UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) [ X ] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 1999 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ___________ to __________ Commission file number 0-18051 ADVANTICA RESTAURANT GROUP, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3487402 - ---------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 203 East Main Street Spartanburg, South Carolina 29319-9966 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (864) 597-8000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X] No [ ] As of May 14, 1999, 40,025,207 shares of the registrant's Common Stock, par value $0.01 per share, were outstanding. 1
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Advantica Restaurant Group, Inc Statements of Consolidated Operations (Unaudited) <TABLE> <CAPTION> SUCCESSOR COMPANY PREDECESSOR COMPANY Quarter Twelve Weeks One Week Ended Ended Ended March 31, 1999 April 1, 1998 January 7, 1998 -------------- ------------- --------------- <S> <C> <C> <C> (In thousands, except per share amounts) Revenue: Company restaurant sales $ 398,831 $ 371,747 $ 31,986 Franchise and licensing revenue 17,804 13,996 1,629 ----------- ----------- ----------- Total operating revenue 416,635 385,743 33,615 ----------- ----------- ----------- Cost of company restaurant sales: Product costs 109,632 98,700 8,638 Payroll and benefits 148,501 136,422 12,577 Occupancy 21,831 22,137 1,155 Other operating expenses 68,867 63,697 5,248 ----------- ----------- ----------- Total costs of company restaurant sales 348,831 320,956 27,618 Franchise restaurant costs 10,025 6,660 983 General and administrative expenses 23,025 17,139 2,323 Amortization of reorganization value in excess of amounts allocable to identifiable assets 34,734 34,272 -- Depreciation and other amortization 34,783 24,397 1,684 Gains on refranchising and other, net (3,174) (3,118) (7,653) ----------- ----------- ----------- Total operating costs and expenses 448,224 400,306 24,955 ----------- ----------- ----------- Operating (loss) income (31,589) (14,563) 8,660 ----------- ----------- ----------- Other expenses: Interest expense, net (contractual interest for the one week ended January 7, 1998 is $4,795) 29,276 26,668 2,669 Other nonoperating expenses (income), net 1,155 975 (313) ----------- ----------- ----------- Total other expenses, net 30,431 27,643 2,356 ----------- ----------- ----------- (Loss) income before reorganization items and taxes (62,020) (42,206) 6,304 Reorganization items -- -- (714,207) ----------- ----------- ----------- (Loss) income before taxes (62,020) (42,206) 720,511 (Benefit from) provision for income taxes (340) 619 (13,829) ----------- ----------- ----------- (Loss) income from continuing operations (61,680) (42,825) 734,340 Discontinued operations: Reorganization items of discontinued operations, net of income tax provision of $7,509 -- -- 48,887 Loss from operations of discontinued operations, net of applicable income tax benefit of: 1998 -- $0 -- (255) (1,154) ----------- ----------- ----------- (Loss) income before extraordinary items (61,680) (43,080) 782,073 Extraordinary items -- -- (612,845) ----------- ----------- ----------- Net (loss) income (61,680) (43,080) 1,394,918 Dividends on preferred stock -- -- (273) ----------- ----------- ----------- Net (loss) income applicable to common shareholders $ (61,680) $ (43,080) $ 1,394,645 =========== =========== =========== </TABLE> See accompanying notes 2
Advantica Restaurant Group, Inc Statements of Consolidated Operations (Unaudited) <TABLE> <CAPTION> SUCCESSOR COMPANY PREDECESSOR COMPANY Quarter Twelve Weeks One Week Ended Ended Ended March 31, 1999 April 1, 1998 January 7, 1998 -------------- ------------- --------------- <S> <C> <C> <C> (In thousands, except per share amounts) Per share amounts applicable to common shareholders: Basic earnings per share: (Loss) income from continuing operations $ (1.54) $ (1.07) $ 17.30 (Loss) income from discontinued operations, net -- (.01) 1.13 --------- ---------- ---------- (Loss) income before extraordinary items (1.54) (1.08) 18.43 Extraordinary items -- -- 14.44 --------- ---------- ---------- Net (loss) income $ (1.54) $ (1.08) $ 32.87 ========= ========== ========== Average outstanding shares 40,020 40,000 42,434 ========= ========== ========== Diluted earnings per share: (Loss) income from continuing operations $ (1.54) $ (1.07) $ 13.32 (Loss) income from discontinued operations, net -- (.01) 0.87 --------- ---------- ---------- (Loss) income before extraordinary items (1.54) (1.08) 14.19 Extraordinary items -- -- 11.11 --------- ---------- ---------- Net (loss) income $ (1.54) $ (1.08) $ 25.30 ========= ========== ========== Average outstanding shares and equivalent common shares, unless antidilutive 40,020 40,000 55,132 ========= ========== ========== </TABLE> See accompanying notes 3
Advantica Restaurant Group, Inc. Consolidated Balance Sheets (Unaudited) <TABLE> <CAPTION> March 31, 1999 December 30, 1998 -------------- ----------------- <S> <C> <C> (In thousands) Assets Current Assets: Cash and cash equivalents $ 146,914 $ 224,768 Receivables, less allowance for doubtful accounts of: 1999 --$4,220; 1998 -- $4,316 19,749 18,461 Inventories 16,685 17,239 Other 16,309 15,860 Restricted investments securing in-substance defeased debt 19,025 19,025 ---------- ---------- 218,682 295,353 ---------- ---------- Property 841,988 817,234 Less accumulated depreciation 152,675 123,921 ---------- ---------- 689,313 693,313 ---------- ---------- Other Assets: Reorganization value in excess of amounts allocable to identifiable assets, net of accumulated amortization of: 1999 -- $174,533; 1998 -- $139,799 523,879 558,961 Other intangible assets, net of accumulated amortization of: 1999 -- $17,287; 1998 -- $14,202 225,220 217,587 Deferred financing costs, net 22,612 24,913 Other 36,561 39,360 Restricted investments securing in-substance defeased debt 158,802 156,721 ---------- ---------- $1,875,069 $1,986,208 ========== ========== Liabilities Current Liabilities: Current maturities of notes and debentures $ 24,801 $ 17,835 Current maturities of capital lease obligations 17,455 17,654 Current maturities of in-substance defeased debt 12,183 12,183 Accounts payable 100,206 102,405 Accrued salaries and vacations 44,369 51,234 Accrued insurance 29,132 32,698 Accrued taxes 18,140 20,235 Accrued interest 28,264 44,837 Other 91,330 92,384 ---------- ---------- 365,880 391,465 ---------- ---------- Long-Term Liabilities: Notes and debentures, less current maturities 889,007 912,699 Capital lease obligations, less current maturities 82,305 76,740 In-substance defeased debt, less current maturities 164,576 166,579 Deferred income taxes 4,694 5,400 Liability for self-insured claims 43,215 44,442 Other noncurrent liabilities and deferred credits 151,028 152,839 ---------- ---------- 1,334,825 1,358,699 ---------- ---------- Total liabilities 1,700,705 1,750,164 ---------- ---------- Shareholders' Equity 174,364 236,044 ---------- ---------- $1,875,069 $1,986,208 ========== ========== </TABLE> See accompanying notes 4
