UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000 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: 811-02144
BKF CAPITAL GROUP, INC.
---------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-0767530
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Rockefeller Plaza, New York, New York 10020
- - - - - - - ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(212) 332-8400
--------------
(Registrant's telephone number, including area code)
Baker, Fentress & Company
-------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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.
There were 6,504,852 shares of the registrant's Common Stock outstanding as
of April 30, 2000.
<PAGE>
Page 2 of 28
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
BKF Capital Group, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Financial Condition
(Unaudited)
(Dollar amounts in thousands, except share and per share data)
(See note 1)
<TABLE>
<CAPTION>
BKF Capital Pro forma Pro forma
Group, Inc. LEVCO adjustments and Consolidated
March 31, March 31, intercompany March 31,
2000 2000 elimination 2000
------------- ------------- ----------------- -------------
<S> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 934 $ 11,873 $ 12,807
Investment advisory fees receivable 11,591 11,591
Prepaid expenses and other current assets 939 1,355 (d) (69) 2,225
------------- ------------- -------------
Total current assets 1,873 24,819 26,623
------------- ------------- -------------
Noncurrent assets:
Investments in affiliated partnerships 4,517 4,517
Fixed assets-net 3,104 3,104
Other assets 851 851
Deferred tax asset (net of allowance of $5,170) 5,170 -
(5,170)
Investments (b) 599 599
Investment in LEVCO 92,000 (a) (3,825) -
(f) (88,175)
Intangible assets:
Goodwill (c) 23,363 23,363
Employment contracts (c) 23,363 23,363
Investment advisory contracts (c) 70,088 70,088
Accumulated amortization (c) (52,786) (52,786)
------------- ------------- -------------
Total assets $ 94,472 $ 33,291 $ 99,722
============= ============= =============
Liabilities and stockholders' equity:
Current liabilities:
Accrued expenses $ 1,608 $ 1,598 (d) $ 170 $ 3,307
(d) (69)
Accrued bonuses 4,737 4,737
Accrued incentive compensation 125 125
Income taxes payable 1,856 (e) (260) 1,596
------------- ------------- -------------
Total current liabilities 1,608 8,316 9,765
Other liabilities 828 828
------------- ------------- -------------
Total liabilities 1,608 9,144 10,593
------------- ------------- -------------
Stockholders' equity:
Common stock, $1 par value, authorized--60,000,000
shares; issued and outstanding--6,504,852 shares 6,505 6,505
Additional paid-in capital 115,005 55,517 50,260
(a) (28,646)
(a) (3,825)
(f) (88,175)
(g) 384
Unrealized depreciation of investments (28,646) (a) 28,646 -
Retained earnings(deficit) (31,370) (c) 64,028 32,364
(d) (170)
(e) 260
(g) (384)
------------- ------------- -------------
Total stockholders' equity 92,864 24,147 89,129
------------- ------------- -------------
Total liabilities and stockholders' equity $ 94,472 $ 33,291 $ 99,722
============= ============= =============
</TABLE>
(a) To record the retroactive effect of accounting for the LEVCO transaction
under purchase accounting.
(b) Represents investments in two private placement securities. The Company
intends to liquidate these positions as appropriate on reasonable terms.
(c) To record the initial acquisition by BKF under purchase accounting and the
reversal of the intercompany loan.
(d) To eliminate intercompany receivable/payable and to record additional
public company operating expenses to be borne by LEVCO.
(e) To record the tax effect of the pro forma adjustments including a deferred
income tax benefit and the related valuation allowance.
(f) To eliminate the intercompany investment (LEVCO) in consolidation.
(g) To adjust for BKF historical income included in Pro forma consolidated net
loss
See accompanying notes
<PAGE>
Page 3 of 28
BKF Capital Group, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Financial Condition
(Unaudited)
(Dollar amounts in thousands, except share and per share data)
(See note 1)
<TABLE>
<CAPTION>
BKF Capital Pro forma Pro forma
Group, Inc. LEVCO adjustments and Consolidated
December 31, December 31, Intercompany December 31,
1999 1999 elimination 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 481,988 $ 12,431 (a) $ (480,058) $ 14,361
Investment advisory fees receivable(h) 12,460 (f) (10) 12,450
Prepaid expenses and other current assets 858 485 1,343
------------- ------------- -------------
Total current assets 482,846 25,376 28,154
------------- ------------- -------------
Noncurrent assets:
Investments in affiliated partnerships 7,633 $ 7,633
Fixed assets-net 3,154 3,154
Other assets 912 912
Investments (e) 1,000 1,000
Investment in LEVCO 92,000 (c) (3,611) -
(g) (88,389)
Intangible assets:
Goodwill (c) 23,363 23,363
Employment contracts (c) 23,363 23,363
Investment advisory contracts (c) 70,088 70,088
Accumulated amortization (c) (49,812) (49,812)
------------- ------------- -------------
Total assets $ 575,846 $ 37,075 $ 107,855
============= ============= =============
Liabilities and stockholders' equity:
Current liabilities:
Accrued expenses $ 2,718 $ 2,036 (b) $ (10) $ 4,744
Accrued bonuses(h) 13,346 13,346
Income taxes payable(h) 306 306
------------- ------------- -------------
Total liabilities 2,718 15,688 18,396
------------- ------------- -------------
Stockholders' equity:
Common stock, $1 par value, authorized--60,000,000
shares; issued and outstanding--6,504,852 shares 39,029 (d) (32,524) 6,505
Additional paid-in capital 463,426 55,517 (a) (422,115) 50,092
(c) (39,018)
(b) 10
(c) (3,611)
(d) 32,524
(a) 51,748
(g) (88,389)
Undistributed net realized gains 57,943 (a) (57,943) -
Unrealized depreciation of investments (39,018) (c) 39,018 -
Retained earnings(h) 51,748 (34,130) (a) (51,748) 32,862
(f) (10)
(c) 67,002
------------- ------------- -------------
Total stockholders' equity 573,128 21,387 89,459
------------- ------------- -------------
Total liabilities and stockholders' equity $ 575,846 $ 37,075 $ 107,855
============= ============= =============
</TABLE>
(a) To record final distribution made to shareholders on January 7, 2000.
