,532,891
Aggressive Blend Fund 76,005 776,947 821,610
Moderate Blend Fund 862,785 8,635,104 9,156,739
Conservative Blend Fund 41,653 431,462 438,277
Small Company Equity Blend Fund 375,432 3,760,018 4,022,755
*Flagstar Stock Fund 104,741 979,903 326,268
------------- -------------
Total 40,565,969 41,298,540
------------- -------------
Collective Trust Funds:
*American Express Trust Equity
Index Fund II 22,923 412,959 447,117
-------------- -------------
Mutual Funds:
Templeton Foreign Fund 19,422 193,505 201,207
-------------- --------------
*Loans to Participants 1,136,374 1,136,374
------------- -------------
TOTAL INVESTMENTS $42,308,807 $43,083,238
=========== ===========
* Denotes party-in-interest
-14-
FLAGSTAR 401(K) PLAN
IRS FORM 5500
ITEM 27D-SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996
5% REPORT BY ASSET-AGGREGATE
1/1/96 THROUGH 12/31/96
b) Description of Asset h) Current Value
(include Interest Rate of Asset on
and Maturity in Case c) Purchase d) Selling g) Cost of Transaction i) Net Gain
of Loan) Price Price Asset Date or (Loss)
.................................... ........... .......... .......... .............. ..............
Dreyfus Fund Inc.
15 Sales 11,288,630 11,907,096 10,506,013 782,617
7 Purchases 546,122 546,122 546,122 0
Nations Prime Fund Primary A Shares
13 Sales 4,649,548 4,649,547 4,649,547 0
8 Purchases 4,314,986 4,314,986 4,314,986 0
Nations Cash Reserves Capital Class
13 Sales 21,987,200 21,987,200 21,987,200 0
20 Purchases 20,313,857 20,313,857 20,313,857 0
Vanguard Explorer Fund
16 Sales 5,313,809 3,905,710 4,805,810 507,999
6 Purchases 462,706 462,706 462,706 0
Principal Mutual Life Insurance
9.72% due on 4/30/96
1 Sale 8,694,548 8,694,548 8,694,548 0
3 Purchases 198,233 198,233 198,233 0
Flagstar Stable Value Fund
75 Sales 658,526 630,666 630,666 27,860
36 Purchases 12,993,927 12,993,927 12,993,927 0
Flagstar Moderate Blend Fund
61 Sales 936,522 912,892 912,892 23,630
36 Purchases 9,547,995 9,547,995 9,547,995 0
Flagstar Small Company Equity Fund
56 Sales 658,526 630,666 630,666 27,860
34 Purchases 4,390,684 4,390,684 4,390,684 0
-15-
FLAGSTAR 401(K) PLAN
IRS FORM 5500
ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996
5% REPORT BY ASSET-SINGLE TRANSACTIONS
1/1/96 THROUGH 12/31/96
b) Description of Asset h) Current Value
(include Interest Rate Description of Asset on
and Maturity in Case of c) Purchase d) Selling g) Cost of Transaction i) Net Gain
of Loan Transaction Date Price Price Asset Date or (Loss)
...................................................................................................................................
