<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
- -------------- SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-43100
A. Full title of the plan and the address of the plan, if different from that
of issuer named below.
Amended and Restated Banner Aerospace, Inc.
Profit Sharing/401(k) Plan and Trust
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Banner Aerospace, Inc.
45025 Aviation Drive Suite #300
Dulles, VA 20166
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AMENDED AND RESTATED
BANNER AEROSPACE, INC.
PROFIT-SHARING/401(k) PLAN AND TRUST
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
Amended and Restated Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust:
We have audited the accompanying statements of net assets available for plan
benefits of the Amended and Restated Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust as of December 31, 1997 and 1996, and the
related statement of changes in net assets available for plan benefits for the
year ended December 31, 1997. These financial statements and the schedules
referred to below are the responsibility of the plan administrator. Our
responsibility is to express an opinion on these financial statements and
schedules 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, 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, 1997 and 1996, and the changes in net assets available for
benefits for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of
investments and reportable transactions 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. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
June 5, 1998
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AMENDED AND RESTATED
BANNER AEROSPACE, INC.
PROFIT-SHARING/401(k) PLAN AND TRUST
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
As of December 31, 1997 and 1996 1
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
For the Year Ended December 31, 1997 2
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
As of December 31, 1997 and 1996 3
ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
As of December 31, 1997 8
ITEM 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1997 9
SCHEDULES OMITTED BECAUSE THERE WERE NO SUCH ITEMS
For the Year Ended December 31, 1997:
Item 27(b) - Loans or Fixed Income Obligations in Default
Item 27(c) - Leases in Default or Classified as Uncollectable
Item 27(e) - Nonexempt Transactions
</TABLE>
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AMENDED AND RESTATED
BANNER AEROSPACE, INC.
PROFIT-SHARING/401(k) PLAN AND TRUST
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
INVESTMENTS, at market value:
Common/Collective Trusts-
PNC Bank Investment Contract Fund $ 935,287 $ 1,077,974
Mutual Funds-
Compass Capital Managed Income Portfolio 1,280,132 1,181,415
Fidelity Advisor Balanced Portfolio 5,516,145 4,805,142
Fidelity Advisor Equity Growth Portfolio 4,203,496 2,258,586
Fidelity Advisor Overseas Portfolio 827,771 554,703
Fidelity Advisor High Yield Portfolio 3,335,034 2,883,256
Common Stock-
Banner Aerospace, Inc. 920,678 552,374
Participant loans 702,912 669,063
Total investments 17,721,455 13,982,513
RECEIVABLES:
Dividends receivable 80,582 67,917
Contributions receivable 174,990 152,423
Total receivables 255,572 220,340
NET ASSETS AVAILABLE FOR PLAN BENEFITS $17,977,027 $14,202,853
</TABLE>
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AMENDED AND RESTATED
BANNER AEROSPACE, INC.
PROFIT-SHARING/401(K) PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
---------------------------------------
COMPASS
PNC BANK CAPITAL FIDELITY
INVESTMENT MANAGED ADVISOR
CONTRACT INCOME BALANCED
<S> <C> <C> <C>
INCREASES:
Contributions-
Employees $ 94,811 $ 131,295 $ 425,019
Employer 30,887 46,985 139,069
Assets of merged plan and other 466,277 67,916 129,696
Interest and dividend income 2,868 84,412 525,252
Unrealized appreciation (decline) in market value of investments 27,295 22,440 422,391
Realized gain (loss) on the sale of investments 36,310 (1,002) 112,325
Total increases 658,448 352,046 1,753,752
DECREASES:
Distributions to participants 774,356 291,123 664,817
NET INCREASE (DECREASE) (115,908) 60,923 1,088,935
TRANSFERS BETWEEN FUNDS 47,230 31,953 (402,838)
NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of period 1,087,025 1,200,690 4,848,583
NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of period $1,018,347 $1,293,566 $5,534,680
<CAPTION>
PARTICIPANT DIRECTED
---------------------------------------
FIDELITY FIDELITY
ADVISOR FIDELITY ADVISOR
EQUITY ADVISOR HIGH
GROWTH OVERSEAS YIELD
<S> <C> <C> <C>
INCREASES:
Contributions-
Employees $ 511,229 $148,923 $ 335,412
Employer 160,600 45,318 111,008
Assets of merged plan and other 512,724 116,162 68,411
