SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
Washington, D.C. 20549
----------------------
FORM 11-K
---------
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2003.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-18051
------------------------------
A. Full title of the plans and the address of the plans, if different from
that of the issuer named below:
DENNY'S SALARIED 401(k) PLAN
DENNY'S HOURLY/HCE 401(k) PLAN
B. Name of issuer of the securities held pursuant to the plans and the
address of its principal executive office:
DENNY'S CORPORATION
203 E. MAIN STREET
SPARTANBURG, SOUTH CAROLINA 29319-0001
1
DENNY'S SALARIED 401(k) PLAN
Financial Statements
December 31, 2003 and 2002
(With Report of Independent Registered Accounting Firm)
2
Report of Independent Registered Public Accounting Firm
The Retirement Committee
Denny's Salaried 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of Denny's Salaried 401(k) Plan (the Plan) as of December 31, 2003 and 2002, and
the related statements of changes in net assets available for benefits for the
years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based upon our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003 and 2002, and the changes in net assets available for benefits
for the years then ended in conformity with United States generally accepted
accounting principles.
KPMG LLP
Greenville, South Carolina
June 11, 2004
3
DENNY'S SALARIED 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
Assets: 2003 2002
-------------- --------------
Investments - plan interest in Denny's
401(k) Plans Master Trust (notes 1, 2, 3, and 4) $ 41,192,710 40,577,963
-------------- --------------
Receivables:
Employer's contribution - 24,965
Participants' contributions - 74,020
-------------- --------------
Total receivables - 98,985
-------------- --------------
Total assets 41,192,710 40,676,948
-------------- --------------
Liabilities:
Accrued expenses 18,730 32,441
Excess contributions refundable (note 1) - 13,907
Payable to FRD successor plan (note 1) - 2,183,627
-------------- --------------
Total liabilities 18,730 2,229,975
-------------- --------------
Net assets available for benefits $ 41,173,980 38,446,973
============== ==============
See accompanying notes to financial statements.
4
DENNY'S SALARIED 401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2003 and 2002
2003 2002
-------------- --------------
Additions:
Investment gain (loss) - plan interest in
Denny's 401(k) Plans Master Trust
investment gain (loss) (notes 1, 2, and 3) $ 4,641,659 $ (2,225,993)
Contributions:
Employer's 712,857 664,559
Participants' 1,797,567 2,166,054
-------------- --------------
Total contributions 2,510,424 2,830,613
-------------- --------------
Total additions, net 7,152,083 604,620
-------------- --------------
Deductions:
Benefits paid to participants 4,259,260 6,253,935
Administrative expenses 75,134 85,606
------------- --------------
Total deductions 4,334,394 6,339,541
------------- --------------
Transfers from(to) Denny's Hourly/HCE
401(k) Plan (note 1) (90,682) 438,616
Transfer to FRD successor plan (note 1) - (2,183,627)
-------------- --------------
Net increase (decrease) in net assets available for benefits 2,727,007 (7,479,932)
Net assets available for benefits:
Beginning of year 38,446,973 45,926,905
-------------- --------------
End of year $ 41,173,980 $ 38,446,973
============== ==============
See accompanying notes to financial statements.
5
DENNY'S SALARIED 401(k) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) Description of the Plan
The following brief description of the Denny's Salaried 401(k) Plan (the
Plan) is provided for general information purposes only. Participants
should refer to the Plan document for more complete information.
(a) General
The Plan, formerly the Advantica 401(k) Plan, is a qualified
deferred compensation plan, subject to the Employee Retirement
Income Security Act of 1974 (ERISA). Any non-highly compensated
salaried employee of Denny's Corporation (Denny's or the Company,
formerly know as Advantica Restaurant Group, Inc. (Advantica)),
who has attained age 21 and has completed 6 months of service with
the Company is eligible to participate in the Plan. The Plan's
committee and plan administrator control and manage the operation
and administration of the Plan. American Express Trust Company
(American Express) serves as the Plan's trustee.
On July 10, 2002, the Company completed the divestiture of FRD
Acquisition Co. (FRD), a wholly owned subsidiary of Advantica. In
conjunction with the sale, FRD employees were no longer eligible
to participate in the Plan. The participant balances of the FRD
employees were transferred to the successor trustee effective
December 31, 2002. The assets of the FRD participants were
transferred on January 2, 2003 and have consequently been
presented as a liability of the Plan as of December 31, 2002.