Dreyfus Fund Sale 6/24/96 9,592,902 10,084,176 8,903,571 689,331
Nations Prime Fund Primary A Shares Purchase 6/30/96 4,072,334 4,072,334 4,072,334 -
Sale 7/31/96 4,152,827 4,152,827 4,152,827 -
Nations Cash Reserves Capital Class Purchase 5/31/96 8,326,863 8,326,863 8,326,863 -
Purchase 6/30/96 2,736,278 2,736,278 2,736,278 -
Purchase 6/30/96 9,101,602 9,101,602 9,101,602 -
Sale 7/31/96 9,145,943 9,145,943 9,145,943 -
Sale 7/31/96 2,781,723 2,781,723 2,781,723 -
Sale 7/31/96 8,026,174 8,026,174 8,026,174 -
Vanguard Explorer Fund Sale 6/21/96 4,346,644 3,178,025 3,899,556 447,088
Principal Mutual Life Insurance Sale 5/1/96 8,694,548 8,694,548 8,694,548 -
GIC #86601-3
9.72% Due 4/30/96
Moderate Blend Fund Purchases 7/3/96 9,145,943 9,145,943 9,145,943 -
Small Company Equity Blend Fund Purchases 7/3/96 4,152,827 4,152,827 4,152,827 -
Flagstar Stable Value Fund Purchase 7/3/96 11,867,195 11,867,195 11,867,195 -
-16-
- --------------------------------------------------------------------------------
DENNY'S 401(K) PLAN
Financial Statements at December 31, 1996 and 1995 and for
each of the Three Years in the Period Ended December 31, 1996,
Supplemental Schedules for the Year Ended December 31, 1996
and Independent Auditors' Report.
- --------------------------------------------------------------------------------
DENNY'S 401(k) PLAN
TABLE OF CONTENTS
Pages
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits
as of December 31, 1996 and 1995 2
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 1996, 1995 and 1994 3
Notes to Financial Statements 4-13
SUPPLEMENTAL SCHEDULES:
IRS Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes
as of December 31, 1996 14
IRS Form 5500, Item 27d - Schedule of Reportable Transactions (Single and
Aggregate Transactions) for the Year Ended December 31, 1996 15-16
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, 1996 and 1995,
and the related statements of changes in net assets available for benefits for
each of the three years in the period ended December 31, 1996. 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,
1996 and 1995, and the changes in net assets available for benefits for each of
the three years in the period ended December 31, 1996 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 1996 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, SC
June 6, 1997
-1-
DENNY'S 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996 AND 1995
1996 1995
------------ ------------
ASSETS:
Investments $ 70,022,567 $ 71,663,128
------------ ------------
Receivables:
Employer's contribution -- 188,377
Participants' contributions 156,789 399,499
Accrued interest -- 72,360
Due from broker -- 42,000
------------ ------------
Total receivables 156,789 702,236
------------ ------------
Cash and cash equivalents -- 12,084,289
------------ ------------
TOTAL ASSETS 70,179,356 84,449,653
------------ ------------
LESS - ACCRUED LIABILITIES 145,446 54,016
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 70,033,910 $ 84,395,637
============ ============
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, 1996, 1995 AND 1994
1996 1995 1994
-------------- --------------- --------------
ADDITIONS:
INVESTMENT INCOME:
Net appreciation (depreciation)
in fair value of investments $ 2,038,290 $ (2,145,771) $ (1,792,198)
Interest income 2,078,221 3,960,887 4,118,730
Dividend income 21,196 3,353,607 591,098
-------------- --------------- --------------
Investment income, net 4,137,707 5,168,723 2,917,630
-------------- --------------- --------------
CONTRIBUTIONS:
Employer's --- 2,588,995 2,848,715
Participants' 5,840,702 7,073,490 7,375,619
-------------- --------------- --------------
Total contributions 5,840,702 9,662,485 10,224,334
-------------- --------------- --------------
TOTAL ADDITIONS 9,978,409 14,831,208 13,141,964
-------------- --------------- --------------
DEDUCTIONS:
DISTRIBUTIONS TO PARTICIPANTS (24,037,303) (17,837,071) (16,923,299)
ADMINISTRATIVE EXPENSES (302,833) (425,402) (296,728)
-------------- --------------- --------------
TOTAL DEDUCTIONS (24,340,136) (18,262,473) (17,220,027)
-------------- --------------- --------------
NET DECREASE (14,361,727) (3,431,265) (4,078,063)
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR 84,395,637 87,826,902 91,904,965
-------------- --------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 70,033,910 $ 84,395,637 $ 87,826,902
============== =============== ==============
See notes to financial statements.
