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 July 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 Identification No.)
incorporation or organization)
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 [ ] No [ X ]
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 September 13, 1996
- ----- ---------------------------------
Common Stock, $.0001 par value 8,434,125 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
July 31, 1996 (Unaudited) and January 31, 1996 3
Consolidated Statements of Income for the three and six
months ended July 31, 1996 and 1995 (Unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended July 31, 1996 and 1995 (Unaudited) 5
Consolidated Statements of Cash Flows for the six months
ended July 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 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
July 31, 1996 January 31, 1996
------------- ----------------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $13,943,000 $ 7,873,000 -
Due from clearing firm 1,707,000 4,338,000
Commissions receivable 181,000 106,000
Syndicate fees receivable 207,000 369,000
Securities owned, at market value 11,730,000 8,152,000
Securities owned, not readily marketable, at fair value 1,305,000 1,744,000
Investments, at cost 337,000 292,000
Office furniture, equipment and leasehold improvements
(net of accumulated depreciation and amortization of
$1,205,000 and $1,027,000) 1,008,000 964,000
Goodwill (net of accumulated amortization of $44,000
and $11,000) 1,592,000 1,595,000
Loans receivable 1,046,000 1,435,000
Other assets 1,611,000 985,000
---------- ----------
Total assets $34,667,000 $27,853,000
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Securities sold, not yet purchased, at market value $ 3,540,000 $ 4,015,000
Commissions payable 2,603,000 1,992,000
Deferred compensation 1,644,000 331,000
Income taxes payable 877,000 318,000
Deferred tax liability 1,042,000 1,292,000
Accrued expenses and other liabilities 4,893,000 4,195,000
---------- ----------
14,599,000 12,143,000
Liability subordinated to the claims of general
creditors 797,000 934,000
---------- ----------
Total liabilities 15,396,000 13,077,000
---------- ----------
Stockholders' equity:
Common stock subscribed, $.0001 par value;
2,875,000 shares at July 31, 1996 15,472,000 -
Common stock subscription receivable (15,525,000) -
---------- ----------
(53,000) -
Common stock, $.0001 par value; 35,000,000 shares
authorized; 6,227,875 and 5,397,875 shares issued;
5,559,125 and 4,885,375 shares outstanding 1,000 1,000
Additional paid-in capital 4,148,000 3,487,000
Retained earnings 16,445,000 11,918,000
Cumulative translation adjustment (28,000) -
---------- ----------
20,513,000 15,406,000
Less treasury stock, at cost; 668,750 and 512,500
shares (1,242,000) (630,000)
---------- ----------
Total stockholders' equity 19,271,000 14,776,000
---------- ----------
Total liabilities and stockholders' equity $34,667,000 $27,853,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended July 31, Six Months Ended July 31,
------------------------------- --------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Commissions $16,951,000 $ 6,747,000 $29,167,000 $12,016,000
Investment banking 2,154,000 1,493,000 5,567,000 2,924,000
Principal transactions 1,027,000 2,427,000 3,504,000 2,693,000
Interest 377,000 148,000 715,000 274,000
Other 95,000 29,000 51,000 95,000
---------- ---------- ---------- ----------
Total revenues 20,604,000 10,844,000 39,004,000 18,002,000
---------- ---------- ---------- ----------
Expenses:
Compensation and benefits 12,966,000 5,942,000 23,694,000 11,183,000
Communications 1,070,000 714,000 1,910,000 1,333,000
Brokerage, clearing and
exchange fees 574,000 266,000 1,205,000 533,000
Occupancy and equipment 704,000 487,000 1,359,000 1,007,000
Business development 349,000 159,000 625,000 367,000
Professional fees 325,000 160,000 1,123,000 398,000
Other 643,000 354,000 1,120,000 787,000
---------- --------- ---------- ----------
Total expenses 16,631,000 8,082,000 31,036,000 15,608,000
---------- ---------- ---------- ----------
Income before income taxes 3,973,000 2,762,000 7,968,000 2,394,000
Income taxes 1,692,000 979,000 3,441,000 866,000
---------- --------- ---------- ----------
Net income $ 2,281,000 $ 1,783,000 $ 4,527,000 $ 1,528,000
========== ========== ========== ==========
Earnings per common share * $ 0.40 $ 0.31 $ 0.83 $ 0.26
==== ==== ==== ====
Weighted average common
shares outstanding 5,716,918 5,781,825 5,450,014 5,781,825
========= ========= ========= =========
</TABLE>
* Represents primary earnings per share. The difference between primary and
fully diluted earnings per share is not material.