Effective July 11, 2002, the Plan was amended, and the Advantica
Salaried 401(k) Plan was renamed the Denny's Salaried 401(k) Plan.
On an annual basis, assets of employees who have changed status,
as defined in the plan document, are transferred between the
Denny's Salaried 401(k) Plan and the Denny's Hourly/HCE 401(k)
Plan. During 2003, transfers from the Denny's Salaried 401(k) Plan
to the Denny's Hourly/HCE 401(k) Plan due to change in status
totaled $90,682.
(b) Interest in Master Trust
The Plan's investments are held in the Denny's 401(k) Plans Master
Trust (the Master Trust) which was established for the investment
of assets of the Plan and the Denny's Hourly/HCE 401(k) Plan.
Effective July 11, 2002, the Master Trust Agreement was amended,
and the Advantica 401(k) Plans Master Trust was renamed the
Denny's 401(k) Plans Master Trust.
(c) Contributions
Each year, participants may make pre-tax contributions of up to
15% of eligible compensation. Participants may also contribute
amounts representing distributions from other qualified defined
benefit or defined contribution plans.
In 2003 and 2002, the Company matched 100% of employee pre-tax
contributions, up to 3% of compensation for all participating
employees of the Company.
6
Contributions are subject to certain Internal Revenue Code (IRC)
limitations. Excess contributions to be returned to participants
are shown as a liability in the accompanying statement of net
assets available for benefits.
(d) Participant Accounts
Individual accounts are maintained for each plan participant. Each
participant's account is credited with the participant's
contribution and allocations of the Company's contributions and
earnings, and is charged with allocations of plan losses and
administrative expenses and benefit payments, if applicable.
Allocations are based on participant earnings or account balances,
as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested
account.
(e) Vesting
All participants are immediately vested in their contributions
plus actual earnings thereon. Vesting in the Company's matching
and discretionary contribution portion of their accounts plus
actual earnings thereon is based on years of continuous service.
For each employee whose initial date of employment is after
December 31, 1998, the Company's contribution portion of his/her
account plus actual earnings thereon will be 100% vested after
five years of continuous service unless the following terms
provide for more accelerated vesting. For certain employees of
Advantica and Flagstar who were initially employed before January
1, 1999, participants are immediately vested in their
contributions and employer contributions plus actual earnings
thereon.
(f) Investment Options
Participants can direct participant and employer contributions in
1% increments in a combination of any of 14 investment options
currently offered by the Plan. Participants may change their
investment options at any time via telephone.
(g) Participant Loans
Participants may borrow from their fund accounts up to the lesser
of 50% of the vested portion of their account balance, or the
amount of $50,000 less the highest outstanding loan balance during
the prior 12-month period. The minimum loan amount is $1,000, and
each participant may have only one loan outstanding at any time.
The plan document indicates that a reasonable borrowing rate will
be assessed, typically evidenced by the prime rate charged by the
Plan's trustee. The loans are secured by the balance in the
participant's account. 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 benefit 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, 2003
have a range of interest rates from 4.00% to 9.50%.
(h) 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
7
account, or annual installments over a 10-year period. For
termination of service due to other reasons, a participant may
receive the value of the vested interest in his or her account as
a lump-sum distribution.
(i) Administrative Expenses
Administrative expenses of the Plan are paid by the Plan.
(j) Withdrawals
Withdrawals during employment are permitted only under hardship
circumstances that are determined by the Internal Revenue Service
"Safe Harbor" rules. Participants who are age 59-1/2 or older may
withdraw from their account at any time, for any reason allowed by
law.
(k) Forfeited Accounts
Forfeitures are used to reduce future employer contributions to
the Plan.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements have been prepared on the
accrual basis of accounting and in accordance with accounting
principles generally accepted in the United States of America.
(b) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of additions and
deductions during the reporting period. Actual results could
differ from those estimates.
(c) Investment Valuation and Income Recognition
The Plan's interest in Denny's 401(k) Plans Master Trust is
presented at fair value, which has been determined based on the
fair value of the underlying investments of the Master Trust.
Purchases and sales of securities are recorded on a trade-date
basis. Dividends are recorded on the ex-dividend date.
(d) Payment of Benefits
Benefit payments to participants are recorded upon distribution.
(e) Investment Risk
The Trust provides for investments that are exposed to risk, such
as interest rate, credit, and market volatility risk. Due to the
level of risk associated with certain investment securities, it is
possible that changes in the value of investment securities may
occur in the near future and that changes could materially affect
the amounts reported in the statement of net assets available for
benefits.