(b) To reflect reversal of advisory fee payable to LEVCO.
(c) To record the initial acquisition by BKF under purchase accounting and the
reversal of the intercompany loan.
(d) To record the reverse stock split (6,504,852 shares are issued and
outstanding after the reverse split).
(e) Represents investments in two private placement securities. The Company
intends to liquidate these positions as appropriate on reasonable terms.
(f) To reverse advisory fee receivable from BKF.
(g) To eliminate the intercompany investment (LEVCO) in consolidation.
(h) Reflects the retroactive effect of the accrual of incentive fees of $375
and the related effect to accrued bonuses, income taxes payable and
retained earnings of $235, $66 and $74 respectively.
See accompanying notes
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Page 4 of 28
BKF Capital Group, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
(Dollar amounts in thousands, except share and per share data)
(See note 1)
<TABLE>
<CAPTION>
BKF Capital Pro forma
Group, Inc. LEVCO Consolidated
Quarter ended Quarter ended Quarter ended
March 31, March 31, Pro forma March 31,
2000 2000 adjustments 2000
-------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Investment advisory fees $ 9,584 $ 9,584
Incentive fees and general partner allocations 5,240 5,240
Commission income - net 449 449
-------------- --------------- -------------
Total revenues 15,273 15,273
-------------- --------------- -------------
Expenses:
Employee compensation and benefits 8,119 8,119
Occupancy & equipment rental 543 543
Other operating expenses $ 182 1,527 (a) 170 1,879
Amortization of intangibles (c) 2,974 2,974
-------------- --------------- -------------
Total expenses 182 10,189 13,515
-------------- --------------- -------------
Operating Income (loss) (182) 5,084 1,758
Other Income(expense):
Net realized and unrealized loss on investments(f) (608) (b) 228 (380)
Interest income 584 138 (b) (406) 316
Interest expense (16) (16)
-------------- --------------- -------------
Income (loss) before taxes (206) 5,206 1,678
-------------- --------------- -------------
Provision for income taxes 2,446 (d) (260) 2,186
Deferred tax (benefit) (g) (5,170) (5,170)
Valuation allowance (g) 5,170 5,170
-------------- --------------- -------------
Net income (loss) $ (206) $ 2,760 $ (508)
============== =============== =============
Net (loss) per share:
Basic and diluted (e) $ (0.08) (e)
=============
Weighted average shares outstanding-basic and
diluted (e) 6,504,852 (e)
=============
</TABLE>
(a) To record additional operating expenses to be borne by LEVCO which had
previously been borne by BKF.
(b) To reverse the investment company specific income and expenses of BKF
Capital Group for the period.
(c) To record the amortization of the intangible assets using purchase
accounting for the original acquisition of LEVCO by BKF.
(d) To record the tax effect of the pro forma adjustments.
(e) Calculation reflects the reverse stock split (which was effectuated January
7, 2000).
(f) Amount includes a permanent write-down of the two remaining private
placement investments of $11 million of which $10.6 million was an
unrealized loss at December 31, 1999.
(g) To record deferred Income tax benefit of item (f) and the related valuation
allowance.
See accompanying notes
<PAGE>
Page 5 of 28
BKF Capital Group, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income
(Unaudited)
(Dollar amounts in thousands, except share and per share data)
(See note 1)
<TABLE>
<CAPTION>
BKF Capital Pro forma
Group, Inc. LEVCO Consolidated
Quarter ended Quarter ended Quarter ended
March 31, March 31, Pro forma March 31,
1999 1999 adjustments 1999
-------------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Investment advisory fees $ 9,390 (a) $ (379) $ 9,011
Incentive fees and general partner allocations(f) 2,014 2,014
Commission income - net 380 380
-------------- -------------- -----------
Total revenues - 11,784 11,405
-------------- -------------- -----------
Expenses:
Employee compensation and benefits(f) $ 413 6,235 (b) (413) 5,784
(a) (451)
Occupancy & equipment rental 273 513 (b) (273) 513
Other operating expenses 801 1,213 (b) (801) 1,565
(a) 352
Investment advisory fees 379 (a) (379) -
Amortization of intangibles (c) 2,974 2,974
-------------- -------------- -----------
Total expenses 1,866 7,961 10,836
-------------- -------------- -----------
Operating Income(loss) (1,866) 3,823 569
Other Income(expense):
Net realized and unrealized gains from investment 6,965 (b) (6,965) -
Interest income 665 62 (b) (665) 62
Dividend income 4,117 (b) (4,117) -
Interest income (expense)- intercompany 1,666 (1,666) -
-------------- -------------- -----------
Income before taxes 11,547 2,219 631
-------------- -------------- -----------
Provision for income taxes(f) 1,021 (d) 638 1,659
-------------- -------------- -----------
Net income (loss) $ 11,547 $ 1,198 $ (1,028)
============== ============== ===========
Net (loss) per share:
Basic and diluted (e) $ (0.16)
===========
Weighted average shares outstanding-basic and
diluted (e) 6,504,852
===========
</TABLE>
(a) To adjust the advisory fee for the revenue earned by LEVCO for the
management of the BKF public portfolio, record additional operating
expenses to be borne by LEVCO which had previously been borne by BKF and
the corresponding reduction in employee bonuses.
(b) To reverse the investment company specific income and expenses of BKF
Capital Group for the period.
(c) To record the amortization of the intangible assets using purchase
accounting for the original acquisition of LEVCO by BKF.
(d) To record additional taxes for the pro forma adjustments.
(e) Basis of calculation reflects the reverse stock split (which was
effectuated January 7, 2000).
(f) Reflects the retroactive effect of the accrual of incentive fees of ($579)
and the related effect to employee compensation expense and provision for
income taxes of ($356) and ($102), respectively.