See accompanying notes to consolidated financial statements.
4
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Cumulative
Subscribed Common Stock Stock Additional Trans- Treasury Stock
--------------------- ---------------- ----------- Paid-in Retained lation ---------------
Shares Amount Shares Amt. Shares Amt. Capital Earnings Adjustment Shares Amount Total
------ ----------- ------ ------ ------ ---- ----------- ---------- ---------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended July 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 - - - - - - - 1,528,000 - - - 1,528,000
--------- --------- --------- ----- ----- --- --------- ---------- ----- ------- -------- ----------
Balance at
July 31,
1995 - $ - 5,397,875 $1,000 1,000 $ - $3,487,000 $ 9,977,000 $ - 287,500 $(180,000)$13,285,000
========= ========= ========= ===== ===== === ========= ========== ===== ======= ======== =========
Six months ended July 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 - - - - - - - 4,527,000 - - - 4,527,000
Stock subscribed 2,875,000 15,472,000 - - - - - - - - - 15,472,000
Subscription
receivable - (15,525,000) - - - - - - - - - (15,525,000)
Stock issued - - 830,000 - - - 881,000 - - - - 881,000
Warrants issued - - - - - - 1,000 - - - - 1,000
Notes receivable - - - - - - (221,000) - - - - (221,000)
Purchase of
treasury shares - - - - - - - - - 156,250 (612,000) (612,000)
Translation
adjustment - - - - - - - - (28,000) - - (28,000)
--------- ---------- --------- ----- ----- --- --------- --------- ------ ------- ---------- ---------
Balance at
July 31,
1996 2,875,000 $ (53,000) 6,227,875 $1,000 - $ - $4,148,000 $16,445,000 $(28,000) 668,750 $(1,242,000)$19,271,000
========= ========== ========= ===== ===== === ========= ========== ======= ======= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended July 31,
1996 1995
----------- ----------
<S> <C> <C>
Operating activities:
Net income $ 4,527,000 $ 1,528,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred taxes (260,000) 443,000
Depreciation 111,000 116,000
Amortization 117,000 67,000
---------- ----------
4,495,000 2,154,000
(Increase) decrease in operating assets:
Due from clearing firm 2,631,000 (757,000)
Commissions receivable (76,000) (111,000)
Syndicate fees receivable 162,000 -
Securities owned, at market value (3,578,000) 862,000
SecuritieS owned, not readily marketable 439,000 (583,000)
Investments (45,000) (240,000)
Loans receivable 389,000 (177,000)
Income taxes receivable - 448,000
Other assets (626,000) 128,000
Increase (decrease) in operating liabilities:
Securities sold, not yet purchased (474,000) 1,053,000
Commissions payable 611,000 104,000
Deferred compensation 1,313,000 171,000
Income taxes payable 568,000 123,000
Accrued expenses and other liabilities 698,000 295,000
Translation adjustment (28,000) -
--------- ---------
Net cash provided by operating activities 6,479,000 3,470,000
--------- ---------
Investing activities:
Purchase of office furniture, equipment
and leasehold improvements (239,000) (58,000)
Goodwill resulting from acquisition cost
adjustment (30,000) -
--------- --------
Net cash used in investing activities (269,000) (58,000)
--------- --------
Financing activities:
Issuance of common shares, net of receivable 608,000 -
Issuance of common stock warrants 1,000 -
Purchase of treasury stock (612,000) -
Repayment of subordinated debt (137,000) -
--------- ---------
Net cash used in financing activities (140,000) -
--------- ---------
Net increase in cash and cash equivalents 6,070,000 3,412,000
Cash and cash equivalents at beginning of year 7,873,000 3,123,000
--------- ---------
Cash and cash equivalents at end of period $13,943,000 $ 6,535,000
========== ==========
</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 and the three months ended April 30, 1996, in its registration
statement filed on Form S-1, as amended. 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.
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 six months ended July 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 $15,472,000 after
other expenses of the offering totaling $903,000. 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.
The Company considered the 2,875,000 shares sold in the offering to be
outstanding as of July 30, 1996, for the purpose of calculating weighted average
shares outstanding.
