-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H5WhAGUMzsDZzsXhJv3E9Vd/XCxM9BP+mZ+QsU7DeMGwEWz0601+bJZ6f+uxZ8iM TS8FOZ3WzdKLTL1bLEOI/g== 0000807708-00-000009.txt : 20000516 0000807708-00-000009.hdr.sgml : 20000516 ACCESSION NUMBER: 0000807708-00-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENETECH CORP CENTRAL INDEX KEY: 0000807708 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 943009803 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22072 FILM NUMBER: 633032 BUSINESS ADDRESS: STREET 1: 500 SANSOME STREET SUITE 410 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4153983825 MAIL ADDRESS: STREET 1: 500 SANSOME STREET SUITE 410 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 10-Q 1 10-Q 1ST QTR FOR KENETECH CORP 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 Commission file number 33-53132 KENETECH CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-3009803 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 500 Sansome Street, Suite 410 San Francisco, California 94111 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 398-3825 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 On May 5, 2000, there were 39,553,918 shares of the issuer's Common Stock, $.0001 par value outstanding. 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. KENETECH Corporation Consolidated Financial Statements Page Consolidated Statements of Operations for the quarterly periods ended March 31, 2000 and 1999 4 Consolidated Balance Sheets, as of March 31, 2000 and December 31, 1999 5 Consolidated Statement of Stockholders' Equity for the quarterly period ended March 31, 2000 6 Consolidated Statements of Cash Flows for the quarterly periods ended March 31, 2000 and 1999 7 Notes to Consolidated Financial Statements 8-16 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 17-20 Item 3. Quantitative and Qualitative Disclosure about Market Risk 21 Part II - OTHER INFORMATION Item 1. Legal Proceedings. 22 Item 5. Other Information. 22 Item 6. Exhibits and Reports on Form 8-K. 22 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements KENETECH CORPORATION -------------------- CONSOLIDATED STATEMENTS OF OPERATIONS for the quarterly periods ended March 31, 2000 and 1999 (unaudited, in thousands, except per share amounts) March 31, March 31, 2000 1999 --------- --------- Revenues: Construction services ............................ $ -- $ 410 Maintenance, management fees and other ........... -- 21 --------- --------- Total revenues ................................. -- 431 Costs of revenues: Construction services ............................ -- 56 --------- --------- Total costs of revenues ........................ -- 56 Gross margin ....................................... -- 375 Project development and marketing expenses ......... 2 61 General and administrative expenses ................ 790 2,161 --------- --------- Loss from operations ............................... (792) (1,847) Interest income .................................... 633 830 Loss on trading debt securities .................... (54) -- Gain on disposition of subsidiaries and assets ..... -- 4,597 Other income ....................................... 281 62 --------- --------- Income before taxes ................................ 68 3,642 Income tax expense ................................. -- -- --------- --------- Net income ................................... $ 68 $ 3,642 ========= ========= Net income per common share: Basic and Diluted $ 0.00 $ 0.09 Weighted average number of common shares used in computing per share amounts: Basic and Diluted 41,919 41,954 The accompanying notes are an integral part of these consolidated financial statements. 4 KENETECH CORPORATION -------------------- CONSOLIDATED BALANCE SHEETS March 31, 2000 and December 31, 1999 (unaudited, in thousands, except share amounts) ASSETS March 31, December 31, 2000 1999 --------- ----------- Current assets: Cash and cash equivalents ......................... $ 5,984 $ 15,291 Funds in escrow ................................... 278 314 Accounts receivable ............................... 10 110 Trading debt securities ........................... 36,077 31,388 Interest receivable ............................... 556 464 --------- ----------- Total current assets ................................. 42,905 47,567 Project development advances ........................ 4,764 2,451 Property, plant and equipment, net ................... 50 58 Other assets ......................................... 54 21 --------- ----------- Total assets ................................... $ 47,773 $ 50,097 ========= =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable .................................. $ 855 $ 937 Accrued liabilities ............................... 3,607 4,580 Current taxes payable ............................. 129 130 Other notes payable ............................... -- 6 Accrued stock repurchase obligation .............. -- 26 --------- ---------- Total current liabilities ....................... 4,591 5,679 Accrued liabilities .................................. 943 1,168 Deferred benefit for deconsolidated subsidiary losses. 10,305 10,305 --------- ---------- Total liabilities ................................ 15,839 17,152 Commitments and contingencies Stockholders' equity: Common stock - 110,000,000 shares authorized, $.0001 par value; 41,919,218 issued and outstanding at March 31, 2000, and December 31, 1999, repurchased for retirement still outstanding 2,059,000 at March 31, 2000, 401,200 at December 31, 1999 - 2,049,400 and 315,900 shares subsequently retired on April 14 and May 3, 2000, respectively.. 4 4 Additional paid-in capital ........................ 222,663 223,742 Accumulated deficit ............................... (190,733) (190,801) --------- ---------- Total stockholders' equity ....................... 31,934 32,945 --------- ---------- Total liabilities and stockholders' equity...... $ 47,773 $ 50,097 ========= ========== The accompanying notes are an integral part of these consolidated financial statements. 5 KENETECH CORPORATION -------------------- CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY for the quarterly period ended March 31, 2000 (unaudited, in thousands, except share amounts)
Common Stock Additional Paid-In Accumulated Shares Amount Capital Deficit Total Balance, December 31, 1999 41,919,218 $4 $223,742 $(190,801) $ 32,945 Shares repurchased pending retirement, still outstanding as of March 31, 2000, subsequently retired -- - (1,079) -- (1,079) Net income -- - -- 68 68 ---------- -- -------- --------- --------- Balance, March 31, 2000 41,919,218 $4 $222,663 $(190,733) $ 31,934 ========== == ======== ========= ========= The accompanying notes are an integral part of these consolidated financial statements.