-3-
DENNY'S 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS,
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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 provisions.
a. 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. (the "Company") and its 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 $2,272,465.
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 $248,941.
-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 $5,924,921.
b. Contributions - Each year, participants' pre-tax contributions are
limited to 15% of eligible compensation, or $9,500 in 1996, $9,240 in
1995, and $9,240 in 1994, 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 1996 the Company elected not to make contributions to the
Plan.
c. 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.
d. 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 percent vested after five years of credited service.
e. Investment Options - Prior to July 1, 1996, contributions to the Plan
could be invested in any combination of four funds chosen by the
participants: Employee Income Fund, Employee Dreyfus Equity Fund,
Employee Explorer Equity 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 Employee Income Fund consisted of insurance contracts
that provided fixed interest rates on the Fund investments. The Dreyfus
Equity Fund and Explorer Equity Fund are mutual equity 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
-5-
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.
As of July 1, 1996, participants may direct employee contributions in
one percent increments in any of eight investment options. (a) 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. (b) The American
Express Trust Equity Index Fund II is a collective trust fund which
invests primarily in common stock. (c) The Conservative Blend Fund is
a pooled fund which invests in the Flagstar Stable Value Fund, American
Express collective trust funds, and mutual funds. (d) The Moderate
Blend Fund is a pooled fund which invests in the Flagstar Stable Value
Fund, American Express collective trust funds, and mutual funds.
(e) The Aggressive Blend Fund is a pooled fund which invests in the
Flagstar Stable Value Fund, American Express collective trust funds,
and mutual funds. (f) The Small Company Equity Fund is a pooled fund
which invests in mutual funds. (g) The Templeton Foreign Fund is a
mutual fund which invests in companies outside of the United States.
(h) The Flagstar Stock Fund is a pooled fund which invests 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. Participants may change their investment
options daily.
f. 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.
g. Forfeited Accounts - At December 31, 1996, forfeited nonvested accounts
totaled $302,575. These accounts will be used to reduce future Company
contributions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Accounting - The financial statements of the Plan are prepared
under the accrual basis of accounting.
b. Investment Valuation and Income Recognition - The Plan's investments
are stated at fair value. Shares of registered mutual funds are valued
at the quoted market prices which represent the net asset value of
shares held by the Plan at year end. Shares of collective trust funds
are valued at market prices determined in good faith by the fund
manager. Investments in the pooled accounts 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
-6-
contracts and synthetic investment contracts which were held by the
Plan as of December 31, 1995 and transferred to the Flagstar Stable
Value Fund, 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. Participant notes receivable are
valued at cost which approximates fair value. Purchases and sales of
securities are recorded on a trade date basis. Dividends are recorded
on the ex-dividend date.
c. Administrative Expenses - Administrative expenses of the Plan are paid
by the Plan and allocated to participant accounts.
d. Payment of Benefits - Benefits are recorded when paid.
e. 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.
f. 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.
