UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 31, 1996
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 0-21105
GKN HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-3414302
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
61 Broadway, New York, New York 10006
- ------------------------------- -----
(Address of principal executive offices) (Zip Code)
(212)509-3800
- -------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 16, 1996
- ----- --------------------------------
Common Stock, $.0001 par value 8,344,125 shares
Exhibit index on page 15.
Page 1 of 16 total pages.
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Index
Page
----
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
October 31, 1996 (Unaudited) and January 31, 1996 3
Consolidated Statements of Income for the three and nine
months ended October 31, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
for the nine months ended October 31, 1996 and 1995 (Unaudited) 5
Consolidated Statements of Cash Flows for the nine months
ended October 31, 1996 and 1995 (Unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<CAPTION>
October 31, January 31,
1996 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $24,638,000 $ 7,873,000
Due from clearing firm 373,000 4,338,000
Commissions receivable 197,000 106,000
Syndicate fees receivable 104,000 369,000
Securities owned, at market value 15,484,000 8,152,000
Securities owned, not readily marketable, at fair value 1,263,000 1,744,000
Investments, at cost 3,249,000 292,000
Office furniture, equipment and leasehold improvements
(net of accumulated depreciation and amortization of
$1,320,000 and $1,027,000) 1,295,000 964,000
Goodwill (net of accumulated amortization of $60,000
and $11,000) 1,575,000 1,595,000
Loans receivable 1,169,000 1,435,000
Income taxes receivable 1,352,000 --
Other assets 1,113,000 985,000
----------- -----------
Total assets $51,812,000 $27,853,000
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Securities sold, not yet purchased, at market value $ 5,903,000 $ 4,015,000
Commissions payable 2,158,000 1,992,000
Deferred compensation 1,865,000 331,000
Income taxes payable -- 318,000
Deferred tax liability 1,168,000 1,292,000
Accrued expenses and other liabilities 4,702,000 4,195,000
----------- -----------
15,796,000 12,143,000
Liability subordinated to the claims of general creditors 731,000 934,000
----------- -----------
Total liabilities 16,527,000 13,077,000
----------- -----------
Stockholders' equity:
Common stock, $.0001 par value; 35,000,000 shares
authorized; 9,102,875 and 5,397,875 shares issued;
8,384,125 and 4,885,375 shares outstanding 1,000 1,000
Additional paid-in capital 19,599,000 3,487,000
Retained earnings 17,260,000 11,918,000
Cumulative translation adjustment (17,000) --
----------- -----------
36,843,000 15,406,000
Less treasury stock, at cost; 718,750 and 512,500 shares (1,558,000) (630,000)
----------- -----------
Total stockholders' equity 35,285,000 14,776,000
----------- -----------
Total liabilities and stockholders' equity $51,812,000 $27,853,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
<CAPTION>
Three Months Nine Months
Ended October 31, Ended October 31,
------------------------ ------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Commissions $10,573,000 $ 8,771,000 $39,740,000 $20,787,000
Investment banking 1,977,000 1,342,000 7,544,000 4,266,000
Principal transactions 914,000 1,966,000 4,418,000 4,659,000
Interest 462,000 168,000 1,176,000 441,000
Other 78,000 26,000 130,000 122,000
----------- ----------- ----------- -----------
Total revenues 14,004,000 12,273,000 53,008,000 30,275,000
----------- ----------- ----------- -----------
Expenses:
Compensation and benefits 8,970,000 7,260,000 32,665,000 18,443,000
Communications 997,000 596,000 2,906,000 1,929,000
Brokerage, clearing and
exchange fees 537,000 301,000 1,742,000 833,000
Occupancy and equipment 751,000 494,000 2,067,000 1,467,000
Business development 429,000 200,000 1,051,000 567,000
Professional fees 286,000 164,000 1,413,000 562,000
Other 667,000 301,000 1,829,000 1,123,000
----------- ----------- ----------- -----------
Total expenses 12,637,000 9,316,000 43,673,000 24,924,000
----------- ----------- ----------- -----------
Income before income taxes 1,367,000 2,957,000 9,335,000 5,351,000
Income taxes 552,000 1,410,000 3,993,000 2,276,000
----------- ----------- ----------- -----------
Net income $ 815,000 $ 1,547,000 $ 5,342,000 $ 3,075,000
=========== =========== =========== ===========
