SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6560
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 #400
Dulles, VA 20166
Amended and Restated
Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust
Financial Statements
As of December 31, 1998 and 1997
Together With Report of
Independent Public Accountants
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 benefits of the Amended and Restated Banner
Aerospace, Inc. Profit-Sharing/401(k) Plan and Trust as of
December 31, 1998 and 1997, and the related statement of changes
in net assets available for benefits for the year ended December
31, 1998. 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, 1998 and
1997, and the changes in net assets available for benefits for
the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion
on the 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 of 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.
Arthur Andersen LLP
Washington, D.C.
May 21, 1999
Amended and Restated
Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust
Table of Contents
Page
Statements of Net Assets Available for Plan Benefits
As of December 31, 1998 and 1997 1
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1998 2
Notes to Financial Statements and Schedules
As of December 31, 1998 and 1997 3
Item 27(a) - Schedule of Assets Held for Investment Purposes
As of December 31, 1998 8
Item 27(d) - Schedule of Reportable Transactions
For the Year Ended December 31, 1998 9
Schedules Omitted Because There Were No Such Items
For the Year Ended December 31, 1998:
Item 27(b) - Loans or Fixed Income Obligations in Default
Item 27(c) - Leases in Default or Classified as Uncollectable
Item 27(e) - Non-Exempt Transactions
<TABLE>
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, 1998 and 1997
<CAPTION>
1998 1997
<S> <C> <C>
Investments, at market value:
Common/Collective Trusts-
PNC Bank Investment Contract Fund $ 347,318 $ 935,287
Mutual Funds-
BlackRock Managed Income Portfolio 615,843 1,280,132
Fidelity Advisor Balanced Portfolio 3,004,741 5,516,145
Fidelity Advisor Equity Growth Portfolio 2,875,853 4,203,496
Fidelity Advisor Overseas Portfolio 495,504 827,771
Fidelity Advisor High Yield Portfolio 1,719,164 3,335,034
Common Stock-
Banner Aerospace, Inc. 330,950 920,678
Participant loans 156,207 702,912
Total investments 9,545,580 17,721,455
Receivables:
Dividends receivable 49,383 80,582
Contributions receivable 108,036 174,990
Total receivables 157,419 255,572
Net assets available for plan benefits $9,702,999 $17,977,027
The accompanying notes are an integral part of these statements
</TABLE>
<TABLE>
Amended and Restated
Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust
<CAPTION>
Statement of Changes in Net Assets Available for Plan Benefits
For the Year Ended December 31, 1998
Fidelity
PNC Bank BlackRock Fidelity Advisor Fidelity
Investment Managed Advisor Equity Advisor
Contract Income Balanced Growth Overseas
<S> <C> <C> <C> <C> <C>
Increases:
Contributions-
Employees $ 36,175 $ 59,783 $ 216,669 $ 324,608 $ 82,635
Employer 10,341 18,710 63,495 94,587 19,491
Assets of merged
plan and other (2,895) (112) 8,645 16,214 7,034
Interest and
dividend income 769 58,200 357,038 321,515 5,773
Unrealized appreciation
(decline) in market
value of investments 10,079 (2,877) 29,667 410,309 33,325
Realized gain (loss)
on the sale of
investments 29,043 (2,628) 211,010 322,386 66,224
Total increases 83,712 131,076 886,524 1,489,619 214,482
Decreases:
Distributions
to participants 758,935 822,447 3,313,815 3,017,502 526,780
Net increase
(decrease) (675,223)(691,371) (2,427,291)(1,527,883) (312,298)
Transfers between
funds 151,417 14,323 (111,363) 157,246 (32,274)
Net assets available
for plan benefits,
beginning of period 947,153 1,299,816 5,555,059 4,258,367 842,302
Net assets available
for plan benefits,
end of period $423,347 $622,768 $3,016,405 $2,887,730 $ 497,730
Fidelity
Advisor Banner
High Common Participant
Yield Stock Loans Total
<S> <C> <C> <C> <C>
Increases:
Contributions-
Employees $ 177,451 $ 67,075 $ -- $ 964,396
Employer 50,920 19,987 -- 277,532
Asset of merged
plan and other 16,627 5,498 (27) 50,984
Interest and
dividend income 216,461 1,556 -- 961,312
Unrealized appreciation
(decline) in market
value of investments (192,542) (56,583) -- 231,378
Realized gain (loss)
on the sale of
investments 53,031 20,917 -- 700,183
Total increases 321,948 58,450 (27) 3,185,784
Decreases:
Distributions
to participants 2,031,636 572,657 416,040 11,459,812
Net increase
(decrease) (1,709,688) (514,207) (416,067)(8,274,028)
Transfers between
funds 36,259 (84,970) (130,638) --
Net assets available
for plan benefits,
beginning of period 3,438,383 933,035 702,912 17,977,027
Net assets available
for plan benefits,
end of period $1,764,954 $333,858 $156,207 $9,702,999
</TABLE>
Amended and Restated
Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust
Notes to Financial Statements and Schedules
As of December 31, 1998 and 1997
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 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.