Advantica Restaurant Group, Inc. Statements of Consolidated Cash Flows (Unaudited) <TABLE> <CAPTION> SUCCESSOR COMPANY PREDECESSOR COMPANY Quarter Twelve Weeks One Week Ended Ended Ended March 31, 1999 April 1, 1998 January 7, 1998 -------------- ------------- --------------- <S> <C> <C> <C> (In thousands) Cash Flows from Operating Activities: Net (loss) income $ (61,680) $ (43,080) $ 1,394,918 Adjustments to reconcile net loss to cash flows from operating activities: Amortization of reorganization value in excess of amounts allocable to identifiable assets 34,734 34,272 -- Depreciation and other amortization 34,783 24,397 1,684 Amortization of deferred gains (2,844) (3,146) (218) Amortization of deferred financing costs 1,913 1,336 111 Deferred income tax benefit (750) (278) (13,856) Gains on refranchising and other, net (3,174) (3,118) (7,653) Equity in (income) loss from discontinued operations, net -- 255 (47,733) Amortization of debt premium (3,739) -- -- Noncash reorganization items -- -- (714,550) Extraordinary items -- -- (612,845) Other (48) (1,965) (333) Changes in Assets and Liabilities Net of Effects of Acquisition and Dispositions: Decrease (increase) in assets: Receivables (38) 12,055 (2,054) Inventories 417 (401) 237 Other current assets (1,135) (3,853) 2,457 Assets held for sale -- (9,656) 1,488 Other assets (774) 23,065 (1,049) Increase (decrease) in liabilities: Accounts payable (2,199) (12,311) (5,534) Accrued salaries and vacations (6,864) (14,732) 6,199 Accrued taxes (2,103) (4,250) (894) Other accrued liabilities (23,779) 3,904 9,562 Other noncurrent liabilities and deferred credits (124) 2,295 (1,302) ----------- ---------- ---------- Net cash flows (used in) from operating activities (37,749) 4,789 8,635 ----------- ---------- ---------- Cash Flows from Investing Activities: Purchase of property (12,698) (8,085) (1) Acquisition of restaurant units (10,853) -- -- Proceeds from disposition of property 3,016 -- 7,255 (Advances to) receipts from discontinued operations, net -- (1,107) 647 Proceeds from sale of discontinued operation, net -- 379,457 -- Purchase of investments securing in-substance defeased debt -- (201,713) -- Other long-term assets, net -- (1,611) -- ----------- ---------- ---------- Net cash flows (used in) provided by investing activities (20,535) 166,941 7,901 ----------- ---------- ---------- </TABLE> See accompanying notes 5
Advantica Restaurant Group, Inc. Statements of Consolidated Cash Flows (Unaudited) <TABLE> <CAPTION> SUCCESSOR COMPANY PREDECESSOR COMPANY Quarter Twelve Weeks One Week Ended Ended Ended March 31, 1999 April 1, 1998 January 7, 1998 -------------- ------------- ---------------- <S> <C> <C> <C> (In thousands) Cash Flows from Financing Activities: Net borrowings under credit agreements $ 7,200 $ -- $ -- Long-term debt payments (26,420) (2,221) (6,891) Deferred financing costs -- -- (4,971) Debt transaction costs (350) -- -- ----------- ----------- ---------- Net cash flows used in financing activities (19,570) (2,221) (11,862) ----------- ----------- ---------- Increase (decrease) in cash and cash equivalents (77,854) 169,509 4,674 Cash and Cash Equivalents at: Beginning of period 224,768 58,753 54,079 ----------- ----------- ---------- End of period $ 146,914 $ 228,262 $ 58,753 =========== =========== ========== </TABLE> See accompanying notes 6
ADVANTICA RESTAURANT GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1999 (UNAUDITED) Note 1. GENERAL Advantica Restaurant Group, Inc. ("Advantica" or, together with its subsidiaries including precedessors, the "Company"), through its wholly-owned subsidiaries, Denny's Holdings, Inc. and FRD Acquisition Co. ("FRD") (and their respective subsidiaries), owns and operates the Denny's, Coco's, Carrows, and El Pollo Loco restaurant brands. On April 1, 1998, the Company consummated the sale of Flagstar Enterprises, Inc. ("FEI"), the wholly-owned subsidiary which had operated Hardee's restaurants under licenses from Hardee's Food Systems. In addition, on June 10, 1998, the Company consummated the sale of Quincy's Restaurants, Inc. ("Quincy's"), the wholly-owned subsidiary which had operated the Company's Quincy's Family Steakhouse restaurants. The Statements of Consolidated Operations and Cash Flows presented herein have been reclassified for the twelve weeks ended April 1, 1998 and the one week ended January 7, 1998 to reflect FEI and Quincy's as discontinued operations in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." On January 7, 1998 (the "Effective Date"), Flagstar Companies, Inc. ("FCI") and Flagstar Corporation ("Flagstar") emerged from proceedings under Chapter 11 of Title 11 of the United States Code pursuant to FCI's and Flagstar's Amended Joint Plan of Reorganization dated as of November 7, 1997 (the "Plan"). On the Effective Date, Flagstar, a wholly-owned subsidiary of FCI, merged with and into FCI, the surviving corporation, and FCI changed its name to Advantica Restaurant Group, Inc. FCI's operating subsidiaries, Denny's Holdings, Inc. and FRD (and their respective subsidiaries), did not file bankruptcy petitions and were not parties to the above mentioned Chapter 11 proceedings. The consolidated financial statements of Advantica and its subsidiaries included herein are unaudited and include all adjustments management believes are necessary for a fair presentation of the results of operations for such interim periods. All such adjustments are of a normal and recurring nature. The interim consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto for the year ended December 30, 1998 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Advantica Restaurant Group, Inc. 1998 Annual Report on Form 10-K. The results of operations for the quarter ended March 31, 1999 are not necessarily indicative of the results for the entire fiscal year ending December 29, 1999. Certain prior year amounts have been reclassified to conform to the current year presentation. Note 2. FRESH START REPORTING As of the Effective Date of the Plan, Advantica adopted fresh start reporting pursuant to the guidance provided by the American Institute