Earnings per common share $ 0.09 $ 0.27 $ 0.80 $ 0.53
=========== =========== =========== ===========
Weighted average common
shares outstanding 8,694,355 5,715,792 6,667,294 5,760,379
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
<CAPTION>
Preferred
Common Stock Stock Additional Cumulative Treasury Stock
----------------- ------------- Paid-in Retained Translation --------------------
Shares Amt. Shares Amt. Capital Earnings Adjustment Shares Amount Total
--------- ------ ------ ---- ----------- ----------- ---------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nine months ended October 31, 1995:
- -----------------------------------
Balance at
January 31, 1995 5,397,875 $1,000 1,000 $ - $ 3,487,000 $ 8,449,000 $ - 287,500 $ (180,000) $11,757,000
Net income - - - - - 3,075,000 - - - 3,075,000
Expiration of
preferred shares - - (1,000) - - - - - - -
Purchase of
treasury shares - - - - - - - 225,000 (450,000) (450,000)
--------- ------ ----- --- ----------- ----------- -------- ------- ---------- -----------
Balance at
October 31, 1995 5,397,875 $1,000 - $ - $ 3,487,000 $11,524,000 $ - 512,500 $ (630,000) $14,382,000
========= ====== ===== === =========== =========== ======== ======= ========== ===========
Nine months ended October 31, 1996:
- -----------------------------------
Balance at
January 31, 1996 5,397,875 $1,000 - $ - $ 3,487,000 $11,918,000 $ - 512,500 $ (630,000) $14,776,000
Net income - - - - - 5,342,000 - - - 5,342,000
Stock issued 3,705,000 - - - 16,332,000 - - - - 16,332,000
Warrants issued - - - - 1,000 - - - - 1,000
Notes receivable - - - - (221,000) - - - - (221,000)
Purchase of
treasury shares - - - - - - - 206,250 (928,000) (928,000)
Translation adjustment - - - - - - (17,000) - - (17,000)
--------- ------ ----- --- ----------- ----------- -------- ------- ----------- -----------
Balance at
October 31, 1996 9,102,875 $1,000 - $ - $19,599,000 $17,260,000 $(17,000) 718,750 $(1,558,000) $35,285,000
========= ====== ===== === =========== =========== ======== ======= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Operating activities:
Net income $ 5,342,000 $ 3,075,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred taxes (114,000) 1,128,000
Depreciation 178,000 175,000
Amortization 229,000 127,000
----------- -----------
5,635,000 4,505,000
(Increase) decrease in operating assets:
Due from clearing firm 3,965,000 (117,000)
Commissions receivable (91,000) 125,000
Syndicate fees receivable 265,000 -
Securities owned, at market value (7,332,000) 119,000
Securities owned, not readily marketable 481,000 (1,312,000)
Investments (2,957,000) (290,000)
Loans receivable 266,000 125,000
Income taxes receivable (1,352,000) 448,000
Other assets (177,000) 160,000
Increase (decrease) in operating liabilities:
Securities sold, not yet purchased 1,888,000 139,000
Commissions payable 166,000 447,000
Deferred compensation 1,534,000 108,000
Income taxes payable (328,000) 553,000
Accrued expenses and other liabilities 507,000 4,548,000
Translation adjustment (17,000) -
----------- -----------
Net cash provided by operating activities 2,453,000 9,558,000
----------- -----------
Investing activities:
Purchase of office furniture, equipment
and leasehold improvements (640,000) (97,000)
Goodwill resulting from acquisition cost
adjustment (30,000) -
----------- -----------
Net cash used in investing activities (670,000) (97,000)
----------- -----------
Financing activities:
Issuance of common shares 16,112,000 -
Issuance of common stock warrants 1,000 -
Purchase of treasury stock (928,000) (450,000)
Repayment of subordinated debt (203,000) -
----------- -----------
Net cash provided by (used in)
financing activities 14,982,000 (450,000)
----------- -----------
Net increase in cash and cash equivalents 16,765,000 9,011,000
Cash and cash equivalents at beginning of year 7,873,000 3,123,000
----------- -----------
Cash and cash equivalents at end of period $24,638,000 $12,134,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Basis of Presentation
The consolidated financial statements include the accounts of GKN Holding Corp.
and its subsidiaries (the Company). All significant intercompany accounts and
transactions are eliminated in consolidation. In the opinion of management, the
consolidated financial statements reflect all adjustments, which are all of a
normal recurring nature, necessary for a fair statement of the Company's
financial position and results of operations for the interim periods presented.
These consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements and notes thereto for the year ended
January 31, 1996, in its registration statement filed on Form S-1, as amended,
and for the periods ended July 31, 1996, in its Form 10-Q for the quarter then
ended. Certain reclassifications have been made to the prior year amounts to
conform to the current presentation.
The financial statements conform with generally accepted accounting principles
(GAAP). The preparation of financial statements in conformity with GAAP requires
the Company to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could vary
from these estimates.
Weighted average common shares outstanding used in the calculation of earnings
per common share reflects common stock equivalents, consisting of stock options
and warrants, when their effect is dilutive. The difference between primary and
fully diluted earnings per share is not material.
The Company's principal business activities are affected by many factors,
including general economic and market conditions, which can result in
substantial fluctuations in the Company's revenues and net income. Therefore,
the results of operations for the three and nine months ended October 31, 1996,
are not necessarily indicative of the results which may be expected for the
entire fiscal year.
2. Initial Public Offering of Common Stock
The Company sold 2,875,000 shares of its common stock in an initial public
offering at a price of $6.00 per share. The sale was effective as of July 30,
1996, and closed on August 2, 1996. The proceeds from the public offering were
$16,375,000 after underwriting discounts and commissions, and $15,452,000 after
other expenses of the offering totaling $923,000. The Company's principal
operating subsidiary, GKN Securities Corp. (GKN), served as a co-manager of the
offering. GKN received underwriting discounts and commissions of $850,000, which
were eliminated in consolidation. The Company plans to use the net proceeds,
which are currently invested in short-term interest-bearing investments,
principally to expand its existing business and also for working capital and
general corporate purposes.
3. Net Capital Requirements
GKN and another wholly-owned subsidiary, Shochet Securities, Inc. (Shochet), are
registered broker-dealers with the Securities and Exchange Commission (the SEC)
and member firms of the National Association of Securities Dealers, Inc. (NASD).
As such, GKN and Shochet are subject to the SEC's net capital rule, which
requires the maintenance of minimum net capital.
GKN has elected to compute net capital using the alternative method permitted by
the net capital rule, which requires that it maintain minimum net capital, as
defined, to be greater than or equal to $250,000. At October 31, 1996, GKN had
net capital of $17,621,000.
7
<PAGE>
Shochet has elected to compute net capital under the standard aggregate
indebtedness method permitted by the net capital rule, which requires that the
ratio of aggregate indebtedness to net capital, both as defined, shall not
exceed 15 to 1. At October 31, 1996, Shochet had net capital of $352,000 and a
net capital requirement of $100,000. Shochet's net capital ratio at October 31,
1996, was 1.1 to 1.
4. Commitments and Contingencies
GKN is the subject of an NASD Regulation, Inc. (NASDR) staff investigation
which, the Company believes, arises primarily from mark-ups and mark-downs taken
on customer transactions in securities of certain issuers whose offerings were
managed by GKN, and sales and trading practices in connection with such
transactions. The purpose of the investigation is to determine whether GKN or
any persons associated with the firm have engaged in any violation of the
federal securities laws or the NASDR Rules of Fair Practice. The NASDR staff has
not advised GKN whether it intends to recommend any enforcement action and GKN
cannot predict when the investigation might end, or its outcome. GKN is
cooperating fully with the NASDR staff in the investigatory process. The NASDR
has broad authority to sanction firms and other persons subject to its
jurisdiction, including the levying of financial penalties, disgorgement, the
imposition of censures, suspensions or bars, and frequently imposes material
sanctions in cases of this nature. The outcome of the NASDR investigation could
have a substantial adverse financial impact on GKN, result in restrictions on
the business activities of GKN and its supervisors and principals and otherwise
have a material adverse effect on the Company.