8
(3) Master Trust
All of the Plan's investment assets are held in a trust account at
American Express and consist of an undivided interest in an investment
account of the Denny's 401(k) Plans Master Trust, a master trust
established by the Company and administered by American Express, the
Plan's trustee. Use of the Master Trust permits the commingling of trust
assets with the assets of the Denny's Hourly/HCE 401(k) plan for
investment and administrative purposes. Although assets of both plans
are commingled in the Master Trust, the trustee maintains supporting
records for the purpose of allocating the net gain or loss of the
investment account to the participating plans. The net investment income
or loss of the investment assets is allocated by the trustee to each
participating plan based on the relationship of the interest of each plan
to the total of the interest of the participating plans.
Investments of the Master Trust at December 31, 2003 and 2002 are
summarized as follows:
2003 2002
------------------- -------------------
Collective trust funds, at estimated fair value:
American Express Emerging Growth Fund II 5,499,312 5,121,039
American Express Trust Equity Index Fund II 9,143,941 8,121,437
American Express Trust Income Fund I - 49,868,288
American Express Trust Income Fund II 49,157,300 -
American Express Trust International Equity Index Fund II 126,454 58,278
American Express Trust Money Market Fund I 15,149 404,547
American Express Trust Small Cap Equity Index Fund II 319,221 139,609
------------------- -------------------
Total 64,261,377 63,713,198
------------------- -------------------
Mutual funds, at quoted market price:
AXP New Dimensions Fund Y 1,323,429 1,262,495
Lazard Small Capital Fund - 5,167,597
Neuberger & Berman Focus Trust Fund - 1,258,258
Pimco NFJ Small Capital Value Fund 5,692,149 -
Spartan Total Money Market Index Fund 277,265 172,610
Templeton Foreign Fund 5,936,347 5,548,046
Washington Mutual Investors Fund 1,328,026 -
------------------- -------------------
Total 14,557,216 13,409,006
------------------- -------------------
Denny's Corporation common stock at quoted market price 226,163 286,963
FDIC Class 1A 6.75% bonds - 2,784
Morgan Stanley 7.125% bonds - 210,296
Loans to participants, at estimated fair value 788,717 819,176
------------------- -------------------
Total investments $ 79,833,473 78,441,423
=================== ===================
Plan's investment in the Master Trust $ 41,192,710 40,577,963
=================== ===================
Plan's investment in the Master Trust as a percentage of total 51.60% 51.73%
=================== ===================
9
The net investment gain (loss) for the Master Trust for the years ended
December 31, 2003 and 2002 is summarized below:
2003 2002
------------------- -------------------
Net appreciation (depreciation) in
fair value of investments:
Collective trust funds $ 4,877,586 $ (2,080,924)
Mutual funds 3,716,314 (2,572,253)
Common stock (114,359) (47,527)
------------------- -------------------
8,479,541 (4,700,704)
Interest and dividend income 41,602 1,189,460
------------------- -------------------
Total investment gain (loss) $ 8,521,143 $ (3,511,244)
=================== ===================
Effective July 1, 2003, the assets held within the Denny's Stable Value
fund were reinvested in the American Express Trust Income Fund II.
Consequently, the Denny's Stable Value fund was closed and all assets
were transferred to the American Express Trust Income Fund II.
The Plan's share of the Master Trust investment gain (loss) for the years
ended December 31, 2003 and 2002 was 54.5% and 63.4% respectively.
(4) Party-in-Interest Transactions
Certain Master Trust investments are units of collective trust funds and
shares of mutual funds managed by American Express. American Express
serves as trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest transactions. Fees paid by the
Plan to American Express for the years ended December 31, 2003 and 2002
amounted to approximately $45,000 and $75,000, respectively.
The Master Trust also invests in common stock of the Plan's sponsor.
These transactions also qualify as party-in-interest transactions.
(5) Plan 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 that the Plan is terminated participants
would become 100% vested in their accounts.
(6) Tax Status
The Internal Revenue Service has issued a favorable determination letter
dated January 17, 2003, indicating that the Plan qualifies under the
applicable section of the IRC and is, therefore, not subject to tax under
present income tax laws. A Plan is required to operate in conformity with
the IRC in order to maintain its qualification. The Plan's management is
not aware of any course of action or series of events that have occurred
that might adversely affect the Plan's qualified status.