of Certified Public Accountants' Statement of Position 90-7, "Financial Reporting By Entities In Reorganization Under the Bankruptcy Code" ("SOP 90-7"). Fresh start reporting assumes that a new reporting entity has been created and requires assets and liabilities to be adjusted to their fair values as of the Effective Date in conformity with the procedures specified by Accounting Principles Board Opinion No. 16, "Business Combinations." In conjunction with the revaluation of assets and liabilities, a reorganization value for the Company was determined which generally approximated the fair value of the Company before considering debt and approximated the amount a buyer would pay for the assets of the Company after reorganization. Under fresh start reporting, the reorganization value of the Company was allocated to the Company's assets and the portion of the reorganization value which was not attributable to specific tangible or identified intangible assets of the Company has been reported as "reorganization value in excess of amounts allocable to identifiable assets, net of accumulated amortization" in the accompanying Consolidated Balance Sheets. Advantica is amortizing such amount over a five-year period. All financial statements for any period subsequent to the Effective Date are referred to as 7
"Successor Company" statements, as they reflect the periods subsequent to the implementation of fresh start reporting and are not comparable to the financial statements for periods prior to the Effective Date. The results of operations in the accompanying Statement of Operations for the week ended January 7, 1998 reflect the results of operations prior to Advantica's emergence from bankruptcy and the effects of fresh start reporting adjustments. In this regard, the Statement of Operations reflects an extraordinary gain on the discharge of certain debt as well as reorganization items consisting primarily of gains and losses related to the adjustments of assets and liabilities to fair value. Subsequent to the first quarter of 1998, the Company substantially completed valuation studies performed in connection with the revaluation of its assets and liabilities in accordance with fresh start reporting. Note 3. ACQUISITION In March 1999, Denny's, Inc. ("Denny's"), a wholly-owned subsidiary of the Company, purchased 30 operating restaurants in western New York from Perk Development Corp., a former franchisee of Perkins Family Restaurants, L.P. The acquisition of the units has been accounted for under the purchase method of accounting. The purchase price of approximately $24.7 million, consisting of cash of approximately $10.9 million and capital leases and other liabilities assumed of approximately $13.8 million, exceeded the estimated fair value of the restaurants' identifiable assets by approximately $9.5 million. Denny's took possession of the restaurants on March 1, 1999. By March 8, 1999, 26 units were opened as Company-owned restaurants and one unit was reopened as a refranchised restaurant. The remaining units remained closed and are being evaluated for ultimate reopening or disposition. Note 4. REPURCHASE OF SENIOR NOTES In March 1999, the Company repurchased $20 million aggregate principal amount of its 11 1/4% Senior Notes due 2008 (the "Senior Notes") for approximately $20.8 million, including approximately $469,000 of accrued interest. The repurchase of the notes resulted in an immaterial gain. Note 5. NEW FRI-M CREDIT FACILITY On May 14, 1999, FRI-M Corporation ("FRI-M"), a wholly-owned subsidiary of FRD, and certain of its operating subsidiaries entered into a new credit agreement with The Chase Manhattan Bank ("Chase") and Credit Lyonnais New York Branch ("Credit Lyonnais") and other lenders named therein and thereby established a $70 million Senior Secured Credit Facility (the "New FRI-M Credit Facility") to replace the bank facility previously in effect for the Company's Coco's and Carrows operations (the "FRI-M Credit Facility") which was scheduled to mature in August 1999. The New FRI-M Credit Facility, which is guaranteed by Advantica, consists of a $30 million term loan and a $40 million revolving credit facility and matures in May 2003. Note 6. COMPREHENSIVE INCOME The Company's comprehensive income for the quarter ended March 31, 1999, the twelve weeks ended April 1, 1998, and the one week ended January 7, 1998 is as follows: <TABLE> <CAPTION> SUCCESSOR COMPANY PREDECESSOR COMPANY Quarter Twelve Weeks One Week Ended Ended Ended March 31, 1999 April 1, 1998 January 7, 1998 -------------- ------------- --------------- <S> <C> <C> <C> (In thousands) Net (loss) income, excluding adjustments for reorganization and fresh start reporting $ (61,680) $ (43,080) $ (3,087) Other comprehensive income: Foreign currency translation adjustment (9) -- -- ---------- ----------- ---------- Comprehensive income $ (61,689) $ (43,080) $ (3,087) ========== =========== ========== </TABLE> 8
Note 7. EARNINGS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS The following table sets forth the computation of basic and diluted loss per share: <TABLE> <CAPTION> SUCCESSOR COMPANY PREDECESSOR COMPANY Quarter Twelve Weeks One Week Ended Ended Ended March 31, 1999 April 1, 1998 January 7, 1998 -------------- ------------- --------------- <S> <C> <C> <C> (In thousands, except per share amounts) Numerator: (Loss) income from continuing operations $ (61,680) $ (42,825) $ 734,340 Preferred stock dividends -- -- (273) ----------- ------------ ---------- Numerator for basic (loss) earnings per share -- (loss) income from continuing operations available to common shareholders (61,680) (42,825) 734,067 ----------- ------------ ---------- Effect of dilutive securities: $2.25 Series A Cumulative Convertible Exchangeable Preferred Stock -- -- 273 10% Convertible Junior Subordinated Debentures -- -- -- ----------- ------------ ---------- -- -- 273 ----------- ------------ ---------- Numerator for diluted (loss) earnings per share -- (loss) income from continuing operations available to common shareholders after assumed conversions $ (61,680) $ (42,825) $ 734,340 =========== ============ ========== Denominator: Denominator for basic earnings per share -- weighted average shares 40,020 40,000 42,434 ----------- ------------ ---------- Effect of dilutive securities: $2.25 Series A Cumulative Convertible Exchangeable Preferred Stock -- -- 8,562 10% Convertible Junior Subordinated Debentures -- -- 4,136 ----------- ------------ ---------- Dilutive potential common shares -- -- 12,698 ----------- ------------ ---------- Denominator for diluted (loss) earnings per share -- adjusted weighted average shares and assumed conversions 40,020 40,000 55,132 =========== ============ ========== Basic (loss) earnings per share from continuing operations $ (1.54) $ (1.07) $ 17.30 =========== ============ ========== Diluted (loss) earnings per share from continuing operations $ (1.54) $ (1.07) $ 13.32 =========== ============ ========== </TABLE> The calculations of basic and diluted loss per share have been based on the weighted average number of Company shares outstanding. Because of the loss from continuing operations for the twelve weeks ended April 1, 1998 and the quarter ended March 31, 1999, warrants and options of the Successor Company have been omitted from the calculation of weighted average dilutive shares for those periods. 9