6 KENETECH CORPORATION -------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS for the quarterly periods ended March 31, 2000 and 1999 (unaudited, in thousands) March 31, March 31, 2000 1999 --------- --------- Cash flows from operating activities: Net income ..................................... $ 68 $ 3,642 Adjustments to reconcile net income to net cash used in operating activities: Depreciation, amortization and other ........ 8 3 Gain on disposition of subsidiaries and assets ................................. -- (4,597) Other income ................................ (281) -- Loss on trading debt securities ............. 54 -- Changes in assets and liabilities: Accounts and interest receivable ........... 8 170 Accounts payable ........................... (82) (579) Accrued liabilities ........................ (923) (902) Current taxes payable ...................... (1) (2,100) Other assets ............................... (33) -- Deferred benefit for deconsolidated subsidiary losses ......................... -- 900 --------- --------- Net cash used in operating activities ... (1,182) (3,463) Cash flows from investing activities: Proceeds from sales of trading debt securities ............................ 3,234 -- Purchase of trading debt securities ......... (7,977) -- Project development advances ................ (2,313) -- Net proceeds on disposition of subsidiaries and assets ................................. -- 2,909 Decrease in funds in escrow restricted for line of credit ......................... 36 -- --------- --------- Net cash provided by (used in) investing activities ............................. (7,020) 2,909 Cash flows from financing activities: Payments on other notes payable ............. -- (1,065) Decrease in stock repurchase payable ........ (26) -- Stock repurchased for retirement ............ (1,079) -- --------- --------- Net cash used in financing activities .... (1,105) (1,065) --------- --------- Decrease in cash and cash equivalents............ (9,307) (1,619) Cash and cash equivalents at beginning of period ........................ 15,291 67,424 --------- --------- Cash and cash equivalents at end of period ... $ 5,984 $ 65,805 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 7 1. General The interim consolidated financial statements presented herein include the accounts of KENETECH Corporation ("KENETECH") and its consolidated subsidiaries (the "Company"), but exclude KENETECH Windpower, Inc. ("KWI"). These interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and the notes thereto for the year ended December 31, 1999. These interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary (consisting of items of a normal recurring nature) for a fair presentation of the Company's interim financial position, results of operations and cash flows. Results of operations for interim periods are not necessarily indicative of those for a full year. 2. Significant Accounting Policies Revenues: Revenues from construction services are recognized on the percentage-of-completion, cost-to-cost method. Costs of such revenues include all direct material and labor costs and those indirect costs related to contract performance such as indirect labor, supplies and tool costs that can be attributed to specific contracts. Indirect costs not specifically allocable to contracts and general and administrative expenses are charged to operations as incurred. Revisions to contract revenue and cost estimates are recognized in the accounting period in which they are determined. Provision for estimated losses on uncompleted contracts is made in the period in which such losses are determined. Maintenance and management fees are recognized as earned under various long-term agreements to manage or operate and maintain certain energy production facilities. Other revenues include development fees earned in connection with various independent power plant development activities. Project development revenues: Project development revenues are recognized as they are earned. Investments: The Company accounts for investments in marketable equity securities in accordance with FAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. Under FAS No. 115, the Company's publicly traded securities are classified as trading securities. Publicly-traded trading securities are stated at their fair value, with any unrealized gains and losses, net of taxes, reported in results of operations. Depreciation: Depreciation is recorded on a straight-line basis over the estimated useful life of the asset. Gains or losses on disposition of subsidiaries and projects (net of costs) are recognized at closing, when proceeds from the sale are received. Income Taxes: The Company accounts for income taxes using the liability method under which deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. Changes in deferred tax assets and liabilities include the impact of any tax rate changes enacted during the year and changes in the valuation allowance. Cash equivalents: Short-term investments purchased with original maturities of three months or less and other instruments which are readily tradeable and without significant interest rate risk are considered cash equivalents. Project development advances: The Company capitalizes amounts funded under various project participation agreements, as described in Note 3, until such time as the funding is repaid. Project development costs incurred by the Company are capitalized as other assets. Comprehensive Income: The Company has adopted Financial Accounting Standards Board SFAS No. 130, "Reporting Comprehensive Income," as of January 1, 1998. SFAS No. 130 requires that all items required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company currently has no reportable comprehensive income items. 8 Recent Accounting Pronouncements: In June 1998, the Financial Accounting Standards Boards issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The new standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 is effective for the Company's quarter ending March 31, 2001. The Company does not expect SFAS No. 133 to have a material effect on its financial position or results of operations. In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101. The SAB summarized certain of the SEC Staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company believes it currently conforms to the guidance contained in the bulletin. 3. Business Activities The Company continues its involvement in project development activities. The Company is currently participating with other parties in developing two electric generating facilities and one oriented strand board facility. OSB Chateaugay In July 1999, the Company entered into a funding and participation agreement with OSB Chateaugay, LLC ("OSB"). The funding will be used by OSB to pursue the development of an oriented, strand-board project in Chateaugay, New York (the "OSB Project"). In addition to development services, the Company agreed to fund up to $1.25 million. The OSB Project is expected to produce up to 475 million square feet of strand board per year. Construction is anticipated to commence in the second half of 2000. In exchange for the services and funding, the Company will receive participation distributions. The advances are to be repaid upon the completion of certain development milestones as specified in the funding and participation agreement. Repayment of the advances is to occur before any participation distributions. Repayment of the advances and participation distributions are both dependent upon the ultimate success of the OSB Project. The Company had advanced $440,000 as of March 31, 2000. As of May 5, 2000, the Company had funded an additional $149,000 on the OSB Project, bringing the total amount funded to $589,000. Astoria In October 1999, the Company entered into funding and participation agreements with Astoria Energy, LLC ("Astoria") to provide funding under a note agreement of up to $3 million for the development of a 1,000 megawatt independent power plant (the "Astoria Project") to be located in Astoria, Queens, New York. The Astoria Project is currently under development and is expected to commence construction in the second