10
DENNY'S HOURLY/HCE 401(k) PLAN
Financial Statements
December 31, 2003 and 2002
(With Report of Independent Registered Public Accounting Firm)
11
Report of Independent Registered Public Accounting Firm
The Retirement Committee
Denny's Hourly/HCE 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of Denny's Hourly/HCE 401(k) Plan (the Plan) as of December 31, 2003 and 2002,
and the related statements of changes in net assets available for benefits for
the years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based upon our audits.
We conducted our audits in accordance with the Standards of the Public Company
Accounting Oversight Board (United States). 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, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003 and 2002, and the changes in net assets available for benefits
for the years then ended in conformity with United States generally accepted
accounting principles.
KPMG LLP
Greenville, South Carolina
June 11, 2004
12
DENNY'S HOURLY/HCE 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
2003 2002
-------------- --------------
Assets:
Investments - plan interest in Denny's 401(k) Plans
Master Trust (notes 1, 2, 3, and 4) $ 38,640,763 37,863,460
-------------- --------------
Receivables:
Employer's contribution - 20,471
Participants' contributions - 54,559
-------------- --------------
Total receivables - 75,030
-------------- --------------
Total assets 38,640,763 37,938,490
-------------- --------------
Liabilities:
Accrued expenses 18,730 31,774
Excess contributions refundable (note 1) 116,837 164,731
Payable to FRD successor Plan (note 1) - 634,357
-------------- --------------
Total liabilities 135,567 830,862
-------------- --------------
Net assets available for benefits $ 38,505,196 37,107,628
============== ==============
See accompanying notes to financial statements.
13
DENNY'S HOURLY/HCE 401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2003 and 2002
2003 2002
-------------- --------------
Additions:
Investment gain (loss) - plan interest in
Denny's 401(k) Plans Master Trust
investment gain (loss) (notes 1, 2, and 3) $ 3,879,484 $ (1,285,251)
Contributions:
Employer's 521,334 460,537
Participants' 1,587,138 2,064,713
-------------- ---------------
Total contributions 2,108,472 2,525,250
-------------- ---------------
Total additions, net 5,987,956 1,239,999
-------------- ---------------
Deductions:
Benefits paid to participants 4,604,705 4,882,232
Administrative expenses 76,365 81,897
-------------- ---------------
Total deductions 4,681,070 4,964,129
-------------- ---------------
Transfers from(to) Denny's Salaried
401(k) Plan (note 1) 90,682 (438,616)
Transfer to FRD successor plan (note 1) - (634,357)
-------------- ---------------
Net increase (decrease) in net assets available for benefits 1,397,568 (4,797,103)
Net assets available for benefits:
Beginning of year 37,107,628 41,904,731
-------------- ---------------
End of year $ 38,505,196 $ 37,107,628
============== ===============
See accompanying notes to financial statements.
14
DENNY'S HOURLY/HCE 401(k) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(1) Description of the Plan
The following description of the Denny's Hourly/HCE 401(k) Plan (the
Plan) is provided for general information purposes only. Participants
should refer to the Plan document for more complete information.
(a) General
The Plan is a qualified deferred compensation plan, subject to the
Employee Retirement Income Security Act of 1974 (ERISA). Any
hourly employee or highly compensated employee of Denny's
Corporation (Denny's or the Company, formerly known as Advantica
Restaurant Group, Inc. (Advantica)), who has attained age 21 and
has completed 6 months of service with the Company is eligible to
participate in the Plan. The Plan's committee and plan
administrator control and manage the operation and administration
of the Plan. American Express Trust Company (American Express)
serves as the Plan's trustee.
On July 10, 2002, the Company completed the divestiture of FRD
Acquisition Co. (FRD), a wholly owned subsidiary of Advantica. In
conjunction with the sale, FRD employees were no longer eligible
to participate in the Plan. The participant balances of the FRD
employees were transferred to the successor trustee effective
December 31, 2002. The assets of the FRD participants were
transferred on January 2, 2003 and have consequently been
presented as a liability of the Plan as of December 31, 2002.
Effective July 11, 2002, the Plan was amended, and the Advantica
Hourly/HCE 401(k) Plan was renamed the Denny's Hourly/HCE 401(k)
Plan.