Note 8. SEGMENT INFORMATION The Company operates four restaurant concepts -- Denny's, Coco's, Carrows and El Pollo Loco -- and each concept is considered a reportable segment. The "Corporate and other" segment consists primarily of corporate operations. Advantica evaluates performance based on several factors, of which the primary financial measure is business segment operating income before interest, taxes, depreciation, amortization and charges for (recoveries of) restructuring and impairment ("EBITDA as defined"). <TABLE> <CAPTION> Quarter Twelve Weeks One Week Ended Ended Ended March 31, 1999 April 1, 1998 January 7, 1998 -------------- ------------- --------------- <S> <C> <C> <C> (In millions) REVENUE Denny's $ 288.5 $ 254.2 $ 23.2 Coco's 54.8 60.5 4.9 Carrows 40.2 42.9 3.5 El Pollo Loco 32.4 28.1 2.0 Corporate and other 0.7 -- -- -------- -------- -------- Total consolidated revenue $ 416.6 $ 385.7 $ 33.6 ======== ======== ======== EBITDA AS DEFINED Denny's $ 35.6 $ 33.2 $ 11.1 Coco's 5.5 7.4 0.8 Carrows 2.5 4.4 -- El Pollo Loco 4.2 5.1 (0.1) Corporate and other (9.9) (6.0) (1.5) -------- -------- -------- Total consolidated EBITDA as defined 37.9 44.1 10.3 Depreciation and amortization expense (69.5) (58.7) (1.7) Other charges: Interest expense, net (29.3) (26.6) (2.6) Other - net (1.1) (1.0) 0.3 Reorganization items -- -- 714.2 -------- ------- -------- Consolidated (loss) income from continuing operations before income taxes and extraordinary items $ (62.0) $ (42.2) $ 720.5 ======== ======== ======== </TABLE> ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is intended to highlight significant changes in financial position as of March 31, 1999 and the results of operations for the quarter ended March 31, 1999 as compared to the twelve weeks ended April 1, 1998 and one week ended January 7, 1998. For purposes of providing a meaningful comparison of the Company's quarterly operating performance, the following discussion and presentation of the results of operations for the twelve weeks ended April 1, 1998 and the one week ended January 7, 1998 will be combined and referred to as the quarter ended April 1, 1998. Where appropriate, the impact of the adoption of fresh start reporting on the results of operations during this period will be separately disclosed. The forward-looking statements included in Management's Discussion and Analysis of Financial Condition and Results of Operations, which reflect management's best judgment based on factors currently known, involve risks, uncertainties, and other factors which may cause the actual performance of Advantica and its subsidiaries, and underlying concepts to be 10
materially different from the performance indicated or implied by such statements. Such factors include, among others: competitive pressures from within the restaurant industry; the level of success of the Company's operating initiatives and advertising and promotional efforts, including the initiatives and efforts specifically mentioned herein; the ability of the Company to mitigate the impact of the Year 2000 issue successfully; adverse publicity; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy, particularly at the retail level; and other factors included in the discussion below, or in the Management's Discussion and Analysis of Financial Condition and Result of Operations and in Exhibit 99 to the Company's Annual Report on Form 10-K for the period ended December 30, 1998. RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED APRIL 1, 1998 The Company's CONSOLIDATED REVENUE for the first quarter of 1999 decreased $2.7 million (0.6%) compared with the 1998 comparable quarter. Company restaurant sales decreased $4.9 million primarily due to a net decrease in Company-owned restaurants, partially offset by higher sales in Denny's and El Pollo Loco ("EPL"). Franchisee and licensing revenue increased $2.2 million, primarily attributable to a 118-unit increase in franchised and licensed units. Denny's reported revenue increases, reflecting positive same-store sales growth and increased franchise revenue in the quarter. EPL also reported growth in revenue due to the addition of both Company-owned and franchised units and same-store sales growth. The revenue growth at Denny's and EPL was offset, however, by lower revenue at Coco's and Carrows, where fewer Company-owned units and lower same-store sales resulted in 16.2% and 13.4% declines in revenue, respectively. CONSOLIDATED OPERATING EXPENSES for the first quarter of 1999 increased $23.0 million (5.4%) compared to the 1998 comparable quarter. Excluding the impact of a $7.6 million decrease in refranchising and real estate transaction gains, operating expenses increased $15.4 million. This increase includes an $8.7 million increase in depreciation and other amortization over the prior year quarter relating to the revaluation of assets and liabilities in accordance with fresh start reporting. The revaluation was completed subsequent to the first quarter of 1998 and resulted in an increase in depreciation and other amortization expense being recorded in subsequent quarters. Product costs increased $2.3 million primarily due to increased sales volumes at Denny's and EPL coupled with slightly higher food costs related to promotions implemented during the quarter. The increase in product costs is offset by the effect of a net decrease of 49 Company-owned restaurants. General and administrative expenses increased $3.6 million, primarily reflecting increased costs related to the Company's Year 2000 remediation efforts and increased transition costs related to the reopening of the acquired Perkins units in the current year quarter. The comparability of general and administrative expenses is also affected by the recognition of a $1.4 million insurance recovery in the prior year quarter. EBITDA AS DEFINED, which is