half of 2001. In exchange for the services and funding, the Company will receive, in addition to repayment of the note evidencing the funding, certain participation distributions. The note is secured by all property and assets of Astoria. Recovery of the note, interest on the note, and participation distributions are all dependent upon the ultimate success of the Astoria Project. Accordingly, interest income and participation distributions will be recognized upon the completion of certain project milestones. On March 14, 2000, the note was amended to change the due date of the original note to December 15, 2000, and provide for interest at 20% on the balance outstanding beginning on April 15, 2000. On March 14, 2000, the Company also committed to fund an additional $2 million toward the development of the Astoria Project in the form of a second note. As of March 31, 2000, the Company had advanced $1.0 million on the second note. The second note is due and payable on December 15, 2000, and carries interest at 20% on the balance outstanding. As of March 31, 2000, the Company had advanced $4.0 million on the Astoria Project, consisting of approximately $3.0 million on the original note and $1.0 million on the second note. An additional $700,000 was funded on the Astoria Project on April 13, 2000, bringing the total amount funded to $4.7 million. 9 Whinash In February 2000, the Company agreed to finance up to $600,000 for the development of a wind-powered electrical generating facility to be located in Whinash, Cumbria, England. The project is a 50 megawatt facility. In exchange for the funding, the Company will receive certain participation distributions upon the sale or financial closing of the Whinash project. As of March 31, 2000, the Company had advanced $350,000. Other Information The Company currently has substantial cash balances and net operating income tax losses and other tax attributes to carry forward to future years. While pursuing development projects, management continues to evaluate different businesses that the Company might pursue, through acquisition or otherwise. In addition, the Company is evaluating all strategic alternatives available to it. The Company has retained professionals to assist it in such evaluations. In addition, the Supreme Court of the State of Delaware affirmed on all counts the judgment previously entered by the Court of Chancery of the State of Delaware in favor of the Company in an action brought by former holders of its PRIDES (see Note 12). 4. Net Income Per Share Net income per share amounts for the periods ended March 31, 2000 and 1999 were calculated as follows: Basic and Diluted (in thousands, except per share amounts) March 31, March 31, 2000 1999 --------- ---------- Net income $ 68 $ 3,642 --------- --------- Net income used in per share calculations $ 68 $ 3,642 ========= ========== Weighted average shares used in per share calculations 41,919 41,954 ========= ========== Net income per share $ 0.00 $ 0.09 ========= ========== 5. Other Income The Company recorded other income of $281 thousand for the quarter ended March 31, 2000, primarily due to the reduction in accrued liabilities related to the favorable resolution of various legal matters. 6. Other Investments Francisco Partners, L.P.: In April 2000, the Company agreed to invest $5 million over the next four years in Francisco Partners, L.P. ("Francisco Partners"), a partnership formed to make private information technology buy-out investments. The Company will receive limited partnership interests for its investment. The limited partnership interests are highly illiquid and Francisco Partners has a term of at least ten years. Draper Atlantic Venture Fund II, L.P.: In April 2000, the Company agreed to invest $2.5 million over the next two years in Draper Atlantic Venture Fund II, L.P. ("Draper Atlantic"), a partnership formed to invest primarily in early-stage information technology companies. The Company will receive limited partnership interests for its investment. The limited partnership interests are highly illiquid and Draper Atlantic has a term of at least ten years. As of May 5, 2000, the Company had invested $125,000. 10 Indosuez Capital Funding VI, Ltd.: In April 2000, the Company agreed to purchase $2.5 million of Class E Junior Subordinated Notes of Indosuez Capital Funding VI, Ltd. ("Indosuez"). Indosuez is a newly formed company organized under the laws of the Cayman Islands to acquire and manage a diversified portfolio of corporate and other debt obligations. The portfolio will consist primarily of U.S. dollar denominated senior secured term loans and high yield bonds generally rated below investment grade which, at the time of purchase by Indosuez, represent obligations of obligors located in the United States or other non-emerging market countries. The notes are highly illiquid and have a term of 12 years. ServiSense.com, Inc.: On April 18, 2000, the Company entered into a Bridge Loan and Warrant Agreement with ServiSense.com, Inc. ("ServiSense"), a Delaware corporation whereby the Company loaned ServiSense $1 million in exchange for a note receivable and a warrant to purchase Servisense preferred stock. ServiSense is a bundler of core energy and telecommunications products sold to small businesses and residential consumers. Its services include local and long distance telephone, natural gas and home heating oil supplied at rates lower than the incumbent's rate. The note, which earns interest at 10% per annum, matures upon the earliest of April 18, 2001 or the date ServiSense closes an equity financing that yields at least $5 million of gross proceeds. The warrant has a term of five years and provides for the purchase of newly issued preferred stock in ServiSense. The number of shares subject to the warrant is variable depending upon the date ServiSense closes its equity financing. There is no market for the note or the warrant. Sage Systems, Inc.: On April 14, 2000, the Company invested $500,000 in Sage Systems, Inc. ("Sage"), in exchange for 390,625 shares of Sage's Series A Preferred Stock. Sage is an early-stage technology company that possesses networking technology which offers web-based control over everyday devices with a proprietary operating system that runs over existing power lines. There is no public market for the capital stock of Sage. Odin Millennium Partnership, Ltd.: On May 1, 2000, the Company invested $250,000 in Odin Millennium Partnership, Ltd., a Texas limited partnership formed to purchase the FPS Laffit Pincay, a semi-submersible offshore drilling rig. The Company will receive limited partnership interests for its investment. The limited partnership interests are highly illiquid. The partnership may operate the drilling rig, lease it to a third party or sell it. The above investments involve significant investment risk. They are long-term in duration and highly illiquid. There is no assurance that the investments will realize net profits or achieve returns commensurate with the risks associated with such investments, or that the investments will not experience losses, which may be substantial. 7. Income Taxes At March 31, 2000 and December 31, 1999, the Company had substantial net deferred tax assets for which a valuation allowance of an equal amount has been established. The balance of the deferred benefit for deconsolidated subsidiary losses remains unchanged from December 31, 1999, to March 31, 2000, with a balance of $10,305,000 at both periods. 