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 April 30, 1998
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.)
One State Street Plaza, New York, NY 10004
- --------------------------------------- ---------------
(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 June 1, 1998
- ------------------------------- ---------------------------
Common Stock, $.0001 par value 8,095,899 shares
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Index
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
April 30, 1998 (Unaudited) and January 31, 1998 3
Consolidated Statements of Income for the three
months ended April 30, 1998 and 1997 (Unaudited) 4
Consolidated Statements of Changes in Stockholders'
Equity for the year ended January 31, 1998 and the three
months ended April 30, 1998 (Unaudited) 5
Consolidated Statements of Cash Flows for the three months
ended April 30, 1998 and 1997 (Unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds 14
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
April 30, January 31,
1998 1998
--------------- -----------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 6,555,000 $ 8,111,000
Receivable from brokers and dealers 8,240,000 896,000
Securities owned, at market value 7,047,000 10,154,000
Securities owned, not readily marketable, at fair value 1,728,000 1,443,000
Investments 3,537,000 3,640,000
Office furniture, equipment and leasehold improvements, net 1,119,000 1,043,000
Goodwill, net 3,645,000 3,684,000
Loans receivable 1,498,000 1,404,000
Income taxes receivable 3,157,000 3,544,000
Other assets 3,290,000 3,053,000
-------------- --------------
Total assets $ 39,816,000 $ 36,972,000
============== ==============
Liabilities and Stockholders' Equity
Liabilities:
Securities sold, not yet purchased, at market value $ 6,830,000 $ 2,320,000
Commissions payable 2,240,000 1,441,000
Deferred compensation 11,000 1,796,000
Deferred tax liability 71,000 236,000
Accrued expenses and other liabilities 2,046,000 2,982,000
------------- -------------
11,198,000 8,775,000
Liability subordinated to the claims of general creditors 579,000 576,000
------------- -------------
Total liabilities 11,777,000 9,351,000
------------- -------------
Stockholders' equity:
Preferred stock, $.10 par value; 1,200,000 shares authorized;
1,140,000 shares issued and outstanding 114,000 114,000
Common stock, $.0001 par value; 35,000,000 shares
authorized; 9,209,875 shares issued; 8,095,899
shares outstanding 1,000 1,000
Additional paid-in capital 20,839,000 20,710,000
Retained earnings 12,034,000 11,734,000
Accumulated other comprehensive income (47,000) (36,000)
------------- ----------
32,941,000 32,523,000
Less treasury stock, at cost; 1,113,976 shares (4,902,000) (4,902,000)
------------- ----------
Total stockholders' equity 28,039,000 27,621,000
----------- -------------
Total liabilities and stockholders' equity $ 39,816,000 $ 36,972,000
============== =============
</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 April 30,
---------------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Revenues:
Commissions $ 11,009,000 $ 8,104,000
Investment banking 2,353,000 676,000
Principal transactions 1,132,000 (754,000)
Interest 352,000 425,000
Other 542,000 98,000
--------------- ---------------
Total revenues 15,388,000 8,549,000
--------------- ---------------
Expenses:
Compensation and benefits 9,855,000 7,754,000
Communications 1,101,000 1,225,000
Brokerage, clearing and
exchange fees 852,000 673,000
Occupancy and equipment 1,366,000 700,000
Business development 533,000 654,000
Professional fees 270,000 228,000
Investigations and settlements - 800,000
Other 800,000 656,000
--------------- ---------------
Total expenses 14,777,000 12,690,000
--------------- ---------------
Income (loss) before income taxes 611,000 (4,141,000)
Income tax (benefit) 311,000 (1,688,000)
--------------- ---------------
Net income (loss) $ 300,000 $ (2,453,000)
=============== ================
Basic earnings (loss) per common share $ 0.04 $ (0.30)
=============== ================
Diluted earnings (loss) per common share $ 0.04 $ (0.30)
=============== ================
Weighted average common
shares outstanding - basic 8,095,899 8,171,856
=============== ================
Weighted average common
shares outstanding - diluted 8,309,022 8,171,856
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the Year Ended January 31, 1998 and the Three Months Ended April 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Peferred Addi- Other