See accompanying notes
<PAGE>
Page 6 of 28
BKF Capital Group, Inc. and Subsidiaries
Pro Forma Consolidated Statements of Cash Flows
Quarter Ended March 31, 2000 and 1999
(Unaudited)
(Dollar amounts in thousands)
(See note 1)
<TABLE>
<CAPTION>
2000 1999
----------- ------------
<S> <C> <C>
Cash flows from operating activities
Pro forma net loss $ (508) $ (1,028)
Adjustments to reconcile net income to net cash
used in operations:
Depreciation and amortization 3,172 3,128
Compensation expense for vesting of restricted stock units 125 -
Realized loss on investment 223 -
(Increase) decrease in investment advisory fees receivable 859 (7)
(Increase) decrease in prepaid expenses and other current assets 206 (169)
Decrease in investments in affiliated investment partnerships 3,116 1,339
Decrease in other assets 61 641
(Decrease) in accrued expenses and accounts payable (1,437) (61)
(Decrease) in accrued bonuses (8,609) (7,315)
Increase in income taxes payable 1,290 1,004
----------- ------------
Net cash (used in) operating activities (1,502) (2,468)
----------- ------------
Cash flows from investing activities
Fixed asset additions (148) (126)
----------- ------------
Net cash (used in) investing activities (148) (126)
----------- ------------
Cash flows from financing activities
Payment of loan principal (82) -
Cash included in deemed contribution (distribution) 178 (1,289)
----------- ------------
Net cash provided by (used in) operating activities 96 (1,289)
----------- ------------
Net (decrease) in cash and cash equivalents (1,554) (3,883)
Cash and cash equivalents at the beginning of the period 14,361 10,779
----------- ------------
Cash and cash equivalents at the end of the period $ 12,807 $ 6,896
=========== ============
Supplemental disclosure of cash flow information
Cash paid for interest $ 11 $ -
=========== ============
Cash paid for taxes $ 915 $ 677
=========== ============
</TABLE>
<PAGE>
Page 7 of 28
BKF Capital Group, Inc.
Statements of Cash Flows - Historical
Quarter Ended March 31, 2000 and 1999
(Unaudited)
(Dollar amounts in thousands)
(See note 1)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations $ (206) $ 11,547
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash (used in) operating activities:
Realized loss on investment 401 -
Net realized and unrealized (gain) on investments - (6,965)
Increase in receivable for securities sold - (6,506)
Increase in dividends and interest receivable - (350)
Increase in other assets (81) (132)
Decrease in accrued expenses and accounts payable (1,110) (229)
Increase in payable for investment management fee - 3
Increase in payable for securities purchased - 585
Net amortization of discounts - (151)
------------ ------------
Net cash (used in) operating activities (996) (2,198)
------------ ------------
Cash flows from investing activities:
Purchases of portfolio securities - (106,010)
Proceeds from sales of portfolio securities - 86,815
Sales/maturities of money market securities,net - 3
------------ ------------
Net cash (used in) investing activities - (19,192)
------------ ------------
Cash flows from financing activities:
Dividends and capital gain distributions (480,058) -
------------ ------------
Net cash (used in) operating activities (480,058) -
------------ ------------
Net (decrease) in cash and cash equivalents (481,054) (21,390)
Cash and cash equivalents at the beginning of the period 481,988 42,351
------------ ------------
Cash and cash equivalents at the end of the period $ 934 $ 20,961
============ ============
</TABLE>
See accompanying notes
<PAGE>
Page 8 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization and Basis of Presentation
Organization
BKF Capital Group, Inc. (formerly Baker, Fentress & Company, hereto referred to
as "BKF" or the "Company") operated under the Investment Company Act of 1940 as
a non-diversified closed-end management investment company. In August 1999, the
Board of Directors and shareholders of BKF adopted and implemented a Plan for
Distribution of Assets ("Plan"), pursuant to which substantially all of BKF's
investment securities were sold. The cash proceeds, as well as shares of
Consolidated-Tomoka Land Company ("CTO"), were subsequently distributed to
shareholders by January 7, 2000. The Company received a deregistration order
from the Securities and Exchange Commission ("SEC") on April 18, 2000,
effectively completing its evolution from an investment company to a holding
company whose primary business now operates through a wholly owned subsidiary,
Levin Management Co., Inc. and its subsidiaries, all of which are referred to as
"Levco." As of April 2000, all future financial reporting of BKF and Levco will
be on a consolidated basis.
The Unaudited Pro Forma Condensed Consolidated Financial Statements of Levco
include its wholly owned subsidiary, John A. Levin & Co., Inc., ("JALCO") and
JALCO's two wholly owned subsidiaries LEVCO GP Inc. ("LEVCO GP") and LEVCO
Securities, Inc. ("LEVCO Securities"). All intercompany transactions have been
eliminated in consolidation.
JALCO is an investment advisor registered under the Investment Advisers Act of
1940 which provides investment advisory services to its clients which include
U.S. and foreign corporations, mutual funds, limited partnerships, universities,
pension and profit sharing plans, individuals, trusts, not-for-profit
organizations and foundations. JALCO also participates in broker consults
programs (Wrap Accounts) with two nationally recognized financial institutions.
LEVCO Securities is registered with the SEC as a broker-dealer and is a member
of the National Association of Securities Dealers, Inc. LEVCO GP acts as the
general partner of six affiliated investment partnerships and is registered with
the Commodities Futures Trading Commission as a commodity pool operator.
<PAGE>
Page 9 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies (continued)
Levco provides all administrative support services to its subsidiaries,
including, among other things, employee services, office space, equipment and
administrative support.
The BKF Unaudited Pro Forma Condensed Consolidated Statements of Financial
Condition at March 31, 2000 and December 31, 1999, reflect the historical
accounting treatment of the Company as a registered investment company.
Therefore, BKF accounted for Levco as an investment carried at fair value, and
the two companies were not consolidated.
The pro forma adjustments account for the liquidation of substantially all of
the private and public portfolios of BKF, the distribution of cash as well as
shares of CTO, and the recasting of the June 1996 acquisition of Levco using
purchase accounting (thereby taking into account intangible assets and
amortization thereon).