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 July 31, 1996, GKN had net
capital of $15,216,000.
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 July 31, 1996, Shochet had net capital of $626,000 and a net
capital requirement of $100,000. Shochet's net capital ratio at July 31, 1996,
was 0.7 to 1.
4. Commitments and Contingencies
GKN is the subject of an NASD staff investigation which, the Company believes,
arises primarily from mark-ups and mark-downs taken on customer transactions in
warrants of certain issuers whose offerings were managed by GKN, and sales
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 NASD Rules of Fair
Practice. The NASD 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 NASD staff in the investigatory
process. The NASD has broad authority to sanction persons subject to its
jurisdiction, including the levying of financial penalties, disgorgement, the
imposition of censures, suspensions or bars on its supervisors and principals,
and frequently imposes material sanctions in cases of this nature. The outcome
of the NASD 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 supported by the SEC staff or approved by the SEC.
8
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Three Months Ended July 31, 1996 vs. Three Months Ended July 31, 1995
Primary earnings per share of common stock for the three months ended July 31,
1996 were $0.40 as compared to $0.31 for the three months ended July 31, 1995.
The increase in earnings was the result of significant increases in volume in
securities brokerage and investment banking.
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 90% to $20,604,000 for the second quarter of fiscal
1997, led by significant increases in commissions and investment banking
revenues.
Commission revenues increased by $10,204,000, or 151%, for the second quarter as
a result of increased business with the Company's retail customers. The Company
processed 113% more trades during the three months over the same period in
fiscal 1996. This higher volume of activity was related to the environment of
declining interest rates, improving economic conditions and record high levels
for the various market indices in the first two months of the quarter. However,
the high degree of volatility experienced in the stock markets during July 1996
somewhat offset the experience of the prior two months. The increase in activity
in fiscal 1997 was also a result of the Company's acquisition of Shochet
Securities in November 1995. Shochet activity represented 16% of the total
increase in commission revenues.
Investment banking revenues increased by $661,000, or 44%. During the second
quarter of fiscal 1997 the Company raised $27.1 million for corporate clients
through two public offerings and two private placements. In the same period in
fiscal 1996 the Company raised $16.9 million for its clients through one public
offering and one private placement.
The $1,400,000 decrease in principal transactions revenues resulted from the
volatile market conditions experienced during July 1996. Revenues generated
through market making activities for over-the-counter equity securities
increased $564,000 to $834,000 for the quarter as the gains realized in the
first two months of the quarter exceeded losses incurred in July. However, these
higher revenues were more than offset by a $1,964,000 decrease in revenues from
the Company's investment account, which totaled $193,000 for the quarter. The
revenue decrease was directly related to decreases in the prices of the shares
underlying the underwriter warrants held by the Company, all of which were
issued by investment banking clients.
Interest income increased significantly 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 $16,631,000, a 106% increase
over the second quarter in fiscal 1996.
9
<PAGE>
Compensation and benefits, communications, and brokerage, clearing and exchange
fees expenses all increased significantly. These expenses were directly impacted
by the Company's increased level of business activity as reflected by the
increases in commission and investment banking revenues.
Occupancy and equipment expenses increased by $217,000, or 45%, primarily due to
the November 1995 acquisition of Shochet Securities.
Business development expenses increased by $190,000, or 119%, due to increased
promotional activities.
Professional fees increased by $165,000, or 103%, primarily as a result of
higher legal fees.
Other expenses increased $289,000 primarily due to increased expenses associated
with a higher level of business activity.
Six Months Ended July 31, 1996 vs. Six Months Ended July 31, 1995
Primary earnings per share of common stock for the six months ended July 31,
1996 were $0.83 as compared to $0.26 for the six months ended July 31, 1995. The
increase in earnings was the result of a strong investment climate for five of
the first six months of fiscal 1997, resulting in significant securities
brokerage and investment banking volumes. The results of operations for the six
months are not necessarily indicative of the results which may be expected for
the entire fiscal year.
Revenues
Total revenues increased by $21,002,000, or 117%, to $39,004,000 for the six
months. Revenues increased in all of the Company's major areas of activity for
the fiscal year-to-date.
Commission revenues increased by $17,151,000, or 143%, 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 52% increase in the number of registered
representatives employed by the Company and a 127% increase in the volume of
trades processed.