Common Stock Stock tional Compre- Treasury Stock
----------------- -------------------- Paid-in Retained hensive ---------------------
Shares Amt. Shares Amt. Capital Earnings Income Shares Amount Total
--------- ------ ---------- -------- ---------- ---------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 31, 1997 9,217,875 1,000 - - 19,931,000 18,247,000 (3,000) (992,363) (3,150,000) 35,026,000
Net loss - - - - - (6,513,000) - - (6,513,000)
Stock issued -
acquisition - - 1,140,000 114,000 1,376,000 - 152,000 482,000 1,972,000
Stock issued -
compensation plan - - - - (1,193,000) - 288,944 1,193,000 -
Amortization of
unearned
compensation - - - - 545,000 - - - 545,000
Stock options
exercised - - - - (45,000) - 34,443 124,000 79,000
Note receivable
forgiven - - - - 100,000 - - - 100,000
Retirement of
stock (8,000) - - - - - 8,000 35,000 35,000
Purchase of
treasury stock - - - - - - (605,000) (3,586,000) (3,586,000)
Translation
adjustment - - - - - - (33,000) - - (33,000)
Other - - - - (4,000) - (4,000)
--------- ------ ---------- -------- ------------ ---------- -------- --------- ----------- ----------
Balance at
January 31, 1998 9,209,875 $ 1,000 1,140,000 $ 114,000 $ 20,710,000 $11,734,000 $(36,000)(1,113,976) $(4,902,000) $27,621,000
--------- ------ ---------- -------- ------------ ---------- -------- --------- ----------- ----------
Net income - - - - - 300,000 - - 300,000
Amortization of
unearned
compensation - - - - 129,000 - - - 129,000
Translation
adjustment - - - - - - (11,000) (11,000)
--------- ------- ---------- --------- ----------- ----------- ------- --------- ----------- ------------
Balance at
April 30, 1998 9,209,875 $ 1,000 1,140,000 $ 114,000 $ 20,839,000 $12,034,000 $(47,000) (1,113,976) $(4,902,000) $28,039,000
========= ======= ========== ========= ============ =========== ========= =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
Operating activities:
Net income/(loss) $ 300,000 $ (2,453,000)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization (31,000) 163,000
Deferred taxes and other 164,000 (537,000)
--------------- --------------
433,000 (2,827,000)
(Increase) decrease in operating assets:
Receivable from brokers and dealers (7,344,000) 7,575,000
Securities owned, at market value 3,107,000 2,219,000
Securities owned, not readily marketable (286,000) 725,000
Loans receivable (94,000) (1,368,000)
Income taxes receivable 386,000 (1,457,000)
Other assets (266,000) 127,000
Increase (decrease) in operating liabilities:
Securities sold, not yet purchased 4,510,000 (4,456,000)
Commissions payable 799,000 (1,788,000)
Deferred compensation (1,785,000) (1,148,000)
Income taxes payable (1,000) (229,000)
Accrued expenses and other liabilities (937,000) (2,359,000)
Translation adjustment (11,000) (9,000)
---------------- -------------
Net cash used in operating activities (1,489,000) (4,995,000)
---------------- -------------
Investing activities:
Purchase of office furniture, equipment
and leasehold improvements (171,000) (51,000)
Limited partnerships 104,000 3,000
Acquisition, net of cash acquired - (197,000)
Goodwill resulting from acquisition - (33,000)
----------------- --------------
Net cash used in investing activities (67,000) (278,000)
----------------- -------------
Financing activities:
Issuance of common shares - 53,000
Purchase of treasury stock - (3,586,000)
Repayment of subordinated debt - (114,000)
---------------- --------------
Net cash provided by (used in) financing activities - (3,647,000)
---------------- ----------------
Net change in cash and cash equivalents (1,556,000) (8,920,000)
Cash and cash equivalents at beginning of year 8,111,000 17,856,000
---------------- -------------
Cash and cash equivalents at end of period $ 6,555,000 $ 8,936,000
============= =============
</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, 1998, in its annual report on Form 10-K.
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 months ended April 30, 1998, are not
necessarily indicative of the results which may be expected for the entire
fiscal year.
2. Net Capital Requirements
GKN Securities Corp. (GKN), Southeast Research Partners, Inc. (Southeast), and
Shochet Securities, Inc. (Shochet), all wholly owned subsidiaries of the
Company, 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, Southeast, 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 April 30,1998, GKN had net
capital of $4,499,000.