8. Trading Securities The Company held trading securities during the year ended December 31, 1999. Cumulative unrealized losses on trading securities equaled approximately $310,000 at March 31, 2000 and $249,000 at December 31, 1999, representing an increase in unrealized losses of $61,000, which has been included in earnings during the quarter ended March 31, 2000. The Company recorded a $54,000 loss on trading securities for the quarter ended March 31, 2000, consisting of $61,000 in unrealized losses, offset by $7,000 in realized gains. The Company uses specific identification to determine the basis used in the computation of gain or loss on the sale of trading securities. 11 9. Stockholder's Equity Stock Repurchase: In November 1999, the Company's Board of Directors authorized the repurchase of up to 2,000,000 shares of the Company's Common Stock. The repurchase program was to continue until the Company acquired the 2,000,000 shares or until September 30, 2000. The Company, on March 22, 2000, authorized the repurchase of an additional 2,000,000 shares and extended the repurchase period to December 31, 2000. As of March 31, 2000, the Company had reacquired 2,059,000 shares at a cost of $1,345,000, resulting in a decrease of Additional Paid in Capital of $1,345,000 from inception of the program and $1,079,000 during the quarterly period ended March 31, 2000. In May 2000, the Company's Board of Directors subsequently authorized the repurchase of an additional 5,000,000 shares, bringing the total number of shares authorized for repurchase to 9,000,000. As of May 5, 2000, the Company had reacquired 8,211,234 of the 9,000,000 shares authorized. On April 14 and May 3, 2000, the Company retired 2,049,000 and 315,400 shares, respectively, of the shares repurchased. The retired shares consisted of the 2,059,000 shares acquired by March 31, 2000, and additional shares acquired subsequent to the quarter. Warrants: In connection with the consulting agreement with Terrasearch, Inc., the Company issued warrants to purchase up to 500,000 shares of Common Stock of the Company at an exercise price of $1.00 per share. The warrants become excercisable on January 1, 2002 and expire on December 31, 2005. The Financial Accounting Standards Board (FASB) has issued Statement No. 123. "Accounting for Stock-Based Compensation" which is effective for 1996 and subsequent financial statements. With respect to transactions with employees, SFAS No. 123 requires either recognition of compensation expense for stock option and other stock-based compensation or supplemental disclosure of the impact such expense recognition would have had on the Company's results of operations had the Company recognized such expense. The Company has elected the supplemental disclosure option with respect to transactions with employees. With respect to transactions with non-employees, SFAS No. 123 requires recognition of compensation expense for stock option and other equity instrument based compensation, including warrants. 10. Fair Value of Financial Instruments The carrying amount and estimated fair values of the Company's financial instruments at March 31, 2000 and December 31, 1999 are as follows: March 31, December 31, 2000 1999 ------------------- ------------------- Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value -------- --------- -------- --------- (in thousands) Assets: Cash and cash equivalents $ 5,984 $ 5,984 $ 15,291 $ 15,291 Funds in escrow 278 278 314 314 Accounts receivable 10 10 110 110 Trading debt securities 36,077 36,077 31,388 31,388 Interest receivable 556 556 464 464 Liabilities: Other notes payable - - 6 6 Estimated fair values are based upon reasonable estimates, using independent sources whenever possible. Trading debt securities are carried at fair value. All other instruments are carried at cost which approximates fair value because they are short-term in nature. 12 The estimated fair value of project development advances is not determinable because of the structure of funding and participation agreements. The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2000 and December 31, 1999. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates, and estimates of fair value subsequent to those dates may differ significantly from the amounts presented herein. 11. Preferred Stock Rights On May 4, 1999, the Board of Directors of the Company declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock, par value $.0001 per share, of the Company (the "Common Stock"). The dividend was paid on May 13, 1999 to the stockholders of record on May 5, 1999 (the "Record Date"). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $.01 per share, of the Company (the "Preferred Stock") at a price of $10 per one one-thousandth of a share of Preferred Stock (the "Purchase Price"), subject to adjustment. The Rights are not exercisable until the earlier to occur of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (with certain exceptions, an "Acquiring Person") has acquired beneficial ownership of 15% or more of the outstanding shares of Common Stock or (ii) 10 business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding shares of Common Stock (the earlier of such dates being called the "Distribution Date"). The Rights will expire on May 4, 2009 (the "Final Expiration Date"), unless the Final Expiration Date is advanced or extended or unless the Rights are earlier redeemed or exchanged by the Company, in each case as described below. Shares of Preferred Stock purchasable upon exercise of the Rights will not be redeemable. Each share of Preferred Stock will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment of the greater of (a) $10 per share, or (b) an amount equal to 1,000 times the dividend declared per share of Common Stock. In the event of liquidation, dissolution or winding up of the Company, the holders of the Preferred Stock will be entitled to a minimum preferential payment of the greater of (a) $10 per share (plus any accrued but unpaid dividends), or (b) an amount equal to 1,000 times the payment made per share of Common Stock. Each share of Preferred Stock will have 1,000 votes, voting together with the Common Stock. Finally, in the event of any merger, consolidation or other transaction in which outstanding shares of Common Stock are converted or exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per share of Common Stock. These rights are protected by customary antidilution provisions. In the event that any person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void), will thereafter have the right to receive upon exercise of a Right that number of shares of Common Stock having a market value of two times the exercise price of the Right. 