3. PLAN UNIT VALUATION
Effective July 1, 1996, the Plan became a participant in a pooled
investment trust agreement with American Express Trust Company together
with the Flagstar 401(k) Plan. The assets of the following investment
options are held in the pooled investment trust: Flagstar Stable Value
Fund, Conservative Blend Fund, Moderate Blend Fund, Small Company Equity
Fund, Flagstar Stock Fund and the Aggressive Blend 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, 1996 for
-7-
each investment fund are as follows:
Flagstar Conservative Moderate Small Flagstar Aggressive
Stable Value Blend Blend Company Stock Blend
Fund Fund Fund Equity Fund 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 --- 16,798 1,468,237 4,863,402 --- 357,115
American Express Trust Equity
Index Fund II --- 136,652 2,849,476 --- --- 277,226
IDS New Dimensions Fund --- --- 956,376 --- --- 279,139
Lazard Small Capital Fund --- 17,656 1,469,171 4,866,335 --- 357,340
Neuberger & Berman Focus Trust Fund --- --- 965,745 --- --- 281,873
Templeton Foreign Fund --- 105,996 3,920,033 --- --- 715,087
Flagstar Stable Value Fund --- 421,246 7,767,590 --- --- 566,785
Guaranteed Investment Contracts 71,131,343 --- --- --- --- ---
Flagstar Stock Fund --- --- --- --- 1,026,547 ---
-------------- ------------ ----------- ------------ ----------- -------------
Total Market Value $ 85,402,386 $ 698,348 $ 19,396,628 $ 9,729,737 $ 1,089,535 $ 2,834,565
============== ============ =========== ============ =========== ============
Units Outstanding, December 31, 1996 4,903,908 24,717 971,445 532,491 243,574 187,912
Net Asset Value Per Unit at:
December 31, 1996 $10.2 $10.5 $10.6 $10.7 $3.1 $10.8
September 30, 1996 10.1 10.1 10.2 10.4 6.4 10.3
July 1, 1996 (Initial Investment) 10.0 10.0 10.0 10.0 10.0 10.0
4. RELATED PARTY TRANSACTIONS
Certain plan investments held during the plan year and at plan year end are
shares of collective trust funds managed by American Express Trust Company
("American Express") or NationsBank. American Express and NationsBank each
served as trustee during the plan year as defined by the Plan and,
therefore, these transactions qualify as party-in-interest. 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 and $55,000 for
the years ended December 31, 1995 and 1994, respectively.
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.
-8-
6. NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS
The net appreciation (depreciation) including investments bought, sold, and
held, by type of security, during the years ended December 31, 1996, 1995,
and 1994 is summarized as follows:
1996 1995 1994
------------- ---------------- -----------------
Flagstar Companies, Inc. Common Stock $ 29,778 $ 696,047 $ (878,768)
Vanguard Explorer Equity Fund 514,246 (1,808,666) (189,114)
Dreyfus Equity Fund 659,440 (1,033,152) (724,316)
Flagstar Stable Value Fund 1,170,405 -- --
Aggressive Blend Fund 110,768 -- --
Moderate Blend Fund 548,871 -- --
Conservative Blend Fund 9,283 -- --
Flagstar Stock Fund (1,432,527) -- --
Small Company Equity Fund 360,114 -- --
Templeton Foreign Fund 9,197 -- --
American Express Trust Equity Index Fund II 58,715 -- --
-----------------------------------------------------
$ 2,038,290 $ (2,145,771) $ (1,792,198)
============= =============== ===============
7. 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.
-9-
8. INVESTMENTS
The following tables represent Plan investments as of December 31, 1996 and
1995:
1996
Fair
Description Value (2)
Pooled Funds:
Flagstar Stable Value Fund $ 49,952,140 (1)
Aggressive Blend Fund 2,031,332
Moderate Blend Fund 10,309,956 (1)
Conservative Blend Fund 260,069
Small Company Equity Blend Fund 5,705,700 (1)
Flagstar Stock Fund 758,734
-------------
Total 69,017,931
-------------
Collective Trust Funds:
American Express Trust Equity
Index Fund II 742,129
-------------
Mutual Funds:
Templeton Foreign Fund 262,507
-------------
TOTAL INVESTMENTS $ 70,022,567
=============
(1) Represents plan investments which exceeded 5% of net assets available for
benefits as of December 31, 1996.
(2) Fair value equals carrying value.
-10-
1995 1995
Description Carrying Value Fair Value
Flagstar Companies, Inc. Common Stock $ 1,616,425 $ 1,616,425
-------------- --------------
Mutual Funds:
Dreyfus Equity Fund 9,268,923* 9,268,923*
Vanguard Explorer Equity Fund 5,198,210* 5,198,210*
-------------- ---------------
Total 14,467,133 14,467,133
-------------- ---------------
Interest Fund:
Insurance Contracts:
John Hancock Mutual Life Ins. Co.