Southeast 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 April 30, 1998, Southeast had net capital of $ 1,003,000 and
a net capital requirement of $100,000. Southeast's net capital ratio at April
30, 1998, was 1.20 to 1.
Shochet has also elected to compute net capital under the standard aggregate
indebtedness method permitted by the net capital rule. At April 30, 1998,
Shochet had net capital of $ 665,000 and a net capital requirement of $100,000.
Shochet's net capital ratio at April 30, 1998, was 0.98 to 1.
7
<PAGE>
3. Earnings Per Share
Effective for the fiscal year ended January 31, 1998, the Company adopted SFAS
No. 128, Earnings per Share (SFAS 128), which established new standards for
computing and presenting earnings per share (EPS). This statement changes the
calculation and presentation of EPS. The new presentation consists of basic EPS,
which includes no dilution and is computed by dividing net income by the
weighted-average number of common shares outstanding for the period, and diluted
EPS, which is similar to the previously disclosed fully diluted EPS. SFAS 128
will result in basic EPS results higher than EPS as calculated under the
previous method. All earnings per share amounts for all periods have been
presented and, where appropriate, restated to conform to the SFAS 128
requirements. For the quarter ended April 30, 1997, common stock equivalents,
consisting of stock options and warrants, were not included in the computation
of diluted EPS, as the inclusion of such shares would be anti-dilutive due to
the Company's net loss for the quarter.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months ended April 30,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Numerator for basic and diluted EPS:
Net income (loss) $300,000 $(2,453,000)
Denominator for basic EPS:
Weighted-average common shares 8,095,899 8,171,856
Dilutive common stock equivalents 213,123 -
Denominator for diluted EPS: 8,309,022 8,171,856
Basic EPS $0.04 $ (0.30)
Diluted EPS $0.04 $ (0.30)
</TABLE>
5. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Three Months Ended April 30,
-------------------------------
1998 1997
------------- --------------
<S> <C> <C>
Cash paid for:
Income taxes $ 109,000 $ 731,000
Interest - 17,000
Non-cash financing activities:
Treasury stock issued for Incentive Compensation Plan $ - $ 3,586,000
Details of acquisition:
Fair value of assets acquired $ - $ 1,479,000
Liabilities assumed - (1,474,000)
Common stock issued in acquisition - ( 960,000)
Preferred stock issued in acquisition - (1,152,000)
Goodwill - 2,304,000
-------------- -----------------
Net cash used for acquisition $ - $ 197,000
=============== =================
</TABLE>
6. Commitments and Contingencies
Various legal proceedings are pending against the broker-dealers. Management
believes that, other than as reflected in the consolidated financial statements,
the aggregate liability resulting from these proceedings will not be material.
8
<PAGE>
7. Comprehensive Income
The Company has adopted SFAS No. 130, Reporting Comprehensive Income, which
establishes standards for the reporting and display of comprehensive income and
its components. Total comprehensive income measures all changes in stockholders'
equity resulting from transactions of the period, other than transactions with
stockholders.
The components of comprehensive income for the three months ended April 30, 1998
and 1997 are as follows:
Three Months Ended
April 30,
1998 1997
------------- ------------
Net income $ 300,000 $(2,453,000)
Other comprehensive income:
Foreign currency translation adjustments (11,000) (9,000)
------------ ------------
Total comprehensive income $ 289,000 $(2,462,000)
============ ============
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months Ended April 30, 1998 vs. Three Months Ended April 30, 1997
- ------------------------------------------------------------------------
Earnings per share of common stock for the three months ended April 30, 1998,
were $0.04 as compared to $(0.30) for the three months ended April 30, 1997. The
increase in earnings was directly attributable to revenue gains through
increased trading volume, greater investment banking activity, and gains in the
investment account, and expense reductions resulting from the Company's cost
reduction program. During January and February of 1998, the Company engaged in a
cost reduction program aimed at significantly reducing the Company's breakeven
point. This program, along with the revenue increases, decreased the Company's
fixed costs as a percentage of revenue from 82% to 45%. The cost reduction
program is ongoing and as a result, the Company expects further positive
enhancements to profitability.