The Unaudited Pro Forma Condensed Consolidated Statements of Income for the
periods ended March 31, 2000 and March 31, 1999 present the historical results
of BKF and Levco. The pro forma adjustments reflect:
-elimination of the intercompany investment management fee revenues
resulting from the liquidation of the BKF public portfolio, which had been
managed by Levco;
-additional operating expenses attributable to operating a publicly traded
company;
-reduction of Levco's 1999 compensation expense based on the reduction of
revenue and increase in expenses;
-reversal of all investment company specific components of BKF revenue and
expenses since it will have no ongoing operations other than that of Levco;
-elimination of the intercompany interest expense due to the
reclassification of the BKF loan to Levco's equity (which was effectuated
in December 1999);
-amortization expense on intangible assets based on the recasting of the
June 1996 acquisition of Levco by BKF using the purchase method of
accounting. This item is non-deductible for income tax purposes;
<PAGE>
Page 10 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies (continued)
-income tax effect of pro forma adjustments;
-deferred tax benefit and related valuation allowance; and
-the 1 to 6 reverse stock split effectuated on January 7, 2000
The Unaudited Pro Forma Condensed Consolidated Statements of Cash Flows for the
three month periods ended March 31, 2000 and March 31, 1999, reflect the pro
forma cash flows of the combined companies as if BKF had received its
deregistration order effective January 1, 1999. Thus, BKF and Levco financial
information would have been presented on a consolidated basis.
The Unaudited Pro Forma Condensed Consolidated Financial Statements are
presented since they are more representative of the Company's operations after
the implementation of the Plan.
The unaudited pro forma financial data does not purport to represent the results
of operations or the financial position of the Company which actually would have
occurred had the proposed transaction been previously consummated or project the
results of operations or the financial position of the Company for any future
date or period. The Unaudited Pro Forma Condensed Consolidated Statements of
Income do not reflect the non-recurring charge relating to the change in
accounting method for the cumulative effect of the amortization of intangible
assets resulting from recording the Levco transaction under purchase accounting.
This charge will be reflected in the Company's consolidated statement of income
for the quarter ending June 30, 2000, since the SEC approved the application for
deregistration as a registered investment company on April 18, 2000.
Basis of Presentation
The Unaudited Interim Pro Forma Condensed Consolidated Financial Statements of
the Company included herein have been prepared in accordance with generally
accepted accounting principles for interim financial information and Rule 10-01
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles. The Unaudited
Interim Pro Forma Condensed Consolidated Financial Statements reflect all
<PAGE>
Page 11 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies (continued)
adjustments, which are of a normal recurring nature, necessary for a fair
presentation of financial position, results of operations and cash flows of the
Company for the interim periods presented and are not necessarily indicative of
a full year's results.
Revenue Recognition
Generally, investment advisory fees are calculated quarterly, in arrears, and
are based upon a percentage of the market value of each account at the end of
the quarter. Wrap account fees are calculated quarterly in advance based upon a
percentage of the market value of each account as of the previous calendar
quarter end. Incentive fees and general partner incentive allocations earned
from affiliated investment partnerships and incentive fees from other accounts
are currently accrued on a quarterly basis and are primarily earned and billed
at the end of their respective contract year. Such accounting practice has been
retroactively applied to the prior period presented.
Commissions earned on securities transactions executed by LEVCO Securities, and
related expenses, are recorded on a trade-date basis.
Cash and Cash Equivalents
The Company treats all highly liquid instruments with maturities at acquisition
of three months or less as cash equivalents. The Company maintained
substantially all of its cash and equivalents invested in interest bearing
instruments at two nationally recognized financial institutions.
Investments in Affiliated Investment Partnerships
Investments in affiliated investment partnerships are held through LEVCO GP and
are recorded based upon the equity method of accounting. The investment amount
equals the sum of LEVCO GP's capital accounts in the partnerships obtained from
financial statements that were prepared in accordance with accounting principles
generally accepted in the United States. LEVCO GP is also entitled to a special
allocation of income from the applicable affiliated investment partnerships
based on their performance.
<PAGE>
Page 12 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies (continued)
Income Taxes
The Company intends to file consolidated federal, state and local income tax
returns. Historically, since BKF was a Regulated Investment Company ("RIC"),
which distributed all of its income, it was generally not subject to income
taxes and, therefore, no tax provision was previously recorded on the BKF
financial statements. Levco, an operating company, has been subject to federal,
state and local taxes on income. The Unaudited Pro Forma Condensed Consolidated
Statements of Income reflect a tax provision on the pro forma consolidated
income.
Principally due to state and local taxes, the Company's provision for income
taxes differs from the amount of income tax determined by applying the
applicable U.S. federal statutory income tax rate. The total tax provision is
based on an overall federal, state and local effective rate of approximately 47%
and 46% for the quarters ended March 31, 2000 and March 31, 1999, respectively.
The Company has determined that the amortization expense on intangible assets is
not tax deductible since the June 1996 purchase method of accounting is being
retroactively applied.
The Company accounts for income taxes under the liability method prescribed by
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to the differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
basis. Future tax benefits are recognized only to the extent that realization of
such benefits is more likely than not. For the quarter ended March 31, 2000, a
pro forma deferred tax benefit and related valuation allowance of $5.17 million
were recorded. The utilization of the tax benefit due to a capital loss
carry-forward is dependent on the character and amount of the partnership
incentive allocation income.
Use of Estimates
In preparing the Unaudited Interim Pro Forma Condensed Consolidated Financial
Statements, management is required to make estimates and assumptions that affect
the amounts reported in the financial statements. Actual results could differ
from those estimates. The bonus accrual at March 31, 1999 reflects an amount
based on the Incentive Compensation Plan approved by the BKF Compensation
Committee (see Note 7). This estimated amount represents a change from previous
assumptions used by management.
<PAGE>
Page 13 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies (continued)
Fixed Assets
Furniture, fixtures, office and computer equipment and leasehold improvements
are carried at cost. Depreciation of furniture, fixtures, office and computer
equipment is provided on the accelerated method over the estimated useful lives
of the respective assets. Leasehold improvements are amortized over the shorter
of the economic life or the term of the lease.