13 In the event that, after a person or group has become an Acquiring Person, the Company is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provisions will be made so that each holder of a Right (other than Rights beneficially owned by an Acquiring Person which will have become void) will thereafter have the right to receive upon the exercise of a Right that number of shares of common stock of the person with whom the Company has engaged in the foregoing transaction (or its parent) that at the time of such transaction have a market value of two times the exercise price of the Right. At any time after any person or group becomes an Acquiring Person and prior to the earlier of one of the events described in the previous paragraph or the acquisition by such Acquiring Person of 50% or more of the outstanding shares of Common Stock, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such Acquiring Person which will have become void), in whole or in part, for shares of Common Stock or Preferred Stock (or a series of the Company's preferred stock having equivalent rights, preferences and privileges), at an exchange ratio of one share of Common Stock, or a fractional share of Preferred Stock (or other preferred stock) equivalent in value thereto, per Right. At any time prior to the time an Acquiring Person becomes such, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price") payable, at the option of the Company, in cash, shares of Common Stock or such other form of consideration as the Board of Directors of the Company shall determine. The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. 12. Commitments and Contingencies As described in Note 3, the Company has committed to fund approximately $6.9 million to various development projects, of which approximately $5.6 million has been funded by May 5, 2000. As described in Note 6, the Company has committed to several long-term investments, which require $11.75 million in cash to be invested. As of May 5, 2000, approximately $1.875 million has been invested. Litigation Delaware Stockholders' Class and Derivative Litigation: On February 2, 2000, plaintiffs Robert L. Kohls and Louise A. Kohls filed two actions in the Court of Chancery of the State of Delaware In and For New Castle County, against the Company, Angus M. Duthie, Mark D. Lerdal, Gerald R. Alderson and Charles Christenson. Plaintiffs filed amended complaints on February 23, 2000. Plaintiffs allege that they were beneficial owners of Preferred Redeemable Increased Dividend Equity Securities, 8-1/4% PRIDES, Convertible Preferred Stock, par value $0.01 per share (the "PRIDES") of the Company, that mandatorily converted, on May 14, 1998, into common stock, par value $0.0001 per share ("Common Stock"), of the Company. The first action is purportedly brought as a class action on behalf of the named plaintiffs and all other persons who owned the PRIDES as of May 13, 1998. Plaintiffs allege, among other things, that defendants breached the terms of the Company's Certificate of Designations, Preferences, Rights and Limitations (the "Certificate of Designations") under which the PRIDES were issued and breached their fiduciary duty to protect the interests of the holders of the PRIDES prior to the PRIDES mandatory conversion. Plaintiffs are seeking, among other things, (i) certification of the action as a class action, (ii) a declaration that the holders of PRIDES are entitled to be paid a liquidation preference of up to $1,012.50 per share of PRIDES, and (iii) a judgment that the defendants are liable to the PRIDES holders in an amount up to $1,012.50 per share. 14 The second action is purportedly brought as a derivative action on behalf of the Company. Plaintiffs generally allege that the purchase of the Company's Common Stock by defendant Mark D. Lerdal in December 1997 was a corporate opportunity and that such Common Stock should have been instead purchased by the Company. Plaintiffs are seeking, among other things, (i) a declaration that the purchase of the Common Stock by defendant Lerdal constituted the taking of a corporate opportunity and is null and void, (ii) an order requiring defendant Lerdal to transfer the Common Stock to the Company for the consideration he paid, and (iii) to the extent the Common Stock may not be transferred to the Company, damages for the fair value of the Common Stock. The defendants filed motions to dismiss both actions on March 20, 2000. Briefing on the motions was completed on May 5, 2000. Oral argument on the motions has been scheduled for May 31, 2000. The Company intends to defend each of these actions vigorously. PRIDES Litigation: On May 6, 1998, Quadrangle Offshore (Cayman) LLC, and Cerberus Partners, L.P. ("Plaintiffs"), filed a Verified Complaint for Declaratory Judgment and Injunctive Relief, in the Court of Chancery of the State of Delaware In and For New Castle County (Civil Action No. 16362-NC). Plaintiffs allege that they were beneficial owners of PRIDES. Plaintiffs filed an amended complaint on July 7, 1998. Generally, the amended complaint alleged that the Company was currently in liquidation and was in liquidation prior to May 14, 1998, that the plaintiffs were entitled to receive the liquidation preference of $1,012.50 per share set forth in the Certificate of Designations in any distribution of assets the Company might make notwithstanding that the PRIDES mandatorily converted and ceased to be outstanding on May 14, 1998, and that the Company breached an implied covenant of good faith and fair dealing under the Certificate of Designations. Plaintiffs sought, among other things, (i) a declaration that they were entitled to receive the liquidation preference in any distribution of assets before any distribution was made to holders of Common Stock and that the mandatory conversion of the PRIDES did not operate to eliminate their right to receive the liquidation preference, (ii) related injunctive relief, and (iii) other unspecified damages. A bench trial in the action was held February 16-19, 1999 before the Court of Chancery and on October 13, 1999, the Court entered judgment in favor of the Company on all counts and denied the relief requested by plaintiffs. On October 26, 1999, plaintiffs filed a Notice of Appeal with the Delaware Supreme Court. On April 6, 2000, the Supreme Court of the State of Delaware affirmed on all counts the judgment of the Court of Chancery in favor of the Company. Federal Stockholders' Class Action: On September 28, 1995, a class action complaint was filed against the Company and certain of its officers and directors (namely, Stanley Charren, Maurice E. Miller, Joel M. Canino and Gerald R. Alderson), in the United States District Court for the Northern District of California, alleging federal securities laws violations. On November 2, 1995, a First Amended Complaint was filed naming additional defendants, including underwriters of the Company's securities and certain other officers and directors of the Company (namely, Charles Christenson, Angus M. Duthie, Steven N. Hutchinson, Howard W. Pifer III and Mervin E. Werth). Subsequent to the Court's partial grant of the Company's and the underwriter defendants' motions to dismiss, a Second Amended Complaint was filed on March 29, 1996. The amended complaint alleged claims under sections 11 and 15 of the Securities Act of 1933, and sections 10(b) and 20(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, based on alleged misrepresentations and omissions in the Company's public statements, on behalf of a class consisting of persons who purchased the Company's Common Stock during the period from September 21, 1993 (the date of the Company's initial public offering) through August 8, 1995 and persons who purchased the Company's PRIDES (depository shares) during the period from April 28, 1994 (the public offering date of the PRIDES) through August 8, 1995. The amended complaint alleged that the defendants misrepresented the Company's progress on the development of its latest generation of wind turbines and the Company's future prospects. The amended complaint sought unspecified damages and other relief. 