4.87% due 12/31/96 6,241,397* 6,087,409*
Allstate Life Ins. Co.
6.95% due 1/2/97 4,159,940 4,219,514
John Hancock Mutual Life Ins. Co.
5.35% due 12/31/97 8,582,813* 8,585,193*
Mutual Benefit Life
11.25% due 12/31/94 1,865,809 1,865,809
Metropolitan Life Ins. Co.
6.77% due 1/1/00 9,119,781* 9,694,921
SunAmerica Life Insurance
6.34% due 10/2/00 3,951,688 4,052,293
-------------- -------------
Total 33,921,428 34,505,139
-------------- -------------
Synthetic Insurance Contracts:
Amber Synthetic
5.50%
US Govt. and Agency Issuances 13,371,493 13,371,493
Asset Backed Securities 4,245,732 4,245,732
Corporate Bonds 1,200,400 1,200,400
Cash and Cash Equivalents 2,737,436 2,737,436
Wrapper Contract 103,081 249,632
-------------- --------------
Total 21,658,142* 21,804,693
-------------- --------------
TOTAL INVESTMENTS $ 71,663,128 $ 72,393,390
============== ==============
* Represents plan investments which exceeded 5% of net assets available for
benefits as of December 31, 1995.
-11-
9. FUND INFORMATION
Participant contributions, employer contributions, distributions to
participants and investment income/dividends by fund are as follow for the
years ended December 31, 1996, 1995, and 1994.
1996 1995 1994
PARTICIPANT CONTRIBUTIONS:
Flagstar Stable Value Fund $ 1,313,859 $ -- $ --
Aggressive Blend Fund 70,616 -- --
Moderate Blend Fund 606,224 -- --
Conservative Blend Fund 9,584 -- --
Flagstar Stock Fund 322,911 -- --
Small Company Equity Fund 375,875 -- --
Templeton Foreign Fund 7,120 -- --
American Express Trust Equity Index II 23,979 -- --
Interest Fund 1,641,457 3,916,630 4,219,749
Dreyfus Equity Fund 655,850 1,398,303 1,408,380
Vanguard Explorer Fund 419,831 849,906 795,678
Flagstar Companies, Inc. Common Stock 393,396 908,651 951,812
-------------- -------------- -------------
Total $ 5,840,702 $ 7,073,490 $ 7,375,619
============== ============== =============
EMPLOYER CONTRIBUTIONS:
Interest Fund $ -- $ 1,474,583 $ 1,728,563
Dreyfus Equity Fund -- 498,950 495,829
Vanguard Explorer Fund -- 291,872 260,323
Flagstar Companies, Inc. Common Stock -- 323,590 364,000
-------------- -------------- -------------
Total $ -- $ 2,588,995 $ 2,848,715
============== ============== =============
DISTRIBUTIONS TO PARTICIPANTS:
Flagstar Stable Value Fund $ 5,749,424 $ -- $ --
Aggressive Blend Fund 40,262 -- --
Moderate Blend Fund 884,465 -- --
Conservative Blend Fund 47,535 -- --
Flagstar Stock Fund 125,701 -- --
Small Company Equity Fund 507,830 -- --
Templeton Foreign Fund 23,558 -- --
American Express Trust Equity Index II 52,966 -- --
Interest Fund 2,929,498 14,124,263 13,618,549
Dreyfus Equity Fund 1,990,906 1,996,036 1,650,613
Vanguard Explorer Fund 1,260,088 1,148,212 905,970
Flagstar Companies, Inc. Common Stock 425,070 568,560 748,167
-------------- -------------- -------------
Total $ 14,037,303 $ 17,837,071 $ 16,923,299
============== ============== =============
INVESTMENT INCOME/DIVIDENDS:
Flagstar Stable Value Fund $ 234,326 $ -- $ --
Moderate Blend Fund 22,174 -- --
Flagstar Stock Fund 6,736 -- --
Small Company Equity Fund 3,800 -- --
Templeton Foreign Fund 6,172 -- --
Interest Fund 1,077,948 3,956,720 4,125,760
Dreyfus Equity Fund 424,642 2,923,676 367,043
Vanguard Explorer Fund 322,095 429,931 213,593