Other Assets
Included in other assets is a security deposit ($807,000 at March 31, 2000 and
at December 31, 1999) required pursuant to the Company's office space lease
agreement. This deposit is held at a nationally recognized financial
institution. Investments in private placements for which market values are not
readily ascertainable are stated at their estimated fair values as determined by
the Company's management. During the quarter ended March 31, 2000, the Company
recorded a permanent write down of $401,000 for one of the investments. Also
included in other assets at March 31, 2000 is $178,000 of accrued interest
receivable on one of the private placement investments.
Intangible Assets
The cost in excess of net assets of Levco acquired by BKF in June 1996 is
reflected as goodwill, employment contracts, and investment advisory contracts
in the Pro Forma Condensed Consolidated Statements of Financial Condition.
Goodwill is amortized straight line over 15 years and investment contracts over
10 years. Employment contracts are amortized over the life of the contract or
shorter period if the employee has subsequently left the Company. Pro forma
accumulated amortization at March 31, 2000 and December 31, 1999 was $52.6
million and $49.8 million, respectively. Whereas the Unaudited Pro Forma
Condensed Consolidated Financial Statements reflect these intangible assets
recorded under the purchase accounting method, the retroactive income effect of
the recasting of this transaction will be recorded in the second quarter of 2000
as a one time charge to income for all accumulated amortization from June 1996
through April 18, 2000. The Company received its deregistration order as an
investment company from the SEC in the second quarter of 2000.
<PAGE>
Page 14 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Summary of Significant Accounting Policies (continued)
Earnings Per Share
The Company has not presented historical earnings per share due to the
significant changes in its operations, which are not reflected in the historical
financial statements. BKF, as a registered investment company, presented its net
asset value ("NAV") per share. The unaudited pro forma earnings per share are
shown using the actual BKF shares outstanding (adjusted for the 1 to 6 reverse
stock split effectuated in January 2000).
The Company will adopt Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share" in the second quarter of 2000. Pro forma diluted
earnings per share is computed by dividing net pro forma income by the total of
the weighted average number of shares of common stock outstanding and common
stock equivalents. Diluted earnings per share are computed using the treasury
stock method. For the quarter ended March 31, 2000, all options outstanding were
anti-dilutive; therefore, basic and diluted earnings per share are the same.
There were no options granted prior to January 2000.
Business Segments
The Company has not presented business segment data, in accordance with SFAS No.
131 "Disclosures about Segments of an Enterprise and Related Information,"
because it operates predominantly in one business segment, the investment
advisory and asset management business.
Stock-based Compensation
The Company follows SFAS No. 123, "Accounting for Stock-Based Compensation," and
has adopted the intrinsic value method for all arrangements under which
employees receive shares of stock or other equity instruments of the Company or
if the Company incurs liabilities to employees in amounts based on the price of
its stock. Fair value disclosures are included in the notes to the Unaudited Pro
Forma Condensed Consolidated Financial Statements.
<PAGE>
Page 15 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
2. Receivable from Clearing Broker
LEVCO Securities acts as an introducing broker and all transactions for its
customers are cleared through and carried by a major U.S. securities firm on a
fully disclosed basis. LEVCO Securities has agreed to indemnify its clearing
broker for losses that the clearing broker may sustain from the customer
accounts introduced by LEVCO Securities. In the event a customer is unable to
fulfill its contractual obligation to the clearing broker, LEVCO Securities may
be exposed to off-balance sheet risk.
3. Related Party Transactions
Term Loan and Other Borrowing from BKF
In June 1996, Levco borrowed $65 million under a term loan agreement (as
amended) with BKF. The loan bore interest at 10.25% per annum during 1999. The
loan was originally due on June 28, 1999 and was subsequently extended to
December 15, 1999 with an interest rate of LIBOR plus 3.5%. On December 15,
1999, Levco's loan due to BKF matured and BKF's Board of Directors approved the
reclassification of the loan to the capital of Levco on that date. Subsequent to
December 15, 1999, Levco has not and will not incur any interest expense on this
loan.
Investment Advisory Fees from BKF
Levco managed the publicly traded portion of BKF's investment portfolio (see
Note 1). Advisory fees earned from this relationship for the quarter ended March
31, 1999 were approximately $379,000. Because of BKF's Plan and subsequent
liquidation of the public portfolio managed by Levco, the portfolio was fully
liquidated by December 31, 1999. Therefore, subsequent to December 31, 1999,
Levco will no longer earn any advisory fees from BKF.
<PAGE>
Page 16 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
Related Party Transactions (continued)
Investments in Affiliated Investment Partnerships and Related Revenue
The Company earned investment advisory fees and general partner allocations
(inclusive of an incentive fee) from affiliated investment partnerships of
approximately $2.5 million and $1.8 million, respectively, for the quarters
ended March 31, 2000 and March 31, 1999. Included in investments in affiliated
partnerships at March 31, 2000 and December 31, 1999 are approximately $2.2
million and $5.4 million, respectively, of incentive allocations. LEVCO GP has
general partner liability with respect to its interest in each of the affiliated
investment partnerships and has no assets other than its interest in these
partnerships and certain cash and cash equivalents.
Commission Revenues
All commission revenues reflected on the Unaudited Pro Forma Condensed
Consolidated Statements of Income have been generated by transactions introduced
to a clearing broker by LEVCO Securities, which acts as a broker for certain
investment advisory accounts of the Company. Commission revenues have been
presented net of the related clearing expenses.
4. Commitment
The Company has office space obligations that require monthly payments plus
escalations through January 2008. At March 31, 2000 the minimum annual rental
commitments under the operating lease are as follows:
April 1 through December 31, 2000 $ 933,000
2001 1,244,000
2002 1,264,000
2003 1,324,000
2004 1,364,000
2005 to 2008 4,581,000
-------------
Total minimum payments required $ 10,710,000
=============
<PAGE>
Page 17 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
5. Net Capital Requirement
LEVCO Securities is subject to the SEC's Uniform Net Capital Rule 15c3-1
("Rule"), which requires the maintenance of minimum net capital and requires
that the ratio of aggregate indebtedness to net capital, both as defined, shall
not exceed 15 to 1. At March 31, 2000 and December 31, 1999, LEVCO Securities
was in compliance with this Rule.