defined by the Company as operating income before depreciation, amortization and charges for restructuring and impairment, is a key internal measure used to evaluate the amount of cash flow available for debt repayment and funding of additional investments. EBITDA as defined is not a measure defined by generally accepted accounting principles and should not be considered as an alternative to net income or cash flow data prepared in accordance with generally accepted accounting principles, or as a measure of a company's profitability or liquidity. The Company's measure of EBITDA as defined may not be comparable to similarly titled measures reported by other companies. The Company's consolidated EBITDA as defined decreased $16.5 million (30.3%) in the first quarter of 1999 as compared to the 1998 comparable quarter. This decrease is a result of the factors noted in the preceding paragraphs, excluding the increase in depreciation and other amortization. CONSOLIDATED OPERATING INCOME for the first quarter of 1999 decreased $25.7 million compared to the 1998 comparable quarter as a result of the factors noted above. CONSOLIDATED INTEREST EXPENSE, NET, totaled $29.3 million during the first quarter of 1999, remaining flat compared to the first quarter of 1998. Excluding the impact of $3.5 million of interest expense allocated to discontinued operations for the 11
prior year quarter, interest expense, net, decreased $3.4 million. This decrease in interest expense, net, resulted from a $2.0 million increase in interest income over the prior year quarter from interest earned on the remaining cash proceeds from the sale of FEI and Quincy's and from the lower debt balances in the current year quarter. REORGANIZATION ITEMS recorded in the one week ended January 7, 1998 include professional fees and other expenditures incurred by the Company in conjunction with the reorganization as well as the impact of adjusting assets and liabilities to fair value in accordance with SOP 90-7 as discussed in Note 2 to the consolidated financial statements included herein. The PROVISION FOR (BENEFIT FROM) INCOME TAXES from continuing operations for the quarter ended March 31,1999 has been computed based on management's estimate of the annual effective income tax rate applied to loss before taxes. The Company recorded an income tax benefit reflecting an effective income tax rate of approximately 0.5% for the quarter ended March 31, 1999 compared to an income tax provision of approximately 1.5% for the twelve weeks ended April 1, 1998. The benefit from income taxes from continuing operations for the one-week period ended January 7, 1998 of approximately $13.8 million includes adjustments of approximately $12.5 million of various tax accruals. The remaining benefit of approximately $1.3 million relates to the tax effect of the revaluation of certain Company assets and liabilities in accordance with fresh start accounting. The EXTRAORDINARY ITEM recorded in the one week ended January 7, 1998 relates to the implementation of the Plan which resulted in the exchange of the Company's Senior Subordinated Debentures and 10% Convertible Debentures previously outstanding for 40 million shares of common stock of Advantica and warrants to purchase an additional 4 million shares of Advantica common stock. The difference between the carrying value of such debt (including principal, accrued interest and deferred financing costs) and the fair value of the common stock and warrants resulted in a gain on debt extinguishment of $612.8 million which was recorded as an extraordinary item. The Statements of Consolidated Operations and Cash Flows presented herein have been reclassified for the twelve weeks ended April 1, 1998 and the one week ended January 7, 1998 to reflect FEI and Quincy's as DISCONTINUED OPERATIONS in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." Revenue and operating income of the discontinued operations for the twelve weeks ended April 1, 1998 and the one week ended January 7, 1998 were $162.4 million and $6.6 million and $12.7 million and $0.1 million, respectively. NET LOSS was $61.7 million for the quarter ended March 31, 1999 compared to net income of $1.4 billion for the quarter ended April 1, 1998, primarily as a result of the adoption of fresh start reporting and the extraordinary gain recorded in the prior year quarter. 12
Restaurant Operations: The table below summarizes restaurant unit activity for the quarter ended March 31, 1999. <TABLE> <CAPTION> Ending Units Units Net Ending Ending Units Opened/ Sold/ Units Units Units 12/30/98 Acquired Closed Refranchised 3/31/99 4/1/98 -------- -------- ------ ------------ ------- ------ <S> <C> <C> <C> <C> <C> <C> Denny's Company-owned units 878 26 (4) (6) 894 877 Franchised units 825 16 (7) 6 840 763 Licensed units 18 -- -- -- 18 18 ------ ------ ------ ------ ------ ------ 1,721 42 (11) -- 1,752 1,658 Coco's Company-owned units 150 -- -- -- 150 176 Franchised units 31 2 -- -- 33 18 Licensed units 300 -- (2) -- 298 295 ------ ------ ------ ------ ------ ------ 481 2 (2) -- 481 489 Carrows Company-owned units 123 -- (1) -- 122 139 Franchised units 26 -- -- -- 26 16 ------ ------ ------ ------ ------ ------ 149 -- (1) -- 148 155 El Pollo Loco Company-owned units 100 1 -- 1 102 99 Franchised units 161 2 (1) (1) 161 148 Licensed units 4 -- -- -- 4 4 ------ ------ ------ ------ ------ ------ 265 3 (1) -- 267 251 ------ ------ ------ ------ ------ ------ 2,616 50 (18) -- 2,648 2,553 ====== ====== ====== ====== ====== ====== </TABLE> 13
DENNY'S <TABLE> <CAPTION> Quarter Ended % March 31, 1999 April 1, 1998 Increase/(Decrease) -------------- ------------- ------------------- <S> <C> <C> <C> ($ in millions, except average unit data) U.S. systemwide sales $ 491.2 $ 456.0 7.7 ========= =========== Net company sales $ 275.3 $ 265.7 3.6 Franchise and licensing revenue 13.2 11.7 12.8 --------- ----------- Total revenue 288.5 277.4 4.0 --------- ----------- Operating expenses: Amortization of reorganization value in excess of amounts allocable to identifiable assets 20.2 18.2 11.0 Other 275.1 249.6 10.2 --------- ----------- Total operating expenses 295.3 267.8 10.3 --------- ----------- Operating (loss) income $ (6.8) $ 9.6 NM ========= =========== EBITDA as defined $ 35.6 $ 44.3 (19.6) Average unit sales: Company-owned 313,800 302,900 3.6 Franchise 264,241 253,500 4.2 Same-store sales increase/(decrease) (Company-owned) 3.6% (2.9%) NM = Not Meaningful </TABLE> Denny's NET COMPANY SALES for the first quarter of 1999 increased $9.6 million (3.6%) compared to the prior year quarter. The increase reflects an increase in