15 The Court certified a plaintiff class consisting of all persons or entities who purchased Common Stock between September 21, 1993 and August 8, 1995 or depositary shares between April 28, 1994 and August 8, 1995, appointed representatives of the certified plaintiff class, appointed counsel for the certified class and certified a plaintiff and defendant underwriter class as to the section 11 claim. On August 9, 1999, the Court granted defendants' motion for summary judgment and ordered that plaintiffs take nothing and that the action be dismissed on the merits. The plaintiffs have appealed the Court's order. The Company intends to defend the appeal vigorously. Insurance Litigation: On January 29, 1999, Travelers Insurance Company filed a complaint against KENETECH and CNF Industries, Inc. ("CNF") in the Superior Court, Judicial District of Hartford, Connecticut. The complaint alleges that the defendants failed to pay premiums and other charges for insurance coverage and services. Damages are alleged to be in excess of $1,121,305. On April 13, 1999, the Company filed a Motion to Dismiss for lack of personal jurisdiction and also filed a Request to Revise. A hearing on the Motion and Request is pending. The Company intends to defend this action vigorously. Annual Meeting Litigation: On July 30, 1999, Campus, LLC and Joseph A. Wagda filed a complaint against the Company and its directors (namely, Angus M. Duthie, Mark D. Lerdal, Gerald R. Alderson and Charles Christenson) in the Court of Chancery of the State of Delaware In and For New Castle County. The plaintiffs in this action purport to be stockholders of the Company. The complaint alleges, among other things, that plaintiffs were deprived of the opportunity to nominate directors for election at the Company's annual meeting which took place on August 18, 1999. Plaintiffs are seeking, among other things, (i) a declaration that the annual meeting was illegally and inequitably scheduled and that any actions taken at the annual meeting are null and void and (ii) an order requiring the defendants to schedule a meeting, allowing stockholders an opportunity to nominate directors, file solicitation materials with the Securities and Exchange Commission and conduct a proxy solicitation. The litigation has been stayed by agreement of the parties. In the event that the litigation resumes, the Company intends to defend this action vigorously. Other: The Company is also a party to various other legal proceedings normally incident to its business activities. The Company intends to defend itself vigorously against these actions. The Company does not believe that the ultimate outcome of the above-described matters will have a material adverse effect on the Company's financial position. Lease Commitments: The Company leases approximately 2,400 square feet of office space in San Francisco, CA. The associated lease commitment is approximately $75,000 annually, expiring on September 30, 2001. 13. Subsequent Events On April 14 and May 3, 2000, the Company retired 2,049,400 and 315,900 shares, respectively, of common stock it had repurchased under the Company's program to repurchase such stock. As discussed at Part II, Item 5, the Company's Board of Directors approved in April 2000 a one-for-ten (1 for 10) reverse stock-split, subject to stockholder approval, at the 2000 Annual Meeting of Stockholders of the Company. 16 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. OVERVIEW KENETECH Corporation ("KENETECH") is a Delaware corporation that has historically been involved in the development, construction, and management of independent power projects. The Company continues in project development activities at this time; however, it has ceased its construction and management activities. The Company is currently participating with other parties in developing two electric generating facilities and one oriented strand board facility. As used in this document, "Company" refers to KENETECH and its wholly-owned subsidiaries (including KENETECH Windpower, Inc. ("KWI") only through May 29, 1996). The Company currently has substantial cash balances and net operating income tax losses and other tax attributes to carry forward to future years. While pursuing development projects, management continues to evaluate different businesses that the Company might pursue, through acquisition or otherwise. In addition, the Company is evaluating all strategic alternatives available to it. The Company has retained professionals to assist it in such evaluations. The Company continues its involvement in project development activities. The Company is currently participating with other parties in developing two electric generating facilities and one oriented strand board facility. OSB Chateaugay In July 1999, the Company entered into a funding and participation agreement with OSB Chateaugay, LLC ("OSB"). The funding will be used by OSB to pursue the development of an oriented, strand-board project in Chateaugay, New York (the "OSB Project"). In addition to development services, the Company agreed to fund up to $1.25 million. The OSB Project is expected to produce up to 475 million square feet of strand board per year. Construction is anticipated to commence in the second half of 2000. In exchange for the services and funding, the Company will receive participation distributions. The advances are to be repaid upon the completion of certain development milestones as specified in the funding and participation agreement. Repayment of the advances is to occur before any participation distributions. Repayment of the advances and participation distributions are both dependent upon the ultimate success of the OSB Project. The Company had advanced $440,000 as of March 31, 2000. As of May 5, 2000, the Company had funded an additional $149,000 on the OSB Project, bringing the total amount funded to $589,000. Astoria In October 1999, the Company entered into funding and participation agreements with Astoria Energy, LLC ("Astoria") to provide funding, under a note agreement, of up to $3 million for the development of a 1,000 megawatt independent power plant (the "Astoria Project") to be located in Astoria, Queens, New York. The Astoria Project is currently under development and is expected to commence construction in the second half of 2001. In exchange for the services and funding, the Company will receive, in addition to repayment of the note evidencing the funding, certain participation distributions. The note is secured by all property and assets of Astoria. Recovery of the note, interest on the note, and participation distributions are all dependent upon the ultimate success of the Astoria Project. Accordingly, interest income and project distributions will be recognized upon the completion of certain project milestones. On March 14, 2000, the note was amended to change the due date of the original note to December 15, 2000, and provide for interest at 20% on the balance outstanding beginning on April 15, 2000. On March 14, 2000, the Company also committed to fund an additional $2 million toward the development of the Astoria Project in the form of a second note. As of March 31, 2000, the Company had advanced $1.0 million on the second note. The second note is due and payable on December 15, 2000, and carries interest at 20% on the balance outstanding. As of March 31, 2000, the Company had advanced $4.0 million on the Astoria Project, consisting of approximately $3.0 million on the original note and $1.0 million on the second note. An additional $700,000 was funded on the Astoria Project on April 13, 2000, bringing the total amount funded to $4.7 million. 