6. Employee Benefit Plan
Levco has adopted a Section 401(k) plan. All employees with six months or more
of service are eligible to participate in the plan. Eligible participants may
contribute up to 15% of their earnings, subject to statutory limitations. The
Company may match employee contributions, up to 100%, subject to statutory
limitations.
7. Incentive Compensation Plan
In December 1998, the shareholders of BKF approved an Incentive Compensation
Plan ("Compensation Plan") that allows the Company to pay officers and employees
a part of their compensation in restricted stock units ("RSU") and other forms
of equity-based compensation, including stock options. The total number of
shares of BKF common stock that may be issued under the Compensation Plan is
650,000 shares, giving effect to the 1 to 6 reverse stock split effectuated in
January 2000. On April 18, 2000, the Compensation Plan was amended to increase
the number of shares that may be issued to 1,300,000. In addition, the
Compensation Plan permits employees to borrow amounts from the Company in order
to purchase BKF stock or exercise options.
In early 2000, the Compensation Committee of BKF ("Committee") authorized the
issuance of 76,855 RSU's and 183,718 non-qualified stock options to purchase BKF
shares under the Compensation Plan as a component of the 1999 year-end bonuses.
Those employees electing to receive RSU's and non-qualified options forfeited
their rights to the cash equivalent portion of their bonus in return for the
RSU's and options received. In return, these employees received an additional
20% of equity based on the amount exchanged. The RSU's granted in exchange for a
portion of the original cash bonus vest pro-rata over a two-year period ending
on December 31, 2001. The RSU's require future services as a condition to the
ultimate receipt of the underlying number of shares of BKF common stock. The
Company's policy is to expense these amounts ratably over the required service
period. The expense for the quarter ended March 31, 2000 relating to the vesting
of the RSU's was $125,000.
<PAGE>
Page 18 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
7. Incentive Compensation Plan (continued)
The Committee granted 183,178 non-qualified stock options to purchase BKF shares
at a strike price of $13.03125 (the average market price on the date of grant).
These options are exercisable in equal annual installments in December 2000 and
December 2001 subject to satisfying employment conditions, with exceptions for
termination due to death, retirement or a change in control of the ownership of
BKF. Once the service requirements have been met, these options will remain
outstanding and exercisable until the tenth anniversary of the date of grant,
subject to earlier expiration upon termination of employment. In January 2000,
the Committee granted an additional 103,098 non-qualified options that will
expire in January 2010. These options also have an exercise price of $13.03125
and vest over one to three years. In 1999, Levco did not incur any compensation
expense related to the Compensation Plan.
Pursuant to SFAS No. 123 "Accounting for Stock-Based Compensation," the Company
has elected to account for its stock option plan under APB Opinion 25,
"Accounting for Stock Issued to Employees," and adopt the disclosure only
provisions for SFAS No. 123. Under APB 25, no compensation costs were recognized
related to the Award Plan because the exercise price of the options awarded was
equal to the fair market price of the common stock on the date of the grant.
Under SFAS No. 123, net income would have been reduced by $114,000 for the
quarter ended March 31, 2000. Basic and diluted earnings per share would have
been reduced by $.02 for the quarter ended March 31, 2000.
The fair value of each option granted in 2000 was estimated using the
Black-Scholes option-pricing model with following assumptions:
Expected dividend yield 0.00%
Expected volatility 15.45%
Risk-free interest 6.35%
Expected term 7 years
Fair value $4.97
None of the options were vested or exercisable as of March 31, 2000.
<PAGE>
Page 19 of 28
BKF Capital Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
8. Deferred Compensation Plan
On April 18, 2000 the Company adopted a Long Term Deferred Compensation Plan to
provide a competitive long-term incentive for key officers and employees. The
awards of RSU's vesting in 2000 may be deferred into this plan and will be
expensed on a straight-line method over the respective vesting periods. As of
March 31, 2000 none of the deferred compensation has been converted to shares of
common stock.
9. Other Liabilities
During 2000, the Company financed a portion of an insurance policy (premium
$910,000). The financed amount is payable in 30 equal monthly installments of
approximately $32,000.
<PAGE>
Page 20 of 28
BKF CAPITAL GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
INTRODUCTION
The primary holding of BKF Capital Group, Inc. ("BKF") is John A. Levin & Co.,
Inc., an investment adviser registered with the U.S. Securities and Exchange
Commission that was acquired by BKF in June 1996. The investment adviser is a
wholly owned subsidiary of Levin Management Co., Inc., which in turn is a wholly
owned subsidiary of BKF. Levin Management Co., Inc. and its subsidiaries are
referred to collectively as "Levco." Levco specializes in managing equity
portfolios for institutional and individual investors primarily in the United
States. Most accounts are managed pursuant to a large cap value strategy; Levco
also offers an event-driven, risk arbitrage product as well as other more
specialized investment programs.
Levco acts as the general partner of a number of investment partnerships
and also acts as an adviser to private investment vehicles organized outside the
United States.
With respect to accounts managed pursuant to its large cap value strategy,
Levco generally receives advisory fees based on a percentage of the market value
of assets under management, including market appreciation or depreciation and
client contributions and withdrawals. With respect to private investment
vehicles and separate accounts managed pursuant to similar strategies, Levco is
generally entitled to receive both a fixed management fee based on a percentage
of the assets under management and a share of net profits.
Levco obtains some of its clients for its large cap value product through
wrap fee programs sponsored by major financial services companies. In these
programs, clients pay the sponsoring broker an asset-based fee that covers
brokerage commissions, advisory services, custodial fees, and other reporting
and administrative services. Investors are able to select Levco from among a
limited number of managers participating in the program, and Levco receives a
portion of the wrap fee paid by the clients who select Levco to manage their
accounts through the program.