GKN is the subject of an SEC staff investigation that arose primarily from
certain sales practices and the supervision of certain registered
representatives in 1991 and 1992. GKN expects to submit to the SEC shortly an
Offer of Settlement. The terms of the Offer of Settlement are the subject of
continuing discussions with the SEC staff and there is no assurance that any
proposed settlement will be approved by the SEC.
8
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Three Months Ended October 31, 1996 vs. Three Months Ended October 31, 1995
- ---------------------------------------------------------------------------
Earnings per share of common stock for the three months ended October 31, 1996,
were $0.09 as compared to $0.27 for the three months ended October 31, 1995. The
decrease in earnings was primarily due to dilution caused by a 52% increase in
average shares outstanding resulting from the Company's July 1996 initial public
offering, as well as higher operating expenses resulting from the Company's
growth over the past year. Increased commission and investment banking revenues
served to partially offset these earnings decreases.
The Company's principal business activities are affected by many factors,
including general economic and market conditions, which can result in
substantial fluctuations in the Company's revenues and net income. Therefore,
the results of operations for the quarter are not necessarily indicative of the
results which may be expected for the entire fiscal year.
Revenues
Total revenues increased by 14% to $14,004,000 for the third quarter of fiscal
1997, as increases in commission and investment banking revenues were partially
offset by lower revenues from principal transactions.
Commission revenues increased by $1,802,000, or 21%, for the third quarter
primarily due to a greater level of retail business resulting from the Company's
acquisition of Shochet Securities in November 1995. The Company processed 37%
more trades during the three months over the same period in fiscal 1996, almost
entirely due to Shochet business.
Investment banking revenues increased by $635,000, or 47%. During the third
quarter of fiscal 1997 the Company raised $26.9 million for corporate clients
through two public offerings and two private placements. In the same period in
fiscal 1996 the Company raised $11.9 million for its clients through one public
offering and two private placements.
Principal transactions generated revenues of $914,000 in the third quarter of
fiscal 1997, a 54% decrease from the fiscal 1996 quarter. The lower revenues
resulted from weakened market conditions for small capitalization stocks during
the fiscal 1997 period. Revenues generated through market making activities for
over-the-counter equity securities decreased $160,000 to $331,000 for the
quarter while revenues from the Company's investment account decreased $892,000
to $583,000. The investment account revenue decrease was directly related to
decreases in the prices of the shares underlying underwriter warrants held by
the Company, all of which were issued by investment banking clients.
Interest income increased $294,000 due to higher cash balances, a greater use of
margin loans by the Company's customers, and a renegotiated interest sharing
arrangement with the Company's clearing firm.
Expenses
Total expenses for the quarter in fiscal 1997 were $12,637,000, a 36% increase
over the third quarter in fiscal 1996.
9
<PAGE>
Compensation and benefits expense increased 24% to $8,970,000. These expenses
are primarily variable as commissions to brokers are paid as a percentage of
commission revenues generated. The expense increase in fiscal 1997 is consistent
with the increases in commission and investment banking revenues.
Communications expense increased by $401,000, or 67%, as a result of the
Company's growth and increased level of business activity. The 276 registered
representatives employed by the Company at October 31, 1996, represent a 36%
increase from October 31, 1995. During the same period total employees increased
by 46% to 479.
Brokerage, clearing and exchange fees and occupancy and equipment expenses
increased by 78% and 52%, respectively. These increases were primarily due to
the November 1995 acquisition of Shochet Securities.
Business development expenses increased by 115% to $429,000 due to increased
promotional activities.
Professional fees increased by $122,000, or 74%, primarily as a result of higher
legal fees.
Other expenses increased $366,000 primarily due to increased expenses associated
with a higher level of business activity.
Weighted average common shares outstanding
The average number of common shares and common stock equivalents outstanding
used in the computation of earnings per common share was 8,694,355 in the third
quarter of fiscal 1997, compared with 5,715,792 in fiscal 1996. The 52% increase
in the weighted average in fiscal 1997 resulted from the 2,875,000 shares of
common stock issued in the Company's initial public offering on July 30, 1996.