Interest and dividend income 469,493 58,511 361,229
Unrealized appreciation (decline) in market value of investments 133,209 (21,705) 73,604
Realized gain (loss) on the sale of investments 112,394 30,590 19,945
Total increases 1,899,649 377,799 969,609
DECREASES:
Distributions to participants 246,944 113,012 358,110
NET INCREASE (DECREASE) 1,652,705 264,787 611,499
TRANSFERS BETWEEN FUNDS 292,812 6,473 (166,287)
NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of period 2,294,884 565,646 2,976,446
NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of period $4,240,401 $836,906 $3,421,658
<CAPTION>
PARTICIPANT DIRECTED
---------------------------------------
BANNER
COMMON PARTICIPANT
STOCK LOANS TOTAL
<S> <C> <C> <C>
INCREASES:
Contributions-
Employees $115,061 $ - $ 1,761,750
Employer 39,061 - 572,928
Assets of merged plan and other 42,076 34,909 1,438,171
Interest and dividend income 1,882 - 1,503,647
Unrealized appreciation (decline) in market value of investments 176,684 - 833,918
Realized gain (loss) on the sale of investments 1,048 - 311,610
Total increases 375,812 34,909 6,422,024
DECREASES:
Distributions to participants 72,278 127,210 2,647,850
NET INCREASE (DECREASE) 303,534 (92,301) 3,774,174
TRANSFERS BETWEEN FUNDS 64,507 126,150 -
NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of period 560,516 669,063 14,202,853
NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of period $928,557 $702,912 $17,977,027
</TABLE>
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AMENDED AND RESTATED
BANNER AEROSPACE, INC.
PROFIT-SHARING/401(k) PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
AS OF DECEMBER 31, 1997 AND 1996
1. SUMMARY OF PLAN:
The following description of the Amended and Restated Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust (the "Plan") provides only general
information. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan which was established July 1, 1990 by
Banner Aerospace, Inc. and Subsidiaries (the Company). The purpose of the Plan
is twofold as it serves as a profit-sharing plan and a 401(k) salary reduction
benefit plan. It is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
The Plan covers certain employees of the Company not covered by a collective
bargaining agreement, who have completed at least three (3) consecutive months
of service provided the employee also completes 250 hours of service during the
three-month period. Participation in the Plan shall commence on the earlier of
January 1, April 1, July 1, or October 1 concurrent with or immediately
following the eligibility date.
CONTRIBUTIONS
Participants may elect to contribute up to 16 percent of their total salary or
wages, including bonuses, commissions and overtime pay. The Company will make
a matching contribution equal to 50 percent of the participant's contribution,
provided that such matching contribution shall only apply to that portion of
such participant's elective contribution which does not exceed 6 percent of the
participant's compensation. Each fiscal year, the Company may also contribute
an amount determined at the discretion of the Board of Directors.
PLAN MERGER
During 1997, the PB Herndon Company Profit-Sharing Plan and Trust was merged
into the Plan, increasing net assets available for plan benefits. PB Herndon
is a subsidiary of Banner Aerospace, Inc., that was acquired in 1997.
VESTING
Participants are immediately vested in their voluntary contributions plus
actual earnings thereon. Vesting in the remainder of their accounts is based
on years of completed service, as follows:
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<TABLE>
<CAPTION>
COMPLETED YEARS VESTED
OF SERVICE PERCENTAGE
<S> <C>
Less than 3 years - %
3 years 20
4 years 40
5 years 60
6 years 80
7 years or more 100
</TABLE>
PAYMENT OF BENEFITS
Upon termination of service, at the direction of the plan administrator, a
participant can receive a lump-sum payment. Any participant who remains in the
employ of the Company, yet is required to receive a distribution, shall have
that distribution made over a fixed term designated by the participant which
satisfies both the minimum distribution rules and the minimum distribution
incidental benefit rules of Code Section 401(a)(9) and which does not exceed
the joint and last survivor life expectancy of the participant and a designated
beneficiary.
FORFEITED ACCOUNTS
Forfeited nonvested accounts totaled $75,672 during 1997, which were used to
reduce employer contributions.
PARTICIPANT'S ACCOUNTS
Each participant's account is credited with the participant's contribution and
an allocation of (a) the Company's contribution and (b) plan earnings.
Allocations are based on participant earnings or account balances, as defined.