Levco also has a wholly-owned broker-dealer subsidiary that clears through
Correspondent Services Corporation, a PaineWebber company, on a fully disclosed
basis. Generally, the customers of the broker-dealer subsidiary are advisory
clients of Levco, and the trades executed through the broker-dealer are
generally placed by Levco in its capacity as investment adviser.
<PAGE>
Page 21 of 28
The following discussion and analysis of the results of operations is based
on the Pro Forma Condensed Consolidated Statements of Income and the Pro Forma
Condensed Consolidated Statements of Financial Condition for BKF Capital Group,
Inc. and Subsidiaries. In light of the evolution of BKF from a closed-end
management investment company to a holding company whose primary asset is the
investment management business of Levco, pro forma financial statements have
been included in Part I - Item 1 of this Quarterly Report on Form 10-Q in order
to provide meaningful comparisons of financial information for the periods ended
March 31, 1999, December 31, 1999 and March 31, 2000. Management has not
included a discussion of historical financial results of BKF as a closed-end
management investment company since it completed the distribution of
substantially all of its assets on January 7, 2000 pursuant to a Plan of
Distribution of Assets approved by shareholders on August 19, 1999 and ceased to
be registered as an investment company on April 18, 2000.
Certain statements under this caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. See "Part II - Other Information".
PRO FORMA RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 as Compared to Three Months Ended March 31,
1999.
Revenues
Total revenues for the first quarter of 2000 rose to $15.27 million,
reflecting an increase of 33.9% from the $11.41 million in revenues generated in
the same period in 1999. This increase was mainly attributable to an increase in
incentive fees and general partner allocations from $2.01 million to $5.24
million. The increase in such incentive fees and allocations is primarily the
result of increased assets under management in the risk arbitrage product, which
assets increased from $345 million at March 31, 1999 to $732 million at March
31, 2000.
Investment advisory fees (excluding incentive fees and general partner
allocations) rose 6.4% from $9.01 million (excluding investment advisory fees
received with regard to the portfolio of BKF managed by Levco) to $9.58 million,
while commission income generated by the broker-dealer business also rose from
$380 million to $449 million, an 18.2% increase.
Assets Under Management
At March 31, 2000, assets under management were higher than they had been a
year earlier, having risen to $8.767 billion from $8.536 billion (including $506
million in BKF assets formerly managed by Levco, the proceeds from the sale of
which were distributed to shareholders as part of the plan of distribution).
<PAGE>
Page 22 of 28
Following is a comparison of firm assets under management as defined by product
and client type:
March 31, 2000 March 31, 1999
-------------- --------------
(In millions)
Institutional $4,184 $4,837
Non-institutional 1,977 1,867
Arbitrage 732 345
Partnerships 136 125
Wrap 1,738 856
BKF 0 506
------ ------
TOTAL $8,767 $8,536
====== ======
Expenses
Total expenses for the first quarter of 2000 rose 24.7% from $10.84 million
to $13.52 million, with the largest component of this increase being a 40.4%
increase in compensation expense, which went from $5.78 million to $8.12
million.
Other operating expenses of BKF rose 20.1% from $1.57 million to $1.88
million, reflecting increases in professional fees relating to the
implementation of the equity compensation plan and the evolution of BKF from an
investment company to a holding company, an increase in insurance expense due to
an increase in policy limits, and an increase in expenses relating to marketing
efforts.
Operating Income
Operating income rose to $1.76 million for the first quarter of 2000, up
209.0% from $569,000 for the same period in 1999, reflecting the increase in
revenues which exceeded the increase in expenses.
Loss on Investments
In the first quarter of 2000, BKF realized a net loss of $223,000 through
the permanent write down of a historical private placement position that had
been part of BKF's portfolio when it was an investment company. This net loss
was comprised of a write down of the position from $1,000,000 to $599,000, and
the accrual of $178,000 in interest with respect to the investment that is
reflected in the interest income for the first quarter. Net realized and
unrealized loss on investments at March 31, 2000 also includes $21,000 received
as part of a class action settlement relating to a position held in BKF's
portfolio when it was an investment company.
<PAGE>
Page 23 of 28
Interest Income
Interest income increased by 409.7%, from $62,000 to $316,000. This
increase in interest income resulted from two major factors. First was the
interest accrual relating to a historical position described in the preceding
paragraph. Second, BKF was able to maintain generally higher cash levels because
of the shift of a portion of 1999 compensation from cash to equity-based
instruments and the reclassification of the $65 million BKF loan to Levin
Management Co., Inc. to equity. This reclassification enabled Levin Management
Co., Inc. to cease making interest payments to BKF, resulting in higher cash
balances for Levco.
Income Taxes
The 31.8% rise in the provision for income taxes from $1.66 million in the
first quarter of 1999 to $2.12 million in the first quarter of 2000 reflects the
increase in income before taxes (as determined without taking a deduction for
the amortization of intangibles). An effective tax rate of 47% was used to make
the determination with respect to the provision for taxes at March 31, 2000,
while an effective tax rate of 46% was used to calculate the provision for taxes
at March 31, 1999. The differential in tax rates is due to state allocations.
Amortization Expense
The amortization of intangibles expense is derived from the 1996
acquisition of Levco by BKF. The transaction became subject to treatment under
purchase accounting rules following the de-registration of BKF as an investment
company. Such amortization expense is non-deductible for income tax purposes
because it is being applied retroactively. A one-time charge to income in the
amount of $53.2 million for accumulated amortization from June 1996 through
April 18, 2000 will be recorded in the second quarter of 2000 because BKF became
an operating company on such date. This charge will not impact cash flows.
LIQUIDITY AND CAPITAL RESOURCES
March 31, 2000 as Compared to December 31, 1999
BKF's current assets as of March 31, 2000 are highly liquid, consisting
primarily of cash, short term investments and advisory fees receivable.
Levco has historically met its cash and liquidity needs through cash
generated by operating activities. At March 31, 2000, BKF had cash and cash
equivalents of $12.81 million, compared to $14.36 million at December 31, 1999.