17 Whinash In February 2000, the Company agreed to finance up to $600,000 for the development of a wind-powered electrical generating facility to be located in Whinash, Cumbria, England. The project is a 50 megawatt facility. In exchange for the funding, the Company will receive certain participation distributions upon the sale or financial closing of the Whinash project. As of March 31, 2000, the Company had advanced $350,000. Other Investments Francisco Partners, L.P.: In April 2000, the Company agreed to invest $5 million over the next four years in Francisco Partners, L.P. ("Francisco Partners"), a partnership formed to make private information technology buy-out investments. It is expected that Francisco Partners will raise approximately $2 billion. The Company will receive limited partnership interests for its investment. The limited partnership interests are highly illiquid and Francisco Partners has a term of at least ten years. Draper Atlantic Venture Fund II, L.P.: In April 2000, the Company agreed to invest $2.5 million over the next two years in Draper Atlantic Venture Fund II, L.P. ("Draper Atlantic"), a partnership formed to invest primarily in early-stage information technology companies. It is expected that Draper Atlantic, will raise approximately $250 million. The Company will receive limited partnership interests for its investment. The limited partnership interests are highly illiquid and Draper Atlantic has a term of at least ten years. As of May 5, 2000, the Company had invested $125,000. Indosuez Capital Funding VI, Ltd.: In April 2000, the Company agreed to purchase $2.5 million of Class E Junior Subordinated Notes of Indosuez Capital Funding VI, Ltd. ("Indosuez"). Indosuez is a newly formed company organized under the laws of the Cayman Islands to acquire and manage a diversified portfolio of corporate and other debt obligations. The portfolio will consist primarily of U.S. dollar denominated senior secured term loans and high yield bonds generally rated below investment grade which, at the time of purchase by Indosuez, represent obligations of obligors located in the United States or other non-emerging market countries. The notes are highly illiquid and have a term of 12 years. ServiSense.com, Inc.: On April 18, 2000, the Company entered into a Bridge Loan and Warrant Agreement with ServiSense.com, Inc. ("ServiSense"), a Delaware corporation whereby the Company loaned ServiSense $1 million in exchange for a note receivable and a warrant to purchase ServiSense preferred stock. ServiSense is a bundler of core energy and telecommunications products sold to small businesses and residential consumers. Its services include local and long distance telephone, natural gas and home heating oil supplied at rates lower than the incumbent's rate. The note, which earns interest at 10% per annum, matures upon the earliest of April 18, 2001 or the date ServiSense closes an equity financing that yields at least $5 million of gross proceeds. The warrant has a term of five years and provides for the purchase of newly issued preferred stock in ServiSense. The number of shares subject to the warrant is variable depending upon the date ServiSense closes its equity financing. There is no market for the note or the warrant. Sage Systems, Inc.: On April 14, 2000, the Company invested $500,000 in Sage Systems, Inc. ("Sage"), in exchange for 390,625 shares of Sage's Series A Preferred Stock. Sage is an early-stage technology company that possesses networking technology which offers web-based control over everyday devices with a proprietary operating system that runs over existing power lines. There is no public market for the capital stock of Sage. Odin Millennium Partnership, Ltd.: On May 1, 2000, the Company invested $250,000 in Odin Millennium Partnership, Ltd., a Texas limited partnership formed to purchase the FPS Laffit Pincay, a semi-submersible offshore drilling rig. The Company will receive limited partnership interests for its investment. The limited partnership interests are highly illiquid. The partnership may operate the drilling rig, lease it to a third party or sell it. 18 The above investments involve significant investment risk. They are long-term in duration and highly illiquid. There is no assurance that the investments will realize net profits or achieve returns commensurate with the risks associated with such investments, or that the investments will not experience losses, which may be substantial. CAUTIONARY STATEMENT Certain information included in this report contains forward looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Such forward looking information is based on information available when such statements are made and is subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Results of Operations --------------------- The Company recognized net income for the first quarter of 2000 of $68 thousand as compared to $3.6 million in the first quarter of 1999. Quarters ended March 31, 2000 and March 31, 1999
Quarters Ended March 31, 2000 March 31, 1999 ------------------------ ------------------------ (in thousands) Gross Gross Revenues Costs Margins Revenues Costs Margins -------- ----- ------- -------- ------ ------- ............................ Construction services ..............$ -- $ -- $ -- $ 410 $ 56 $ 354 Maintenance, management fees and other .................... -- -- -- 21 -- 21 -------- ----- ------- -------- ------ ------- Total ...............................$ -- $ -- $ -- $ 431 $ 56 $ 375 ======== ===== ======= ======== ====== =======
There were no maintenance, management fees and other revenues or associated costs in the first quarter of 2000, compared to $21 thousand for this period in 1999 which was related to the delayed collection of development and administrative fees. KENETECH Facilities Management, Inc. (KFM), a wholly-owned subsidiary of the Company which performed operations and maintenance of thermal power plants, has no further business activity or employees and is in the process of disposing of its remaining assets and liabilities. Project development and marketing expenses decreased to $2 thousand for the quarter ended March 31, 2000 from $61 thousand for the comparable period in 1999. Project development and marketing expenses incurred in the first quarter of 2000 related to the development of the OSB Project. General and administrative expenses decreased to $790 thousand for the quarter ended March 31, 2000 from $2.2 million for the comparable period in 1999 due principally to reduced personnel expenses related to the payment of severance to several senior level executives in 1999. Current period general and administrative expense consists primarily of salary and wages, legal costs associated with litigation, and consulting expenses. Interest income decreased to $633 thousand for the quarter ended March 31, 2000 from $830 thousand for the comparable period in 1999 due to the reduction in funds invested when the payment of accrued PRIDES dividends was made in April 1999. During the quarter ended March 31, 2000, the Company recorded a $54 thousand loss on trading debt securities, comprised of a $7 thousand realized gain on sale, offset by a $61 thousand unrealized loss in fair value. No such securities were owned during the comparable quarter in 1999. 