Flagstar Companies, Inc. Common Stock 1,524 4,167 3,432
-------------- -------------- -------------
Total $ 2,099,417 $ 7,314,494 $ 4,709,828
============== ============= =============
-12-
10. SUBSEQUENT EVENT
FCI FINANCIAL RESTRUCTURING (UNAUDITED) -- On March 17, 1997, Flagstar
Companies, Inc. ("FCI"), parent company of the plan sponsor, reached an
agreement in principle on the terms of a financial restructuring plan with
an ad hoc committee representing holders of both its 11.375% Senior
Subordinated Debentures due 2003 and 11.25% Senior Subordinated Debentures
due 2004. In conjunction with such plan, FCI has decided to pursue a
restructuring of its debt and preferred stock through "prepackaged"
bankruptcy filings to be made under Chapter 11 of the Bankruptcy Code by
FCI and its wholly-owned subsidiary, Flagstar Corporation ("Flagstar"),
FCI's operating subsidiaries would not be a party to any such filings under
the Bankruptcy Code.
In addition, on March 6, 1997, FCI's Credit Agreement was amended to
provide for less restrictive financial covenants for measurement periods
ending on April 2, 1997 and July 2, 1997, as well as to provide FCI
flexibility to forego scheduled interest payments due in March, May and
June 1997 under the 10 3/4% Senior Notes, the 10 7/8% Senior Notes, the
11 3/8% Senior Subordinated Debentures, the 11.25% Senior Subordinated
Debentures, and the 10% Junior Subordinated Debentures without triggering a
default under the agreement, unless any such debt is declared to be due and
payable as a result of the failure to pay any such interest.
On March 17, 1997, Flagstar elected not to make the $7.1 million interest
payment due and payable as of that date to holders of its 11 3/8% Senior
Subordinated Debentures. In addition, on May 1, 1997, Flagstar elected not
to make the $40.6 million and $5.0 million interest payments due and
payable as of that date to holders of its 11.25% Senior Subordinated
Debentures and its 10% Convertible Junior Subordinated Debentures,
respectively. As a result of these nonpayments, and as a result of a
continuation of such nonpayments for 30 days following their respective
due dates, Flagstar is in default under the indentures governing such
debentures, and the holders of 25% of such debentures or the trustees
therefor may declare such debt to be due and payable. If such debt is
declared to be due and payable this will create an event of default
relative to the 10 3/4 % Senior Notes due 2001 and the 10 7/8% Senior Notes
due 2002, entitling 30% of the holders of such indebtedness or the trustee
therefor to declare such indebtedness also to be due and payable.
FLAGSTAR STOCK FUND -- On March 18, 1997, the Flagstar Retirement Committee
directed the Flagstar Retirement and Savings Department to immediately
discontinue investments in The Flagstar Stock Fund. They additionally
directed that when sufficient time had passed to allow the public to
understand the restructuring plan, the Flagstar stock should be liquidated.
In March and April of 1997, all Flagstar stock held by the Plan was
liquidated. Participants could elect to keep their proceeds in the Flagstar
Stock Fund which now invests in money market funds or transfer the proceeds
into another investment option.