Investment banking revenues increased by $2,643,000, or 90%. The Company raised
$59 million for its clients in the fiscal 1997 period through four public
offerings and five private placements, a significant increase from the
comparable fiscal 1996 period when the Company raised $27 million through two
public offerings and two 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.
Revenues from principal transactions increased by $811,000, or 30%, for the six
months. Market making activities generated increased revenues of $2,001,000,
which were partially offset by a revenue decrease of $1,190,000 from the
Company's investment account. The market making revenues, which amounted to
$2,386,000 for the fiscal 1997 period, reflect the strong market conditions
experienced during February through June 1996. 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, as investment account revenues for the six
months totaled $1,118,000.
Interest income increased by $441,000 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.
10
<PAGE>
Expenses
Total expenses for the first six months of fiscal 1997 were $31,036,000, a 99%
increase over the same period in fiscal 1996. Total expenses as a percentage of
revenues for the 1997 fiscal period decreased to 79.6% from 86.7% in the fiscal
1996 period.
Increases in the Company's expense categories for the six month period resulted
from the same factors causing increases in expenses for the second quarter. The
primary factor resulting in higher expenses was the significant increase in the
level of business activities, while the November 1995 acquisition of Shochet and
increased promotional activities and legal fees incurred also served to increase
the Company's expenses.
Liquidity and Capital Resources
On July 30, 1996, the Company raised $15,472,000, net of underwriters' discounts
and commissions and associated costs, in an initial public offering of the
Company's common stock. The common stock subscription receivable at July 31,
1996, was received on August 2, 1996. 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
securities inventories, receivables from other broker-dealers and the Company's
clearing firm, and cash and cash equivalents, all of which fluctuate depending
upon the levels of customer business and trading activity. 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
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 July 31,
1996, were $15,216,000 and $626,000, which were $14,966,000 and $526,000 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
$797,000 was outstanding at July 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, during the six months ended July
31, 1996, the Company repurchased 156,250 shares at a cost of $612,000. These
repurchases were funded from cash flow from operations.
11
<PAGE>
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.
Other Matters
Securities and Exchange Commission Regulations
In August 1996 the SEC issued new regulations relating to Nasdaq Stock Market
dealers. These regulations, which will be phased in beginning in December 1996,
will require Nasdaq dealers to publicly display certain investor limit orders,
to notify the public of the absolute best prices at which they are willing to
trade any stock, and to expand the size of any offered block of stock at the
best marketwide price to include a customer's limit order at the same price. The
Company does not expect these regulations to have a material impact on its
results of operations.
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. These forward-looking statements may be contained in filings with
the SEC, press releases and oral statements. Actual results could potentially
differ materially from these statements. Therefore, no assurance can be given
that the outcomes stated in such forward-looking statements will be achieved.
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.
12
<PAGE>
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On July 22, 1996, the following matters were submitted to a vote of security
holders through a written consent in lieu of special meeting of the
shareholders:
o Amendment of the Company's By-Laws such that the number of Directors
which constitute the Board of Directors shall be fixed by resolution of the
Board of Directors, and that the Board of Directors shall be divided into three
classes each of which shall serve for a term of three years.
o Adoption and approval of the Company's 1996 Incentive Compensation Plan.
Each of the matters was approved with 2,994,250 shares voted for each matter.
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: September 13, 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 (7/31/96) 16
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jan-31-1997
<PERIOD-START> Feb-01-1996
<PERIOD-END> Jul-31-1996
<CASH> 13,943,000
<RECEIVABLES> 3,141,000
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 13,372,000
<PP&E> 1,008,000
<TOTAL-ASSETS> 34,667,000
<SHORT-TERM> 0
<PAYABLES> 0
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 3,540,000
<LONG-TERM> 797,000
<COMMON> 1,000
0
0
<OTHER-SE> 19,270,000
<TOTAL-LIABILITY-AND-EQUITY> 34,667,000
<TRADING-REVENUE> 3,504,000
<INTEREST-DIVIDENDS> 715,000
<COMMISSIONS> 29,167,000
<INVESTMENT-BANKING-REVENUES> 5,567,000
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 49,000
<COMPENSATION> 23,694,000
<INCOME-PRETAX> 7,968,000
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,527,000
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.82
</TABLE>