Nine Months Ended October 31, 1996 vs. Nine Months Ended October 31, 1995
- -------------------------------------------------------------------------
Earnings per share of common stock for the nine months ended October 31, 1996,
were $0.80 as compared to $0.53 for the nine months ended October 31, 1995. The
increase in earnings was the result of a strong investment climate for five of
the first nine months of fiscal 1997 combined with the Company's growth,
resulting in significant securities brokerage and investment banking volumes.
The results of operations for the nine months are not necessarily indicative of
the results which may be expected for the entire fiscal year.
Revenues
Total revenues increased by $22,733,000, or 75%, to $53,008,000 for the nine
months, led by significant increases in commission and investment banking
revenues.
Commission revenues increased by $18,953,000, or 91%, for the year-to-date
period. The increase reflects strong overall market conditions in the first five
months of fiscal 1997, as well as a 36% increase in the number of registered
representatives employed by the Company and a 92% increase in the volume of
trades processed.
Investment banking revenues increased by $3,278,000, or 77%. The Company raised
$85.8 million for its clients in the fiscal 1997 period through six public
offerings and seven private placements, an increase from the comparable fiscal
1996 period when the Company raised $41.6 million through three public offerings
and four private placements. The increase in underwriting activity was the
result of general market conditions and a more concentrated effort to develop a
quality investment banking clientele.
10
<PAGE>
Revenues from principal transactions decreased by $241,000, or 5%, for the nine
months. Market making activities generated increased revenues of $1,840,000,
which were more than offset by a revenue decrease of $2,081,000 from the
Company's investment account. The market making revenues, which amounted to
$2,717,000 for the fiscal 1997 period, were positively impacted by the strong
market conditions experienced during February through June 1996, resulting in
revenue increases which were partially negated by the subsequent periods of
market volatility and weakness, specifically in the small capitalization stock
sector. The high degree of volatility experienced in the markets during July
1996 adversely impacted the stock prices of the Company's underwriting clients,
which was reflected in the valuation of the underwriter warrants held in the
Company's investment account. This impact served to eliminate much of the gains
recognized in the account in the first five months of the fiscal year. Third
quarter market conditions provided only a modest recovery in the stock prices,
resulting in net investment account revenues for the nine months of $1,701,000.
Interest income increased by $735,000 due to higher cash balances, a greater use
of margin loans by the Company's customers, and a renegotiated interest sharing
arrangement with the Company's clearing firm.
Expenses
Total expenses for the first nine months of fiscal 1997 were $43,673,000, a 75%
increase over the same period in fiscal 1996. Total expenses as a percentage of
revenues were 82% in both periods.
Increases in the Company's expense categories for the nine month period resulted
from the same factors causing increases in expenses for the third quarter. The
primary factors resulting in higher expenses were the increases in the level of
business activities and number of Company employees, while the November 1995
acquisition of Shochet Securities and increased promotional activities and legal
fees incurred also served to increase the Company's expenses.
Weighted average common shares outstanding
The average number of common shares and common stock equivalents outstanding
used in the computation of earnings per common share was 6,667,294 for the
year-to-date period in fiscal 1997, compared with 5,760,379 in fiscal 1996. The
16% increase in the weighted average in fiscal 1997 resulted from the 2,875,000
shares of common stock issued in the Company's initial public offering on July
30, 1996.
Liquidity and Capital Resources
On July 30, 1996, the Company raised $15,452,000, net of underwriters' discounts
and commissions and associated costs, in an initial public offering of the
Company's common stock. The Company plans to use the net proceeds from the
offering, which are currently invested in short-term interest-bearing
investments, principally to expand its existing business and also for working
capital and general corporate purposes.
The Company's assets are highly liquid with the majority consisting of cash and
cash equivalents, securities inventories, and receivables from other
broker-dealers and the Company's clearing firm, all of which fluctuate depending
upon the levels of customer business and trading activity. Approximately 79% of
the Company's assets at October 31, 1996, were highly liquid. Receivables from
broker-dealers and the Company's clearing firm turn over rapidly. As a
securities dealer, the Company may carry significant levels of trading
inventories to meet customer needs. The Company's inventory of market making
securities is readily marketable; however, holding large blocks of the same
security may limit liquidity and prevent realization of full market value for
the securities. Securities owned, but not readily marketable, represent
underwriter warrants and the securities underlying such warrants. The liquidity
11
<PAGE>
of these securities is limited. A relatively small percentage of the Company's
total assets are fixed. The Company's total assets or the individual components
of total assets may vary significantly from period to period because of changes
relating to customer demand, economic and market conditions, and proprietary
trading strategies.
