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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 15, 1999 (December 31, 1998)
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BANNER AEROSPACE, INC.
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(Exact name of Registrant as Specified in
Charter)
DELAWARE 1-10561 95-2039311
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(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification No.)
Incorporation or
Organization)
45025 AVIATION DRIVE, SUITE 300
DULLES, VA 20166-7556
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (703) 478-5790
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 31, 1998 (the "Closing Date"), Banner Aerospace, Inc. (the
"Company") consummated the sale of all the issued and outstanding shares of
common stock, par value $1.00 per share (the "Solair Shares"), of Solair, Inc.
("Solair") to Kellstrom Industries, Inc. ("Kellstrom") in exchange for
approximately $57,000,000 in cash and a warrant (the "Kellstrom Warrant") to
purchase 300,000 shares of common stock, par value $0.001 per share (the
"Kellstrom Shares"), of Kellstrom (the "Transaction"). The Kellstrom Warrant is
for a term of four years at an exercise price of $27.50. The purchase price for
the Solair Shares is based on the consolidated net worth of Solair as of the
Closing Date, subject to certain adjustments. Based on the number of shares of
common stock of Kellstrom issued and outstanding as of October 31, 1998, the
Kellstrom Shares would represent, upon issuance, approximately 0.025% of the
then issued and outstanding shares of Kellstrom.
The terms of the Transaction are set forth in a Stock Purchase Agreement
dated as of December 5, 1998 (the "Agreement") among the Company, Solair and
Kellstrom. A copy of the Agreement is attached hereto as Exhibit 2.1 The form of
the Kellstrom Warrant is included as Exhibit D to the Agreement. For certain
additional information regarding the Transaction, reference is made to the press
release of the Company dated December 7, 1998, which is attached hereto as
Exhibit 99.1, and the press release of the Company dated January 4, 1999, which
is attached hereto as Exhibit 99.2.
Additional information regarding Kellstrom is contained in Kellstrom's
filings with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 (Commission File No. 0-23764).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following financial statements, pro forma financial information and
exhibits are filed as a part of this report.
(b) Unaudited Pro Forma Financial Information:
The following unaudited pro forma consolidated income statements for the
fiscal year ended March 31, 1998 and for the six months ended September 30, 1998
and unaudited balance sheet as of September 30, 1998 give effect to the
Transaction. The pro forma income statement information for the fiscal year
ended March 31, 1998 also gives effect to the disposition of the Company's
Hardware Group and PacAero unit to AlliedSignal Inc. on January 13, 1998. The
Form 8-K filed on January 28, 1998 with respect to such transaction is
incorporated herein by reference.
The unaudited pro forma consolidated financial information is based on the
historical financial information of the Company for the fiscal year ended March
31, 1998, for the six months ended September 30, 1998 and as of September 30,
1998. The unaudited pro forma consolidated financial information is presented
for informational purposes only and is not necessarily indicative of what
earnings and results of operations would have been had the Transaction been
consummated at the beginning of the periods presented, nor is such information
intended necessarily to be indicative of the future results of operations that
may occur.
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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998
ASSETS
(1)
(IN THOUSANDS) HISTORICAL ADJUSTMENTS PRO FORMA
------------ ----------- ------------
Current Assets:
Cash and marketable securities $ 174,033 $ --- $ 174,033
Accounts receivable, net 33,153 (15,376) 17,777
Inventories 149,577 (60,281) 89,296
Other current assets 19,574 2,302 21,876
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Total current assets 376,337 (73,355) 302,982
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Net fixed assets 4,767 (1,487) 3,280
Other Assets:
Investments 21,858 2,445 24,303
Cost in excess of net tangible
assets of purchased business, net 12,075 (2,660) 9,415
Other 1,605 --- 1,605
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Total other assets 35,538 (215) 35,323
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Total assets $ 416,642 $ (75,057) $ 341,585
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LIABILITIES AND STOCKHOLDERS' EQUITY
(1)
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ----------- ------------
Current Liabilities:
Accounts payable $ 22,271 $ (8,663) $ 13,608
Other current liabilities 33,257 2,616 35,873
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Total current liabilities 55,528 (6,047) 49,481
Long-Term Liabilities:
Long-term debt 97,500 (52,000) 45,500
Other 27,917 (4,510) 23,407
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125,417 (56,510) 68,907
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Total liabilities 180,945 (62,557) 118,388
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Stockholders' Equity:
Preferred stock 41 --- 41
Common stock 23,730 --- 23,730
Treasury stock at cost (23,331) --- (23,331)
Paid-in-capital 152,292 --- 152,292
Retained earnings 93,746 (12,500) 81,246
Cumulative other comprehensive
income (10,781) --- (10,781)
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Total stockholders' equity 235,697 (12,500) 223,197
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Total liabilities & stockholders'
equity $ 416,642 $ (75,057) $ 341,585
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UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