This decrease in cash and cash equivalents reflects the payment of bonuses
accrued in 1999 and paid in 2000, which bonus payments were partially offset by
the collection of receivables and the annual withdrawal of incentive allocations
from the investment partnerships. Such distributions from the partnerships also
account for the
<PAGE>
Page 24 of 28
decrease in investments in affiliated investment partnerships from $7.63 million
at December 31, 1999 to $4.52 million at March 31, 2000.
Prepaid expenses rose 65.7% from $1.34 million at December 31, 1999 to
$2.23 million at March 31, 2000 as the result of the purchase of a new, three
year Directors and Officers/Errors and Omissions Liability insurance policy. The
premium for the policy is being financed by BKF over a three year period,
resulting in an insurance payable of $828,000.
The (40.1%) decrease in investments to $599,000 from $1.0 million reflects
the permanent write down of historical private placement positions that had been
part of BKF's portfolio when it was an investment company. The March 31, 2000
valuation of these investments does not include accrued interest of $178,000,
which is included in prepaid expenses and other current assets. This interest
was included in the valuation of the investments at December 31, 1999.
Accrued expenses decreased by (30.3%) to $3.31 million from $4.74 million,
principally as the result of the payment of non-recurring expenses in connection
with the closing of the Chicago office of BKF. The decrease in accrued bonuses
from $13.35 million to $4.74 million reflects the cash payment of 1999 bonuses.
Based upon BKF's current level of operations and anticipated growth, BKF
expects that cash flows from operating activities will be sufficient to finance
its working capital needs for the foreseeable future. BKF has no material
commitments for capital expenditures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Since BKF's revenues are largely driven by the market value of Levco's
assets under management, these revenues are exposed to fluctuations in the
equity markets. Management fees for most accounts are determined based on the
market value of the account on the last day of the quarter with respect to which
the investment advisory fee is charged, so any significant increases or
decreases in market value occurring on or shortly before the last day of a
quarter may materially impact revenues for the quarter. Furthermore, since Levco
manages most of its assets in a large cap value style, a general decline in the
performance of value stocks could have an adverse impact on Levco's revenues.
Similarly, a lack of opportunity to implement, or a failure to successfully
implement, Levco's event-driven, risk arbitrage strategy, could reduce
performance based incentive fees and allocations and thereby negatively impact
BKF's revenues.
PART II. OTHER INFORMATION
This Quarterly Report on Form 10-Q contains certain statements that are not
historical facts, including, most importantly, information concerning possible
or assumed future results of operations of BKF and statements preceded by,
followed by or that include the words "may," "believes," "expects,"
"anticipates," or the negation thereof, or similar expressions, which constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). For those statements, we claim
the protection of the safe harbor for forward-looking statements contained in
the Reform Act. These forward-looking statements are based on our current
expectations and are susceptible to a number of risks, uncertainties and other
factors, and our actual results, performance and achievements may differ
materially from any future results, performance or achievements expressed or
implied by such
<PAGE>
Page 25 of 28
forward-looking statements. Such factors include the following: competition; the
existence or absence of adverse publicity; changes in business strategy; quality
of management; availability, terms and deployment of capital; business abilities
and judgment of personnel; availability of qualified personnel; labor and
employee benefit costs; changes in, or failure to comply with, government
regulations; the costs and other effects of legal and administrative
proceedings; and other risks and uncertainties referred to in this document and
in our other current and periodic filings with the Securities and Exchange
Commission, all of which are difficult or impossible to predict accurately and
many of which are beyond our control. We will not undertake and specifically
decline any obligation to publicly release the result of any revisions which may
be made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated or
unanticipated events. In addition, it is our policy generally not to make any
specific projections as to future earnings, and we do not endorse any
projections regarding future performance that may be made by third parties.
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On April 18, 2000, BKF held its Annual Meeting of Stockholders. At the
Annual Meeting, Anson M. Beard, Jr., David D. Grumhaus, Jeffrey A. Kigner, Peter
J. Solomon and James S. Tisch were elected to serve as directors of BKF. J.
Barton Goodwin, John A. Levin, Burton G. Malkiel and Dean J. Takahashi continued
as directors following the Annual Meeting. At the Annual Meeting, the
stockholders also approved proposal 2, changing the name of the company from
"Baker, Fentress & Company" to "BKF Capital Group, Inc.", proposal 3, amending
and restating the Baker, Fentress & Company 1998 Incentive Compensation Plan,
and proposal 4, ratifying the appointment of Ernst & Young LLP as BKF's
independent auditors.
<PAGE>
Page 26 of 28
The voting on the above matters is set forth below:
Proposal 1
NOMINEE VOTES FOR VOTES WITHHELD
------- --------- --------------
Anson M. Beard, Jr. 4,626,819 164,256
David D. Grumhaus 4,636,032 155,043
Jeffrey A. Kigner 4,594,662 196,413
Peter J. Solomon 4,625,159 165,916
James S. Tisch 4,627,289 163,786
Proposal 2 - There were 4,668,898 votes for, 106,024 votes against, 16,053
abstentions.
Proposal 3 - There were 2,821,511 votes for, 637,948 votes against, 57,642
abstentions and 1,273,974 broker non-votes.
Proposal 4 - There were 4,960,550 votes for, 55,174 votes against and 45,351
abstentions.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
Page 27 of 28
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.
BKF CAPITAL GROUP, INC.
Date: May 22, 2000
By: /s/ JOHN A. LEVIN
---------------------------------
John A. Levin
Chairman, Chief Executive Officer
and President
By: /s/ GLENN A. AIGEN
---------------------------------
Glenn A. Aigen
Senior Vice President and
Chief Financial Officer
<PAGE>
Page 28 of 28
Exhibit Index
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule
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<MULTIPLIER> 1,000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 934
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,873
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,472
<CURRENT-LIABILITIES> 1,608
<BONDS> 0
0
0
<COMMON> 6,505
<OTHER-SE> 86,359
<TOTAL-LIABILITY-AND-EQUITY> 94,472
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 206
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (206)
<INCOME-TAX> 0
<INCOME-CONTINUING> (206)
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