INVESTMENTS
As specified by the Plan, participants have a choice of investing all or a
portion of their contributions into seven investment funds - the PNC Bank
Investment Contract Fund, the Compass Capital Managed Income Portfolio, the
Fidelity Advisor Balanced Portfolio, the Fidelity Advisor Equity Growth
Portfolio, the Fidelity Advisor Overseas Portfolio, the Fidelity Advisor High
Yield Portfolio and/or the Banner Common Stock Fund. PNC Bank acts as trustee
of all investments of the Plan.
The PNC Bank Investment Contract Fund buys investment contracts from insurance
companies and banks on behalf of its investors. These contracts are designed
to pay a specified rate of interest to the fund while providing for the return
of principal. The Compass Capital Managed Income Portfolio invests primarily
in a wide range of bonds. The Fidelity Advisor Balanced Portfolio seeks both
income and growth of capital by investing in a diversified portfolio of equity
and fixed income securities. The Fidelity Advisor Equity Growth Portfolio
seeks capital appreciation through investments in the stocks of companies that
are experiencing or have
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above average growth potential. The Fidelity Advisor Overseas Portfolio seeks
growth of capital primarily through investments in foreign securities. The
Fidelity Advisor High Yield Portfolio seeks a combination of a high level of
income and the potential for capital gains. The Banner Common Stock Fund
invests in the common stock of Banner Aerospace, Inc.
SIGNIFICANT ASSETS
The following assets individually represent 5 percent or more of the Plan's
total assets as of December 31:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
PNC Bank Investment Contract Fund $ 935,287 $1,077,974
Compass Capital Managed Income Portfolio 1,280,132 1,181,415
Fidelity Advisor Balanced Portfolio 5,516,145 4,805,142
Fidelity Advisor Equity Growth Portfolio 4,203,496 2,258,586
Fidelity Advisor High Yield Portfolio 3,335,034 2,883,256
Banner Aerospace, Inc. Common Stock 920,678 *
</TABLE>
*Less than 5 percent of the Plan's total assets in the respective period.
LOANS TO PARTICIPANTS
The Trustee may make loans to participants at the direction of the plan
administrator. The loan program is equally applied to all participants on a
uniform and nondiscriminatory basis. The maximum loan allowed to a participant
(when added to the outstanding balance of any existing loans of such
participant) may not be greater than 50 percent of the participant's vested
account or $50,000, if less. The minim loan is $1,000. Loan payments are to
be made not less frequently than quarterly. The loan period shall not be in
excess of five years from the date of loan unless the proceeds are used for the
purpose of acquiring, constructing or rehabilitating the principal residence of
the participant or member of his family. The plan administrator shall
determine the length of these loan terms. Loans granted shall bear a
reasonable rate of interest commensurate with the interest rates charged by
persons in the business of lending money for loans, which would be made under
similar circumstances, taking into consideration such factors as
creditworthiness of the borrower and security given for the loan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF ACCOUNTING
The accompanying financial statements and schedules have been prepared on the
accrual basis of accounting. The preparation of the financial statements in
conformity with generally accepted accounting principles requires the Plan's
management to use estimates and assumptions that affect the accompanying
financial statements and disclosures. Actual results could differ from these
estimates.
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<PAGE> 10
INVESTMENTS
Investments are stated at the current market value. Changes in the current
market value throughout the year are reflected in the statements of changes in
net assets available for plan benefits as they occur. Realized and unrealized
gains/losses on investments are based on the market value of the investments at
the beginning of the plan year or initial cost if purchased during the year.
The Investment Contract Fund is a collective investment fund of PNC Bank, not a
portfolio of the PNC Fund. Investments in the guaranteed investment contracts
("GIC"s) are valued at fair value as determined in good faith by the Trustee,
based on contractual terms, credit worthiness of the GIC issuer, current market
conditions, and comparison to similar instruments with readily ascertainable
market values. The fair value of the GICs was determined by the Trustee to be
equal to cost plus accrued interest.
BENEFIT PAYMENTS
Benefit payments are recorded when paid.
3. ADMINISTRATIVE EXPENSES:
Expenditures for trustee fees, audit fees, legal fees and other administrative
expenses of the Plan are to be paid by the Plan to the extent that the Company
does not pay such expenses. The Company paid all administrative expenses in
the years ended December 31, 1997 and 1996.