(1)
(IN THOUSANDS EXCEPT PER SHARE DATA) HISTORICAL ADJUSTMENTS PRO FORMA
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Net sales $ 105,566 $ (34,611) $ 70,955
Cost of goods sold 83,138 (28,286) 54,852
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Gross profit 22,428 (6,325) 16,103
Selling, general and administrative
expenses 19,013 (7,119) 11,894
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Operating income 3,415 794 4,209
Investment income 2,570 --- 2,570
Interest expense, net 3,261 --- 3,261
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Income before taxes 2,724 794 3,518
Provision for taxes 660 309 (2) 969
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Net income $ 2,064 $ 485 $ 2,549
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Preferred stock dividends 1,364 --- 1,364
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Net income available for common
shareholders $ 700 $ 485 $ 1,185
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Earnings per common share - basic $ 0.03 $ 0.03 $ 0.06
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Earnings per common share - diluted $ 0.03 $ 0.02 $ 0.05
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Weighted average number of shares -
basic 21,444 --- 21,444
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Weighted average number of shares - diluted 21,856 --- 21,856
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UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED MARCH 31, 1998
(IN THOUSANDS EXCEPT PER SHARE DATA) (1) (3)
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
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Net sales $ 420,323 $ (74,709) $ (194,542) $ 151,072
Cost of goods sold 305,385 (59,543) (128,078) 117,764
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Gross profit 114,938 (15,166) (66,464) 33,308
Selling, general &
administrative expenses 87,296 (14,470) (49,139) 23,687
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Operating income 27,642 (696) (17,325) 9,621
Non-recurring income 124,041 --- (124,041) ---
Interest expense, net 13,960 --- (13,960)(4) ---
----------- ----------- ------------ -----------
Income before taxes 137,723 (696) (127,406) 9,621
Provision for taxes 56,182 (373)(5) (52,057)(5) 3,752
----------- ----------- ------------ -----------
Net income $ 81,541 $ (323) $ (75,349) $ 5,869
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Preferred stock dividends 2,034 --- --- 2,034
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Net income available for
common shareholders $ 79,507 $ (323) $ (75,349) $ 3,835
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Earnings per common share -
basic $ 3.46 $ (0.01) $ (3.28) $ 0.17
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Earnings per common share -
diluted $ 3.10 $ (0.01) $ (2.93) $ 0.16
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Weighted average
number of shares -
basic 22,995 --- --- 22,995
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Weighted average
number of shares -
diluted 26,333 --- (2,975)(6) 23,358
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(1) Represents the elimination of the results of Solair from the results of the
Company, except as otherwise noted and as indicated in footnotes (2) and (5)
below. Approximately $52 million of the cash proceeds received from the
transaction (remaining $5 million cash proceeds held in escrow pursuant to
the Agreement) is assumed to have reduced outstanding debt at September 30,
1998. The warrant received in the Transaction to purchase 300,000 shares of
Kellstrom common stock was valued at $2.4 million at September 30, 1998. An
accrual of $6 million was recorded to reflect certain non-recurring costs
that the Company reasonably expects to incur as a result of the Transaction.
(2) Represents the adjustment required to reflect a 39% effective tax rate, less
the 70% exclusion permitted on dividend income, on consolidated pro forma
income before taxes. The Company recorded approximately $1.5 million of
dividend income for the six months ended September 30, 1998, classified as
investment income, from the shares of common stock received from
AlliedSignal Inc. in connection with the disposition on January 13, 1998.
(3) Represents the elimination of the results of Adams Industries, Inc.,
Aerospace Bearing Support, Inc., Aircraft Bearing Corporation, Banner
Distribution, Inc., Burbank Aircraft Supply, Inc., Harco, Inc., PacAero, and
PB Herndon Aerospace, Inc. from the results of the Company in connection
with the disposition to AlliedSignal Inc. on January 13, 1998, as well as
the gain realized (non-recurring income) from the disposition, except as
indicated in footnotes (4) and (5). In addition, such adjustments include
the elimination of BAI resulting from the disposition on January 2, 1998.
(4) Represents the receipt of AlliedSignal Inc. common stock and simultaneous
repayment of outstanding debt. Accordingly, all interest expense and
deferred financing fees have been eliminated. No investment income was
recognized on the remaining holdings of AlliedSignal Inc. common stock.
(5) Represents the adjustment required to reflect a 39% effective tax rate on
consolidated pro forma income before taxes.
(6) Represents the adjustment required to eliminate the antidilutive effect of
Preferred Stock on a pro forma basis for diluted earnings per common share.
(c) Exhibits:
2.1 Stock Purchase Agreement dated as of December 5, 1998, among Kellstrom
Industries, Inc., Solair, Inc., and Banner Aerospace, Inc.
99.1 Press Release of the Registrant dated December 7, 1998.
99.2 Press Release of the Registrant dated January 4, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANNER AEROSPACE, INC.
By /s/ EUGENE W. JURIS
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Eugene W. Juris
Vice President and
Chief Financial Officer
Dated: January 15, 1999
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