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 80% to $15,388,000 for the first quarter of fiscal
1999, mainly as a result of higher commission revenues, increased investment
banking fees, and investment account gains.
Commission revenues increased by $2,905,000, or 36%, for the first quarter. The
Company executed 77% more trades during the period at an average commission 23%
lower as compared to the same period in the prior year.
Investment banking revenues increased by $1,677,000, or 248%. During the first
quarter of fiscal 1999 the Company raised $8.0 million for corporate clients
through one public offering. In the same period in fiscal 1998 the Company
raised $5.8 million for its clients through two private placements. The Company
is transitioning from being the sole manager on micro-cap underwritings to a
co-manager on small and mid-cap issues. The Company is also participating in
selling groups of other underwriters on a greater number of transactions.
Principal transactions generated gains of $1,132,000 in the first quarter of
fiscal 1999, as opposed to a $754,000 loss in the fiscal 1998 quarter.
Investment account gains totaled $1,370,000, while market making activities
generated a loss of $238,000.
Interest income decreased $73,000 due mainly to a decrease in average cash
balances.
Other revenues increased 453% to $542,000, mainly as a result of the Company's
new merchant banking and asset management activities.
10
<PAGE>
Expenses
Total expenses for the quarter in fiscal 1999 were $14,777,000, a 16% increase
over the first quarter in fiscal 1998. This increase is tied to the increase in
commission revenues, as compensation expenses are directly correlated with
commissions generated.
Compensation and benefits expense increased 27% to $9,855,000. These expenses
are primarily variable as commissions to brokers are paid as a percentage of
commission revenues generated and incentive compensation is directly related to
net income. The expense increase in fiscal 1999 is consistent with the increase
in commission revenue which is partially offset by the decrease in number of
employees effectuated through staff reductions in January and February of 1998.
Communications expense decreased by $124,000, or 10%, as a result of the
Company's consolidation of its departments in line with its new mission. While
there are certain fixed market data service expenses, many communications costs
vary directly with the number of employees, particularly the number of
registered representatives. The 238 registered representatives employed by the
Company at April 30, 1998, represent a 27% decrease from April 30, 1997. During
the same period total employees decreased by 26% to 401.
Brokerage, clearing and exchange fees increased by $179,000 or 27%. This
increase was attributable to the increase in trade volume.
Occupancy and equipment expenses increased $666,000 as a result of the addition
of the Southeast's offices for the entire period, the move of the Company's
corporate headquarters, and the investment made to upgrade the Company's
technological infrastructure.
Business development expenses decreased by 19% to $533,000 due to decreased
promotional activities.
Professional fees increased by $42,000, or 18%, mainly as a result of costs
associated with implementing the Company's new mission.
Investigations and settlements were eliminated, as the SEC and NASDR
investigatory matters are settled and have been completed.
Other expenses increased $144,000 primarily due to expenses associated with the
Company's development plan.
Weighted average common shares outstanding
The average number of common shares and common stock equivalents outstanding
used in the computation of basic earnings per common share was 8,095,899 for the
first quarter of fiscal 1999, compared with 8,171,856 in fiscal 1998.
Correspondingly, the number of shares outstanding used in the diluted earnings
per share computation was 8,309,022 in fiscal 1999, compared with 8,171,856 in
fiscal 1998.
11
<PAGE>
Liquidity and Capital Resources
Approximately 55% of the Company's assets at April 30, 1998 are highly liquid,
consisting primarily of cash and cash equivalents, securities inventories, and
receivables from other broker-dealers, all of which fluctuate depending upon the
levels of customer business and trading activity. Additionally, at April 30,
1998, the Company had recognized income taxes receivable of $3,157,000. The
income tax receivable is expected to be received upon processing the current
year's tax returns, which have been filed. Receivables from broker-dealers,
which are primarily from the Company's clearing broker, 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, Southeast, and Shochet, the Company's domestic operating broker-dealer
subsidiaries, are subject to the net capital rules of the National Association
of Securities Dealers, Inc. (NASD) and the Securities and Exchange Commission
(SEC). As such, they and the Company are subject to certain restrictions on the
use of capital and its related liquidity. GKN's, Southeast's, and Shochet's
respective net capital positions as of April 30, 1998, were $4,499,000,
$1,003,000, and $665,000, which were $4,249,000, $903,000 and $565,000,
respectively, in excess of their respective net capital requirements.