Plan Distributions
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.
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:
<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 non-vested accounts totaled $74,934 during 1998, 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 in the Plan.
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 BlackRock
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
BlackRock 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 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>
1998 1997
<S> <C> <C>
PNC Bank Investment Contract Fund $ * $ 935,287
BlackRock Managed Income Portfolio 615,843 1,280,132
Fidelity Advisor Balanced Portfolio 3,004,741 5,516,145
Fidelity Advisor Equity Growth 2,875,853 4,203,496
Portfolio 2,875,853 4,203,496
Fidelity Advisor Overseas Portfolio 495,504 *
Fidelity Advisor High Yield
Portfolio 1,719,164 3,335,034
Banner Aerospace, Inc. Common Stock * 920,678
*Less than 5 percent of the Plan's total assets in the
respective period.
</TABLE>
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 minimum 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
the loan unless the proceeds are used for the purpose of
acquiring, constructing or rehabilitating the principal residence
of the participant or a 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 and Use of Estimates
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.
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 and 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 PNC Bank 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, creditworthiness 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, 1998 and 1997.
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 parties-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, 1998 and
1997, and the transactions in such assets for the year ended
December 31, 1998, 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.
8.Subsequent Event:
On April 8, 1999, a special meeting of the shareholders of the
Company was held to approve the exchange of the Company's common
stock for common stock of The Fairchild Corporation. As a result
of the approval by the shareholders to exchange the Company's
common stock with common stock of The Fairchild Corporation, the
Banner Common Stock Fund is now The Fairchild Corporation Common
Stock Fund. Each share of Banner Aerospace common stock was
converted into the right to receive 0.7885 shares of Fairchild
Class A Common Stock.
<TABLE>
Schedule I
Amended and Restated
Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust
<CAPTION>
Item 27(a) - Schedule of Assets Held for Investment Purposes
As of December 31, 1998
Description of
Investment Including
Maturity Date, Rate of
Identity of Issuer, Borrower, Interest, Collateral, and Market
Lessor, or Similar Party Par or Maturity Value Value Cost
<S> <C> <C> <C>
PNC Bank Investment Contract Common/Collective
Fund* Trust (Note 2) $ 347,318 308,799
BlackRock Managed Income Mutual Fund 615,843 599,924
Portfolio*
Fidelity Advisor Balanced Mutual Fund 3,004,741 2,684,053
Portfolio
Fidelity Advisor Equity Mutual Fund 2,875,853 2,332,595
Growth Portfolio
Fidelity Advisor Overseas Mutual Fund 495,504 457,082
Portfolio
Fidelity Advisor High Yield Mutual Fund 1,719,164 1,809,068
Portfolio
Banner Aerospace, Inc.* Common Stock 330,950 290,075
Participant Loans Loans to Plan
participants, bearing
interest rates ranging
from 8.75% to 9.5% 156,207 156,207
$9,545,580 $8,637,803
* Represents a party-in-interest.
</TABLE>
<TABLE>
Schedule II
Amended and Restated
Banner Aerospace, Inc.
Profit-Sharing/401(k) Plan and Trust
<CAPTION>
Item 27(d) - Schedule of Reportable Transactions
For the Year Ended December 31, 1998
Purchases
-----------------------
Description of Number of Purchase
Identity of Party Involved Asset Transactions Price
- ---------------------------- ----------------- ------------ ---------
<S> <C> <C> <C>
PNC Bank Investment Contract Common/Collective 97 $ 725,134
Fund* Trust
BlackRock Managed Income Mutual Fund 42 263,398
Portfolio*
Fidelity Advisor Balanced Mutual Fund 49 1,137,385
Portfolio
Fidelity Advisor Equity Mutual Fund 51 1,253,940
Growth Portfolio
Fidelity Advisor High Yield Mutual Fund 56 698,497
Portfolio
Sales
----------------------------------------
Number
Identity of Party Description of of
Involved Asset Trans- Selling Cost of Net
actions Price Assets Gain
- ------------------- ----------------- ------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
PNC Bank Investment Common/Collective 65 $1,352,429 $1,255,065 $ 97,364
Contract Fund* Trust
BlackRock Managed Mutual Fund 58 922,182 893,428 28,755
Income Portfolio*
Fidelity Advisor Mutual Fund 82 3,889,506 3,208,148 681,318
Balanced Portfolio
Fidelity Advisor Mutual Fund 85 3,314,279 2,864,936 449,343
Equity Growth Portfolio
Fidelity Advisor Mutual Fund 88 2,174,855 2,031,778 143,077
High Yield Portfolio
* Represents a party-in-interest.
</TABLE>
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 28, 1999