4. TAX STATUS:
The Internal Revenue Service issued a determination letter dated September 24,
1997, stating that the Plan was designed in accordance with applicable sections
of the Internal Revenue Code ("IRC") and, therefore, is not subject to tax
under present income tax law. Once qualified, the Plan is required to operate
in conformity with the IRC to maintain its qualification.
5. RELATED PARTY TRANSACTIONS:
Certain Plan investments are shares of mutual funds managed by PNC Bank. PNC
Bank is the trustee as defined by the Plan and, therefore, these transactions
qualify as party-in-interest.
6. PLAN TERMINATION:
Although it is the intention of the Company to keep the Plan in operation
indefinitely, the Company has the right under the Plan to discontinue its
contributions at any time and to terminate the Plan subject to the provisions
of ERISA. In the event of Plan termination, participants will become 100
percent vested in their accounts.
7. INFORMATION CERTIFIED BY TRUSTEE:
Information as to the Plan's assets as of December 31, 1997 and 1996, and the
transactions in such assets for the year ended December 31, 1997, including
income on investments, investment transactions, gain or loss on the sale of
securities and market values, has been certified as complete and accurate to
the plan administrator by PNC Bank.
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8. SUBSEQUENT EVENTS:
On January 13, 1998, the Company transferred 100 percent of the assets of
certain subsidiaries to AlliedSignal, Inc. ("Allied"). Those participants who
were effected by the transfer of assets to Allied were fully vested in their
benefits under the Plan. During March and April 1998, assets totaling
approximately $7,011,347 were distributed to participants whose employment
transferred to Allied.
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SCHEDULE I
AMENDED AND RESTATED
BANNER AEROSPACE, INC.
PROFIT-SHARING/401(k) PLAN AND TRUST
ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE,
RATE OF INTEREST,
IDENTITY OF ISSUER, BORROWER, COLLATERAL, AND PAR OR MARKET
LESSOR, OR SIMILAR PARTY MATURITY VALUE VALUE COST
<S> <C> <C> <C>
PNC Bank Investment Contract Fund* Common/Collective Trust
(Note 2) $ 935,287 $ 838,730
Compass Capital Managed Income Portfolio* Mutual Fund 1,280,132 1,229,954
Fidelity Advisor Balanced Portfolio Mutual Fund 5,516,145 4,754,816
Fidelity Advisor Equity Growth Portfolio Mutual Fund 4,203,496 3,943,591
Fidelity Advisor Overseas Portfolio Mutual Fund 827,771 821,582
Fidelity Advisor High Yield Portfolio Mutual Fund 3,335,034 3,142,349
Banner Aerospace, Inc.* Common Stock 920,678 649,409
Participant loans Loans to Plan
participants, bearing
interest rates ranging
from 5.6% to 10.0% 702,912 702,912
$17,721,455 $16,083,343
</TABLE>
* Represents a party-in-interest.
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SCHEDULE II
AMENDED AND RESTATED
BANNER AEROSPACE, INC.
PROFIT-SHARING/401(k) PLAN AND TRUST
ITEM 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PURCHASES
NUMBER OF PURCHASE
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET TRANSACTIONS PRICE
<S> <C> <C> <C>
PNC Bank Investment Contract Fund* Common/Collective Trust 84 $1,247,027
Fidelity Advisor Balanced Portfolio Mutual Fund 64 1,378,327
Fidelity Advisor Equity Growth Portfolio Mutual Fund 73 2,476,761
Fidelity Advisor High Yield Portfolio Mutual Fund 63 1,095,650
<CAPTION>
SALES
NUMBER OF SELLING COST OF
IDENTITY OF PARTY INVOLVED TRANSACTIONS PRICE ASSETS NET GAIN
<S> <C> <C> <C> <C>
PNC Bank Investment Contract Fund* 72 $1,458,703 $1,395,240 $ 63,463
Fidelity Advisor Balanced Portfolio 106 1,202,040 1,026,830 175,210
Fidelity Advisor Equity Growth Portfolio 73 777,457 663,430 114,027
Fidelity Advisor High Yield Portfolio 102 737,424 690,655 46,769
</TABLE>
* Represents a party-in-interest.
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<PAGE> 14
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Amended and Restated Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust
By: /s/ Eugene W. Juris
---------------------
Eugene W. Juris
Chief Financial Officer
Date: June 26, 1998