In conjunction with the Company's move of its corporate headquarters in New York
City the Company has significantly upgraded its technological infrastructure.
The combined costs of the move and the technological investment were financed
through a series of operating leases. These leases total $4.8 million. As
security for these leases, the Company arranged for a standby letter of credit.
As collateral for the standby letter of credit, the Company has placed $2.4
million in a restricted cash escrow account with the provider. The Company
intends to use debt and lease financing prudently in the future.
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
Year 2000 Computer Issue
Based upon a preliminary study, the Company expects a minimal internal impact
from the "Year 2000 Computer Issue". All of the Company's computer programs are
provided by third-party vendors and service providers. Most of the programs were
purchased after the Year 2000 Computer Issue became widely recognized. The
Company has sought, and expects to receive, written confirmation from its
third-party program and service providers that the Year 2000 Computer Issue has
been appropriately managed. Schroder & Co., the Company's clearing firm, is the
Company's largest and most important computer services related vendor. Schroder
& Co. has provided the Company with assurances that they expect to appropriately
manage the Year 2000 Computer Issue on a timely basis. Management does not
expect the Year 2000 Computer Issue to have a material effect on the Company's
earnings. However, there can be no assurance that the systems of other companies
or third-party vendors and service providers on which the Company's systems rely
also will be appropriately examined on a timely basis. The Year 2000 Computer
Issue creates risk for the Company from unforeseen problems in its own computer
systems, third-party vendors and service providers, and from third parties with
whom the Company deals on financial transactions worldwide. Such failures could
have a material impact on the Company's ability to conduct business.
12
<PAGE>
New Accounting Pronouncement
In March 1997 the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128),
effective beginning in the fiscal year ending January 31, 1998. This statement
changes the calculation and presentation of earnings per common share (EPS). The
new presentation consists of basic EPS, which includes no dilution and is
computed by dividing net income by the weighted-average number of common shares
outstanding for the period, and diluted EPS, which is similar to the previous
fully diluted EPS. The financial statements reflect the implementation of SFAS
128.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income (SFAS 130), effective beginning in the
fiscal year ending January 31, 1999. This statement establishes standards for
the reporting and display of comprehensive income and its components. Total
comprehensive income measures all changes in stockholders' equity resulting from
transactions of the period, other than transactions with stockholders. The
financial statements reflect the implementation of SFAS 130.
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 report 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
speaks 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 that
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), and the Company's periodic Form 10-K, 10-Q, and 8-K
filings with the SEC. The Company has no obligation to publicly release the
result of any revisions that may be made to any forward-looking statements to
reflect anticipated or unanticipated events or circumstances occurring after the
date of such statements.
13
<PAGE>
Part II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
During April 1998, the Company offered certain of its option holders
the opportunity to swap their options for new options. Option holders
could receive one new option for every two exchanged, or two new
options for every three exchanged, depending upon the original grant
date. The new options all have at least a one year vesting period and a
strike price equal to $3.125, the closing price on the date of grant.
Option holders elected to swap 186,641 outstanding options for 102,792
new options. The exemption claimed for these issuances is Section
3(a)(9) of the Securities Act of 1933, as amended.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 - Financial Data Schedule BD
(b) Reports on Form 8-K:
None
14
<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: June 4, 1998 /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
15
<PAGE>
GKN HOLDING CORP. AND SUBSIDIARIES
Exhibit Index
Number Description
27 Financial Data Schedule BD (4/30/98)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1998
<CASH> 6,555,000
<RECEIVABLES> 12,895,000
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 12,312,000
<PP&E> 1,119,000
<TOTAL-ASSETS> 39,816,000
<SHORT-TERM> 0
<PAYABLES> 0
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 6,830,000
<LONG-TERM> 579,000
0
114,000
<COMMON> 1,000
<OTHER-SE> 27,924,000
<TOTAL-LIABILITY-AND-EQUITY> 39,816,000
<TRADING-REVENUE> 1,132,000
<INTEREST-DIVIDENDS> 352,000
<COMMISSIONS> 11,009,000
<INVESTMENT-BANKING-REVENUES> 2,353,000
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 0
<COMPENSATION> 9,855,000
<INCOME-PRETAX> 611,000
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 300,000
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