On an annual basis, assets of employees who have changed status,
as defined in the Plan document, are transferred between the
Denny's Hourly/HCE 401(k) Plan and the Denny's Salaried 401(k)
Plan. During 2003, transfers from the Denny's Salaried 401(k) Plan
to the Denny's Hourly/HCE 401(k) Plan due to change in status
totaled $90,682.
(b) Interest in Master Trust
The Plan's investments are in the Denny's 401(k) Plans Master
Trust (Master Trust) which was established for the investment of
assets of the Plan and the Denny's Salaried 401(k) Plan.
Effective July 11, 2002, the Master Trust Agreement was amended,
and the Advantica 401(k) Plan Master Trust was renamed the Denny's
401(k) Plan Master Trust.
(c) Contributions
Participants may make pre-tax contributions of up to 15% of
eligible compensation. Participants may also contribute amounts
representing distributions from other qualified defined benefit or
defined contribution plans.
In 2003 and 2002, the Company matched 100% of employee pre-tax
contributions, up to 3% of compensation for all participating
employees of the Company. Highly compensated employees are not
eligible for the employer match.
15
Contributions are subject to certain Internal Revenue Code (IRC)
limitations. Excess contributions to be returned to participants
are shown as a liability in the accompanying statement of net
assets available for benefits.
(d) Participant Accounts
Individual accounts are maintained for each plan participant. Each
participant's account is credited with the participant's
contribution and allocations of the Company's contributions (for
hourly employees) and earnings, and is charged with allocations of
plan losses, administrative expenses, and benefit payments, if
applicable. Allocations are based on earnings and participant
account balances, as defined. The benefit to which a participant
is entitled is the benefit that can be provided from the
participant's vested account.
(e) Vesting
All participants are immediately vested in their contributions
plus actual earnings thereon. Vesting in the Company's matching
and discretionary contribution portion of their accounts plus
actual earnings thereon is based on years of continuous service.
For each hourly employee whose initial date of employment is after
December 31, 1998, the Company's contribution portion of their
account plus actual earnings thereon will be 100% vested after
five years of continuous service unless the following terms
provide for more accelerated vesting. For certain employees of
Advantica and Flagstar who were initially employed before January
1, 1999, participants are immediately vested in their
contributions and employer contributions, plus actual earnings
thereon.
(f) Investment Options
Participants can direct participant and employer contributions in
1% increments in a combination of any of 14 investment options
currently offered by the Plan. Participants may change their
investment options at any time via telephone.
(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 10-year period. For
termination of service due to other reasons, a participant may
receive the value of the vested interest in his or her account as
a lump-sum distribution.
(h) Administrative Expenses
Administrative expenses of the Plan are paid by the Plan.
(i) Withdrawals
Withdrawals during employment are permitted only under hardship
circumstances that are determined by the Internal Revenue Service
"Safe Harbor" rules. Participants who are age 59-1/2 or older may
withdraw from their account at any time, for any reason allowed by
law.
16
(j) Forfeited Accounts
Forfeitures are used to reduce future employer contributions to
the Plan.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements have been prepared on the
accrual basis of accounting and in accordance with accounting
principles generally accepted in the United States of America.
(b) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of additions and
deductions during the reporting period. Actual results could
differ from those estimates.
(c) Investment Risk
The Trust provides for investments that are exposed to risk, such
as interest rate, credit, and market volatility risk. Due to the
level of risk associated with certain investment securities, it is
possible that changes in the value of investment securities may
occur in the near future and that changes could materially affect
the amounts reported in the statement of net assets available for
benefits.
(d) Investment Valuation and Income Recognition
The Plan's interest in Denny's 401(k) Plans Master Trust is
presented at fair value which has been determined based on the
fair value of the underlying investments of the Master Trust.
Purchases and sales of securities are recorded on a trade-date
basis. Dividends are recorded on the ex-dividend date.
(e) Payment of Benefits
Benefit payments to participants are recorded upon distribution.
17
(3) Master Trust
All of the Plans' investment assets are held in a trust account at
American Express and consist of an undivided interest in an investment
account of the Denny's 401(k) Plans Master Trust, a master trust
established by the Company and administered by American Express, the
Plan's trustee. Use of the Master Trust permits the commingling of trust
assets with the assets of the Denny's Salaried 401(k) Plan for
investments and administrative purposes. Although assets of both plans
are commingled in the Master Trust, the trustee maintains supporting
records for the purpose of allocating the net gain or loss of the
investment account to the participating plans. The net investment income
or loss of the investment assets is allocated by the trustee to each
participating plan based on the relationship of the interest of each plan
to the total of the interests of the participating plans.