19 The Company recorded no gain on the disposition of subsidiaries and assets for the quarter ended March 31, 2000, a decrease from $4.6 million for the comparable quarter in 1999. The $4.6 million gain in 1999 related primarily to the sales of partnership interests. The Company recorded other income of $281 thousand for the quarter ended March 31, 2000 compared to $62 thousand in this period in 1999. Other income in 2000 relates primarily to the reduction in accrued liabilities related to the favorable resolution of various legal matters. Income taxes: The Company uses the asset and liability approach for financial accounting and reporting for income taxes. The Company reported no income tax expense or benefit for the periods ended March 31, 2000 and 1999 due to the expected utilization of deferred tax benefits offset by reduction in valuation reserve. Liquidity and Capital Resources ------------------------------- Operating activities During the first quarter of 2000, operating activities used cash of approximately $1,182,000 principally from the payment of previously accrued general and administrative expenses. Investing activities During the first quarter of 2000, investment activities used cash of approximately $7,702,000, consisting primarily of investment in marketable securities and project development advances. Financing activities During the first quarter of 2000, the Company used cash of approximately $1,105,000 in repurchasing its common stock. Status Given the current operations and strategy of the Company, its cash balances are adequate for the foreseeable future. As of May 5, 2000, the Company had approximately $1.3 million remaining to be funded under its project development funding commitments and approximately $9.875 million remaining under its investment funding commitments. Effect of Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." The new standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 is effective for the Company's quarter ending March 31, 2001. The Company does not expect SFAS No. 133 to have a material effect on its financial position or results of operations. In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101. The SAB summarized certain of the SEC Staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company currently conforms to the guidance contained in the bulletin. Year 2000 Compliance The Company currently is not aware of any Year 2000 problem in any of the Company's critical systems and services. However, the success to date of our Year 2000 efforts cannot guarantee that a Year 2000 problem affecting third parties upon which the Company relies will not become apparent in the future that could have a material adverse effect on the Company's business or operations. 20 Item 3. Quantitative and Qualitative Disclosure about Market Risk Market Risk. As of March 31, 2000, the Company's exposure to market risk is principally confined to its investment in trading debt securities, which are subject primarily to interest rate risk. The Company's investment in trading debt securities is a material component of the Company's total assets; therefore, market risk exposure should be considered to be material. The Company manages its interest rate risk through specific investment criteria designed to minimize such risk. The Company also employs discretionary selling practices aimed at minimizing realized market losses. The Company could foreseeably hold its investment in trading debt securities until the investments' maturity, thereby effectively eliminating associated interest rate risk. The majority of the Company's investment in trading debt securities that is subject to interest rate risk matures within three years. The potential gain or loss in fair value to the Company's investment in trading debt securities resulting from selected hypothetical increases in interest rates is expressed in the following sensitivity analysis. Change in market interest rates ------------------------------- Current 10% 20% ------------------------------------- (in thousands) Fair value of trading debt securities $36,077 $35,936 $35,797 Increase (decrease) from current fair value - ($141) ($280) The sensitivity analysis above, known as a stress test in the banking industry, models the change in fair value based upon specific changes in the prime interest rate. The Company has no material market risk relating to foreign exchange rate risk or commodity price risk. 21 Part II OTHER INFORMATION Item 1. Legal Proceedings. See discussion under Note 12 of Item 1 incorporated herein by reference. Item 5. Other Information. On April 19, 2000, the Company's Board of Directors set Wednesday, August 23, 2000 as the date of the Annual Meeting of Stockholders of the Company for 2000. The Annual Meeting will be held in San Francisco, for the purpose of: 1. Electing two Class I Directors of the Company to hold office for a three-year term; 2. Considering and voting upon a proposal to amend and restate the Certificate of Incorporation of the Company to eliminate the Company's Series U Preferred Stock; 3. Considering and voting upon a proposal to amend and restate the Certificate of Incorporation of the Company to effect a one-for-ten reverse stock split; 4. Ratifying the Board of Directors' appointment of independent auditors to audit the financial statements of the Company for the 2000 fiscal year; and 5. Acting upon all other matters which may properly come before the meeting or any adjournments or postponements thereof. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 27 Financial Data Schedule. (b) Reports on Form 8-K The Company filed a Report on Form 8-K, on May 4, 2000, reporting under Item 5, the approval of the repurchase of an additional 5,000,000 shares under the Company's stock repurchase program. The Company also reported that it had completed the repurchase of 2,000,000 shares under the repurchase program approved in March 2000. The Company filed a Report on Form 8-K, on April 7, 2000, reporting, under Item 5, the affirmance by the Delaware Supreme Court of the ruling in favor of the Company on all counts in the PRIDES Litigation (see Item 1, Note 12). The Company filed a Report on Form 8-K, on March 22, 2000, reporting, under Item 5, the approval of the repurchase of an additional 2,000,000 shares and extension of the closing date to December 31, 2000 under the Company's stock repurchase program. The Company also reported that it had completed the repurchase of 2,000,000 shares under the repurchase program approved in November 1999. The Company filed a Report on Form 8-K, on February 3, 2000, reporting, under Item 5, the filing of the Delaware Stockholders' Class and Derivative Litigation referred to in Item 1, Note 12. 22 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. KENETECH Corporation By: Date: May 15, 2000 Mark D. Lerdal President, Chief Executive Officer and Principal Accounting Officer Date: May 15, 2000 By: Andrew M. Langtry Corporate Controller and Chief Accounting Officer 23 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. KENETECH Corporation By: /s/ Mark D. Lerdal Date: May 15, 2000 Mark D. Lerdal President, Chief Executive Officer and Principal Accounting Officer Date: May 15, 2000 By: /s/ Andrew M. Langtry Andrew M. Langtry Corporate Controller and Chief Accounting Officer 24 EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM KENETECH CORPORATION'S MARCH 31, 2000 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000807708 KENETECH CORPORATION 1 U.S. DOLLARS 3-mos DEC-31-2000 JAN-1-2000 MAR-31-2000 1 5,984 36,077 10 0 0 42,905 128 (78) 47,773 4,591 0 0 0 4 31,930 47,773 0 0 0 0 792 0 0 68 0 68 0 0 0 68 0.00 0.00
-----END PRIVACY-ENHANCED MESSAGE-----