same-store sales which was driven primarily by a higher guest check average. The average guest check increased as a result of the menu mix gains from the successful promotion of higher-priced menu items. The increase in net company sales also reflects the additional sales from 26 of the Perkins restaurants acquired in March 1999. FRANCHISE AND LICENSING REVENUE increased $1.5 million (12.8%), primarily attributable to a net increase of 77 franchised units over the prior year quarter. Denny's OPERATING EXPENSES increased $27.5 million (10.3%) compared to the prior year quarter. Excluding the impact of a $7.5 million decrease in refranchising and real estate gains, operating expenses increased $20.0 million. This increase is primarily the result of increased sales volume, increased food costs and an increase in depreciation and other amortization. Higher food costs for the current year quarter resulted from a shift in the menu mix to higher cost items such as skillet dinners and from increased produce costs. Additionally, increased labor costs and general administrative expenses resulted from additional transition costs related to the reopening of the acquired Perkins restaurants. The increase in depreciation and other amortization relates to the revaluation of assets and liabilities in accordance with fresh start reporting. The revaluation was completed subsequent to the first quarter of 1998 and resulted in increased depreciation and other amortization being recorded in subsequent quarters. EBITDA AS DEFINED decreased $8.7 million (19.6%) in the first quarter of 1999 compared to the first quarter of 1998 as a result of the factors noted in the preceding paragraphs, excluding the increase in depreciation and other amortization. Denny's OPERATING INCOME for the 1999 quarter decreased $16.4 million compared to the prior year quarter as a result of the factors noted above. 14
COCO'S <TABLE> <CAPTION> Quarter Ended % March 31, 1999 April 1, 1998 Increase/(Decrease) -------------- ------------- ------------------- <S> <C> <C> <C> ($ in millions, except average unit data) U.S. systemwide sales $ 63.5 $ 69.9 (9.2) ============ ============ Net company sales $ 53.4 $ 64.3 (17.0) Franchise and licensing revenue 1.4 1.1 27.3 ------------ ------------ Total revenue 54.8 65.4 (16.2) ------------- ------------ Operating expenses: Amortization of reorganization value in excess of amounts allocable to identifiable assets 5.3 5.2 1.9 Other 54.0 61.0 (11.5) ------------ ----------- Total operating expenses 59.3 66.2 (10.4) ------------ ----------- Operating loss $ (4.5) $ (0.8) NM ============ =========== EBITDA as defined $ 5.5 $ 8.2 (32.9) Average unit sales: Company-owned 358,000 364,900 (1.9) Franchised 311,400 327,100 (4.8) Same-store sales decrease (Company-owned) (7.8%) (0.2%) NM = Not Meaningful </TABLE> Coco's NET COMPANY SALES for the first quarter of 1999 decreased $10.9 million (17.0%) compared to the prior year quarter. The decrease reflects a 26-unit decrease in Company-owned restaurants and a decrease in same-store sales. The decrease in same-store sales resulted primarily from a decline in customer traffic. FRANCHISE AND LICENSING REVENUE increased $0.3 million (27.3%) primarily attributable to a net increase of 15 franchised units over the prior year quarter. Coco's OPERATING EXPENSES decreased $6.9 million (10.4%) compared to the prior year quarter, primarily reflecting a 26-unit decrease in Company-owned restaurants. The decrease in operating expenses related to fewer units is partially offset by higher food costs resulting from value-priced promotions and changes in menu mix and by an increase in depreciation and other amortization relating to the revaluation of assets and liabilities in accordance with fresh start reporting. The revaluation was completed subsequent to the first quarter of 1998 and resulted in increased depreciation and other amortization being recorded in subsequent quarters. EBITDA AS DEFINED decreased $2.7 million (32.9%) in the first quarter of 1999 compared to the first quarter of 1998 as a result of the factors noted in the preceding paragraphs, excluding the increase in depreciation and other amortization. Coco'S OPERATING INCOME for the 1999 quarter decreased $3.7 million compared to the prior year quarter as a result of the factors noted above. 15
CARROWS <TABLE> <CAPTION> Quarter Ended % March 31, 1999 April 1, 1998 Increase/(Decrease) -------------- ------------- ------------------- <S> <C> <C> <C> ($ in millions, except average unit data) U.S. systemwide sales $ 46.4 $ 50.2 (7.6) ========== ============ Net company sales $ 39.6 $ 46.0 (13.9) Franchise and licensing revenue 0.6 0.4 50.0 ---------- ------------ Total revenue 40.2 46.4 (13.4) ---------- ------------ Operating expenses: Amortization of reorganization value in excess of amounts allocable to identifiable assets 4.5 4.1 9.8 Other 41.1 44.9 (8.5) ---------- ------------ Total operating expenses 45.6 49.0 (6.9) ---------- ------------ Operating loss $ (5.4) $ (2.6) NM ========== ============ EBITDA as defined $ 2.5 $ 4.4 (43.2) Average unit sales: Company-owned 327,200 327,900 (0.2) Franchise 263,400 284,200 (7.3) Same-store sales decrease (Company-owned) (3.6%) (1.4%) NM = Not Meaningful </TABLE> Carrows' NET COMPANY SALES for the first quarter of 1999 decreased $6.4 million (13.9%) compared to the prior year quarter. The decrease reflects a 17-unit decrease in Company-owned restaurants and a decrease in same-store sales. The decrease in same-store sales is primarily due to a decrease in average guest check, somewhat offset by increased customer traffic. FRANCHISE AND LICENSING REVENUE increased $0.2 million, primarily attributable to a net increase of 10 franchised units over the prior year quarter. Carrows' OPERATING EXPENSES decreased $3.4 million (6.9%) compared to the prior year quarter, primarily reflecting a 17-unit decrease in Company-owned restaurants. The decrease in operating expenses related to fewer units is partially offset by higher food and labor costs as a result of value-priced promotions implemented during the quarter. The increase in food costs is balanced by an improvement in underlying operating expenses resulting from product re-engineering. The decrease in expenses is also offset by an increase in depreciation and other amortization relating to the revaluation of assets and liabilities in accordance with fresh start reporting. The revaluation was completed subsequent to the first quarter of 1998 and resulted in increased depreciation and other amortization being recorded in subsequent quarters. EBITDA AS DEFINED decreased $1.9 million (43.2%) in the first quarter of 1999 compared to the first quarter of 1998 as a result of the factors noted in the preceding paragraphs, excluding the increase in depreciation and other amortization. Carrows' OPERATING INCOME for the 1999 quarter decreased $2.8 million compared to the prior year quarter as a result of the factors noted above. 16