GKN and Shochet, the Company's operating broker-dealer subsidiaries, are subject
to the net capital rules of the NASD and the SEC. As such, they and the Company
are subject to certain restrictions on the use of capital and its related
liquidity. GKN's and Shochet's respective net capital positions as of October
31, 1996, were $17,621,000 and $352,000, which were $17,371,000 and $252,000 in
excess of their respective net capital requirements.
Prior to its initial public offering, the Company financed its operations
through the private placement of debt and equity securities and cash flow from
operations. The Company has not employed any significant leverage or debt. In
conjunction with the Company's November 1995 acquisition of Shochet, the Company
issued the seller a subordinated note as part of the purchase price, of which
$731,000 was outstanding at October 31, 1996. The Company intends to use debt
prudently in the future and to arrange for lines of credit in the near future.
Prior to the Company's initial public offering, the Company repurchased 156,250
shares at a cost of $612,000 during the current fiscal year. On October 31,
1996, the Company authorized the repurchase of up to $600,000 of its common
stock on the open market in order to fund the common stock portion of awards due
under the Company's 1996 Incentive Compensation Plan. The Company subsequently
repurchased 90,000 shares at a cost of $566,000, of which 50,000 shares were
repurchased on October 31, 1996. All repurchases were funded from cash flow from
operations.
The Company's overall capital and funding needs are continually reviewed to
ensure that its capital base can support the estimated needs of its business
units. These reviews take into account business needs as well as regulatory
capital requirements of the subsidiaries. Based upon these reviews, management
believes that the Company's capital structure is adequate for current operations
and reasonably foreseeable future needs.
Safe Harbor Cautionary Statement
The Company occasionally makes forward-looking statements such as forecasts and
projections of expected future performance or statements of its plans and
objectives. When used in this Form 10-Q and in future filings by the Company
with the SEC, in the Company's press releases and in oral statements made with
the approval of an authorized executive officer of the Company, the words or
phrases "will likely result", "the Company expects", "will continue", "is
anticipated", "estimated", "project", or "outlook" or similar expressions
(including confirmations by an authorized executive officer of the Company of
any such expressions made by a third party with respect to the Company) are
intended to identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. Factors
which could affect the Company's results of operations and cause its results to
differ from these statements include the volatility and price level of the
securities markets; the volume, size and timing of securities transactions; the
demand for investment banking services; the level and volatility of interest
rates; the availability of credit; legislation affecting the business and
financial communities; and the economy in general. For a more complete
discussion of these and other factors, see the Company's registration statement
filed on Form S-1, as amended (No. 333-05273). The Company has no obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.
12
<PAGE>
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 - Financial Data Schedule BD
(b) Reports on Form 8-K:
None
13
<PAGE>
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.
GKN HOLDING CORP.
Date: December 16, 1996 /s/ David M. Nussbaum
--------------------------
David M. Nussbaum
Chairman of the Board and
Chief Executive Officer
/s/ Peter R. Kent
---------------------------
Peter R. Kent
Chief Operating Officer and
Chief Financial Officer
14
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Exhibit Index
Number Description Page
- ------ ----------- ----
27 Financial Data Schedule BD (10/31/96) 16
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 24,638,000
<RECEIVABLES> 3,195,000
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 19,996,000
<PP&E> 1,295,000
<TOTAL-ASSETS> 51,812,000
<SHORT-TERM> 0
<PAYABLES> 0
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 5,903,000
<LONG-TERM> 731,000
0
0
<COMMON> 1,000
<OTHER-SE> 35,284,000
<TOTAL-LIABILITY-AND-EQUITY> 51,812,000
<TRADING-REVENUE> 4,418,000
<INTEREST-DIVIDENDS> 1,176,000
<COMMISSIONS> 39,740,000
<INVESTMENT-BANKING-REVENUES> 7,544,000
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 74,000
<COMPENSATION> 32,665,000
<INCOME-PRETAX> 9,335,000
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,342,000
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.79
</TABLE>