The investments of the Master Trust at December 31, 2003 and 2002, are
summarized as follows:
2003 2002
------------------- -------------------
Collective trust funds, at estimated fair value:
American Express Emerging Growth Fund II 5,499,312 5,121,039
American Express Trust Equity Index Fund II 9,143,941 8,121,437
American Express Trust Income Fund I - 49,868,288
American Express Trust Income Fund II 49,157,300 -
American Express Trust International Equity Index Fund II 126,454 58,278
American Express Trust Money Market Fund I 15,149 404,547
American Express Trust Small Cap Equity Index Fund II 319,221 139,609
------------------- -------------------
Total 64,261,377 63,713,198
------------------- -------------------
Mutual funds, at quoted market price:
AXP New Dimensions Fund Y 1,323,429 1,262,495
Lazard Small Capital Fund - 5,167,597
Neuberger & Berman Focus Trust Fund - 1,258,258
Pimco NFJ Small Capital Value Fund 5,692,149 -
Spartan Total Money Market Index Fund 277,265 172,610
Templeton Foreign Fund 5,936,347 5,548,046
Washington Mutual Investors Fund 1,328,026 -
------------------- -------------------
Total 14,557,216 13,409,006
------------------- -------------------
Denny's Corporation common stock at quoted market price 226,163 286,963
FDIC Class 1A 6.75% bonds - 2,784
Morgan Stanley 7.125% bonds - 210,296
Loans to participants, at estimated fair value 788,717 819,176
------------------- -------------------
Total investments $ 79,833,473 78,441,423
=================== ===================
Plan's investment in the Master Trust $ 38,640,763 37,863,460
=================== ===================
Plan's investment in the Master Trust as a percentage of total 48.40% 48.27%
=================== ===================
18
The net investment gain (loss) for the Master Trust for the years ended
December 31, 2003 and 2002 is summarized below:
2003 2002
------------------- -------------------
Net appreciation (depreciation) in
fair value of investments:
Collective trust funds $ 4,877,586 $ (2,080,924)
Mutual funds 3,716,314 (2,572,253)
Common stock (114,359) (47,527)
------------------- -------------------
8,479,541 (4,700,704)
Interest and dividend income 41,602 1,189,460
------------------- -------------------
Total investment gain (loss) $ 8,521,143 $ (3,511,244)
=================== ===================
Effective July 1, 2003, the assets held within the Denny's Stable Value
fund were reinvested in the American Express Trust Income Fund II.
Consequently, the Denny's Stable Value fund was closed and all assets
were transferred to the American Express Trust Income Fund II.
The Plan's share of the Master Trust investment gain (loss) for the years
ended December 31, 2003 and 2002 was 45.5% and 36.6%, respectively.
(4) Party-In-Interest Transactions
Certain Master Trust investments are units of collective trust funds and
shares of mutual funds managed by American Express. American Express
serves as trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest transactions. Fees paid by the
Plan to American Express for the years ended December 31, 2003 and 2002
amounted to approximately $45,000 and $75,000, respectively.
The Master Trust also invests in the common stock of the Plan's sponsor.
These transactions also qualify as party-in-interest transactions.
(5) Plan 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 that the Plan is terminated, participants
would become 100% vested in their accounts.
(6) Tax Status
The Internal Revenue Service has issued a favorable determination letter
dated January 17, 2003, indicating that the Plan qualifies under the
applicable sections of the IRC and is, therefore, not subject to tax
under present income tax laws. A Plan is required to operate in
conformity with the IRC in order to maintain its qualification. The
Plan's management is not aware of any course of action or series of
events that have occurred that might adversely affect the Plan's
qualified status.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plans) have duly
caused this annual report to be signed on its behalf by the undersigned,
hereunto duly authorized.
DENNY'S SALARIED 401(k) PLAN
DENNY'S HOURLY/HCE 401(k) PLAN
Dated: June 28, 2004 By: /s/ Rhonda J. Parish
---------------------------------
Rhonda J. Parish
Executive Vice President,
General Counsel and Secretary and
as member of Retirement Plan Committee
(administrator of Denny's Salaried 401(k) Plan
and Denny's Hourly/HCE 401(k) Plan)
Exhibit No. Description
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23 Consent of KPMG LLP, Independent Registered Public
Accounting Firm
20