-13-
DENNY'S 401(K) PLAN
IRS FORM 5500, ITEM 27a - SCHEDULE OF ASSETS HELD FOR
INVESTMENT PURPOSES AS OF DECEMBER 31, 1996
Shares, Units Current
Description or Par Value Cost Value
Pooled Funds:
Flagstar Stable Value Fund 4,903,908 $ 49,043,199 $ 49,952,140
Aggressive Blend Fund 187,912 1,922,209 2,031,332
Moderate Blend Fund 971,446 9,747,494 10,309,956
Conservative Blend Fund 24,717 251,217 260,069
Small Company Equity Blend Fund 532,584 5,338,953 5,705,700
*Flagstar Stock Fund 243,574 2,128,363 758,734
------------- --------------
Total 68,431,435 69,017,931
------------- --------------
Collective Trust Funds:
*American Express Trust Equity
Index Fund II 38,048 690,400 742,129
------------- --------------
Mutual Funds:
Templeton Foreign Fund 25,338 253,633 262,507
------------- --------------
TOTAL INVESTMENTS $ 69,375,468 $ 70,022,567
============= ==============
* Denotes party-in-interest
-14-
DENNY'S 401(k) PLAN
IRS FORM 5500
ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996
5% REPORT BY ASSET-AGGREGATE
1/1/96 THROUGH 12/31/96
b) Description of Asset h) Current Value
(include Interest Rate of Asset on
and Maturity in Case c) Purchase d) Selling g) Cost of Transaction i) Net Gain
of Loan) Price Price Asset Date or (Loss)
....................................... ........... ........... .......... .............. ............
Dreyfus Fund Inc.
10 Sales 10,797,953 11,560,816 10,138,514 659,439
8 Purchases 891,041 891,041 891,041 0
Nations Cash Reserves Capital Class
35 Sales 27,176,804 27,176,804 27,176,804 0
14 Purchases 15,462,515 15,462,515 15,462,515 0
Nations Treasury Reserves Capital Class
11 Sales 8,365,781 8,365,781 8,365,781 0
1 Purchases 8,365,781 8,365,781 8,365,781 0
Vanguard Explorer Fund
8 Sales 6,404,362 5,084,382 5,890,116 514,246
6 Purchases 723,475 723,475 723,475 0
Flagstar Stable Value Fund
83 Sales 8,729,098 8,647,769 8,647,769 81,329
21 Purchases 2,621,252 2,621,252 2,621,252 0
Flagstar Moderate Blend Fund
53 Sales 927,123 906,081 906,081 21,042
50 Purchases 10,582,521 10,582,521 10,582,521 0
Flagstar Small Company Equity Fund
53 Sales 703,798 682,176 682,176 21,622
45 Purchases 6,021,129 6,021,129 6,021,129 0
-15-
DENNY'S 401(k) PLAN
IRS FORM 5500
ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996
5% REPORT BY ASSET-SINGLE TRANSACTIONS
1/1/96 THROUGH 12/31/96
b) Description of Asset h) Current Value
(include Interest Rate Description of Asset on
and Maturity in Case of c) Purchase d) Selling g) Cost of Transaction i) Net Gain
of Loan Transaction Date Price Price Asset Date or (Loss)
....................................................................................................................... ..........
Dreyfus Fund Sale 6/27/96 6,180,633 6,577,959 5,774,963 405,670
Nations Cash Reserves Capital Class Sale 1/31/96 8,857,848 8,857,848 8,857,848 -
Purchase 6/30/96 5,503,492 5,503,492 5,503,492 -
Purchase 6/30/96 9,291,792 9,291,792 9,291,792 -
Sale 7/31/96 9,297,512 9,297,512 9,297,512 -
Sale 7/31/96 5,511,691 5,511,691 5,511,691 -
Nations Treasury Reserves Capital Class Purchase 1/2/96 8,365,781 8,365,781 8,365,781 -
Vanguard Explorer Fund Sale 6/27/96 5,382,035 4,256,695 4,922,257 459,778
Moderate Blend Fund Purchase 7/3/96 9,297,512 9,297,512 9,297,512 -
Small Company Equity Blend Fund Purchase 7/3/96 5,511,691 5,511,691 5,511,691 -
-16-