EL POLLO LOCO <TABLE> <CAPTION> Quarter Ended % March 31, 1999 April 1, 1998 Increase/(Decrease) -------------- ------------- ------------------- <S> <C> <C> <C> ($ in millions, except average unit data) U.S. systemwide sales $ 62.8 $ 56.7 10.8 ========== ========== Net company sales $ 29.8 $ 27.6 8.0 Franchise and licensing revenue 2.6 2.5 4.0 ---------- ---------- Total revenue 32.4 30.1 7.6 ---------- ---------- Operating expenses: Amortization of reorganization value in excess of amounts allocable to identifiable assets 2.8 2.8 -- Other 30.4 26.8 13.4 ---------- ---------- Total operating expenses 33.2 29.6 12.2 ---------- ---------- Operating income $ (0.8) $ 0.5 NM ========== ========== EBITDA as defined $ 4.2 $ 5.0 (16.0) Average unit sales: Company-owned 296,300 281,200 5.4 Franchise 216,900 202,700 7.0 Same-store sales increase/(decrease) (Company-owned) 5.9% (1.6%) NM = Not Meaningful </TABLE> El Pollo Loco's NET COMPANY SALES for the first quarter of 1999 increased $2.2 million (8.0%) compared to the prior year quarter. The increase reflects strong same-store sales generated by successful promotions which increased both customer traffic and average guest check. FRANCHISE AND LICENSING REVENUE increased $0.1 million (4.0%), primarily attributable to a net increase of 13 franchised units over the prior year quarter. El Pollo Loco's OPERATING EXPENSES increased $3.6 million (12.2%) compared to the prior year quarter, resulting primarily from increased sales volume, increased food costs and an increase in depreciation and other amortization. The increased food costs reflect an increase in the price of chicken over the prior year quarter, increased costs associated with the current quarter promotions and a one-time food distribution rebate received during the prior year quarter. The increase in depreciation and other amortization relates to the revaluation of assets and liabilities in accordance with fresh start reporting. The revaluation was completed subsequent to the first quarter of 1998 and resulted in increased depreciation and other amortization being recorded in subsequent quarters. EBITDA AS DEFINED decreased $0.8 million (16.0%) in the first quarter of 1999 compared to the first quarter of 1998 as a result of the factors noted in the preceding paragraphs, excluding the increase in depreciation and other amortization. El Pollo Loco's OPERATING INCOME for the 1999 quarter decreased $1.3 million compared to the prior year quarter as a result of the factors noted above. 17
LIQUIDITY AND CAPITAL RESOURCES On the Effective Date, the Company entered into a credit agreement with Chase and other lenders named therein providing the Company (excluding FRD) with a $200 million senior secured revolving credit facility (the "Credit Facility"). At March 31, 1999, Advantica had no outstanding working capital advances against the Credit Facility; however, letters of credit outstanding were $49.4 million. In connection with the acquisition of Coco's and Carrows, FRI-M, which thereby became a wholly-owned subsidiary of the Company, entered into the FRI-M Credit Facility on May 23, 1996, which provides for a $35 million revolving credit facility that is also available for letters of credit. At March 31, 1999, the Company had outstanding working capital borrowings and letters of credit of $7.2 million and $13.2 million, respectively. Because of covenant limitations under the indenture under which the Advantica 11 1/4% Senior Notes due 2008 were issued (the "Senior Notes Indenture") and the Credit Facility, and under FRI-M Credit Facility and the indenture under which the FRD 12 1/2% Senior Notes due 2004 were issued, the Company's ability to make further investments in FRD to upgrade its Coco's and Carrows concepts has been severely limited. In an effort to address this issue and otherwise improve FRD's financial flexibility, during the first quarter of 1999, the Company (1) designated FRD and its subsidiaries as restricted subsidiaries in accordance with the terms of the Senior Notes Indenture, generally increasing Advantica's investment flexibility thereunder in its relationship with FRD and its subsidiaries, (2) obtained certain amendments to the Credit Facility to increase Advantica's investment flexibility under that facility with respect to the Coco's and Carrows operations, and (3) obtained written commitments from Chase and Credit Lyonnais for the New FRI-M Credit Facility. The New FRI-M Credit Facility, which closed on May 14, 1999, is guaranteed by Advantica and consists of a $30 million term loan and a $40 million revolving credit facility and matures in May 2003 (see Note 5 to the consolidated financial statements). The New FRI-M Credit Facility, which refinanced the existing FRI-M Credit Facility, is available to fund Coco's and Carrows' capital expenditures and for general corporate purposes. Such facility is unavailable to Advantica and its other subsidiaries. In March 1999, the Company repurchased $20 million aggregate principal amount of its Senior Notes, as also permitted by the Credit Facility amendment referenced above, for approximately $20.8 million, including approximately $469,000 of accrued interest. The repurchase of the notes resulted in an immaterial gain. As of March 31, 1999 and December 30, 1998, the Company had working capital deficits of $147.2 million and $96.1 million, respectively. The increase in the deficit is attributable primarily to debt-related interest payments, the repurchase of Senior Notes for approximately $20.8 million and the acquisition of certain Perkins restaurants by Denny's for approximately $10.9 million cash and the assumption of capital leases and other liabilities (see Note 4 to the consolidated financial statements). The Company is able to operate with a substantial working capital deficit because: (1) restaurant operations are conducted primarily on a cash (and cash equivalent) basis with a low level of accounts receivable, (2) rapid turnover allows a limited investment in inventories and (3) accounts payable for food, beverages, and supplies usually become due after the receipt of cash from related sales. IMPACT OF THE YEAR 2000 ISSUE The Year 2000 issue is the result of computer programs which were written using two digits rather than four to define the applicable year. Any of the Company's computer programs or operating equipment that have date-sensitive software using two digits to define the applicable year may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in normal business activities. The Company has a comprehensive enterprise-wide program in place to address the impact and issues associated with processing dates up to, through and beyond the year 2000. This program consists of three main areas: (a) information systems, (b) supply chain and critical third party readiness and (c) business equipment. The Company is utilizing both internal and external resources to inventory, assess, remediate, replace and test its systems for Year 2000 compliance. To 18
oversee the process, the Company has established a Steering Committee which is comprised of senior executives from all functional areas within the Company and which reports regularly to the Board of Directors and the Audit Committee. The Company has performed an assessment of the impact of the Year 2000 issue and determined that a significant portion of its software applications will need to be modified or replaced so that its systems will properly utilize dates beyond December 31, 1999. For the most part, the Company intends to replace existing systems and, based on current estimates, expects to spend approximately $20 million in 1999 to address its information systems issues. Relative to this amount, the Company estimates that approximately $16 million will be used to develop or purchase new software and will be capitalized. The remaining amounts will be expensed as incurred. Total Year 2000 expenditures through March 31, 1999 are approximately $3.5 million. All estimated costs have been budgeted and are expected to be funded by cash flows from operations. Currently, all information systems projects are on schedule and are fully staffed. Financial systems that are critical to the Company's operations are targeted to be Year 2000 compliant by the end of June 1999. Restaurant systems are targeted to be compliant by August 1999. The nature of its business makes the Company very dependent on critical suppliers and service providers, and the failure of such third parties to address the Year 2000 issue adequately could have a material impact on the Company's ability to conduct its business. Accordingly, the Company has a dedicated team in place to assess the Year 2000 readiness of all third parties on which it depends. Surveys have been sent to critical suppliers and service providers and each survey response is being scored and assessed based on the third party's Year 2000 project plans in place and progress to date. On-site visits or follow-up phone interviews are being performed for critical suppliers and service providers. For any critical supplier or service provider which does not provide the Company with satisfactory evidence of their Year 2000 readiness, contingency plans will be developed which will include establishing alternative sources for the product or service provided. The Company is also communicating with its franchise business partners regarding Year 2000 business risks. The Company's current estimate of costs associated with the Year 2000 issue excludes the potential impact of the Year 2000 issue on third parties. There can be no guarantee that the systems of other companies on which the Company relies will be timely converted, or that a failure to convert by another company would not have a material adverse effect on the Company's operations. The Company has inventoried and determined the business criticality of all restaurant equipment. Based on preliminary findings, the Company believes that the date-related issues associated with the proper functioning of such assets are insignificant and are not expected to represent a material risk to the Company or its operations. The Company believes, based on available information, that it will be able to manage its Year 2000 transition without any material adverse effect on its business operations. As the Year 2000 project progresses, the Company will establish contingency plans addressing business critical processes for operations and other critical corporate functions. However, the costs of the project and the ability of the Company to complete the Year 2000 transition on a timely basis are based on management's best estimates, which were derived based on numerous assumptions of future events including the availability of certain resources, third party modification plans and other factors. Specific factors that could have a material adverse effect on the cost of the project and its completion date include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, unanticipated failures by critical vendors and franchisees as well as a failure by the Company to execute its own remediation efforts. As a result, there can be no assurance that these forward looking estimates will be achieved and actual results may differ materially from those plans, resulting in material financial risk to the Company. 19
PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. The following are included as exhibits to this report: EXHIBIT NO. DESCRIPTION - ------- ----------- 3.1 By-Laws of Advantica as amended through March 19, 1999. 10.1 Employment Agreement between Advantica and James B. Adamson, amended and restated as of January 7, 1998. 10.2 Form of Agreement and Subsidiary Guarantee dated December 3, 1997 providing certain retention incentives and severance benefits for Company management. 10.3 Amendment No. 5, dated March 12, 1999, as amended and restated as of April 12, 1999, to the Credit Agreement, dated January 7, 1998, among Advantica's principal operating subsidiaries (other than FRD and its subsidiaries) as borrowers, Advantica as guarantor, The Chase Manhattan Bank and other lenders named therein. 10.4 Merger Amendment, dated March 15, 1999, to the Advantica Restaurant Group Stock Option Plan and the Advantica Restaurant Group Officer Stock Option Plan. 10.5 Advantica Stock Option Plan as amended through March 15, 1999. 27 Financial Data Schedule. - -------------------------- b. No reports on Form 8-K were filed during the first quarter ended March 31, 1999. 20
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADVANTICA RESTAURANT GROUP, INC. Date: May 14, 1999 By: /s/ Rhonda J. Parish --------------------------------- Rhonda J. Parish Executive Vice President, General Counsel and Secretary Date: May 14, 1999 By: /s/ Ronald B. Hutchison --------------------------------- Ronald B. Hutchison Executive Vice President and Chief Financial Officer 21