SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 31, 2003
SWS GROUP, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE No. 0-19483 No. 75-2040825
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(State or other jurisdiction (Commission (IRS employer
of incorporation) File Number) Identification No.)
1201 ELM STREET, SUITE 3500
DALLAS, TEXAS 75270
(Address, including zip code, of principal executive office)
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Registrants' telephone number, including area code: 214-859-1800
Not applicable
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(Registrant's former name or address, if changed since last report)
Item 12. Results of Operations and Financial Condition.
On July 31, 2003, SWS Group, Inc. ("SWS") issued a press release regarding
its results of operations for the quarter and fiscal year ended June 27, 2003.
The following information contained therein shall be deemed to be "filed"
for the purposes of Section 18 of the Securities and Exchange Act of 1934, as
amended, and shall be incorporated by reference in SWS' filings under the
Securities Act of 1933, as amended:
For the fourth quarter ended June 27, 2003, SWS recorded net income of $3
million, or diluted earnings per share (EPS) of 18 cents, on revenues of $72.1
million, compared with a net loss of $10.4 million, or a loss of 60 cents per
share, on revenues of $76.3 million in the fourth quarter of the prior fiscal
year.
For fiscal 2003, SWS recorded net income of $2.9 million, or EPS of 17
cents, on revenues of $263.5 million, compared with a net loss of $7.2 million,
or a loss of 42 cents per share, on revenues of $332.2 million in the prior
fiscal year.
Included in the fourth quarter is a $2.7 million after tax gain from the
sale of the online retail accounts of Mydiscountbroker (MDB) as well as
impairment charges of $624,000 after tax for leases on space formerly occupied
by MDB and a trading operation. The quarter also includes an extraordinary gain
net of tax of $445,000 from the purchase and consolidation of insurance
operations. Excluding these charges and credits, the company's earnings from
ongoing operations were $488,000 in the quarter and $317,000 for the full fiscal
year. The company recorded losses from ongoing operations of $7.6 million and
$17.6 million, respectively, in fiscal 2002.
Clearing revenue increased 25 percent over that of the immediately
preceding quarter, marking the first revenue increase in this key business in
six quarters. Commission revenue, driven by retail and fixed income commissions,
increased 18 percent over levels achieved in last year's fourth quarter. Trading
revenue was up 44 percent over last year after adjusting for gains on the sales
in fiscal 2002 of Knight Trading Group, Inc. common stock held for investment.
SWS Group's banking subsidiary, First Savings Bank, reported a 47 percent
increase in net interest revenue over that recorded in the prior year's fourth
quarter.
Southwest Securities cleared or executed 29.3 million securities
transactions in fiscal 2003, compared with 52.3 million in the prior year. The
44 percent decline in volume primarily is a result of fewer high-volume
correspondents as well as a decline in the business volumes of those
correspondents. Southwest had a total of 227 correspondents at the end of fiscal
2003. Book value per share was $14.73 at the end of June 2003, compared with
$14.81 at the end of the prior fiscal year.
During the first six months of fiscal 2003, SWS Group repurchased 364,800
shares of its common stock at an average price of $12.13. The company did not
buy back any shares during the last half of the year. Under the current
authorization from the SWS Group Board of Directors, management may repurchase
at its discretion up to 836,200 shares of the company's stock in the open
market.
This report contains forward-looking statements regarding the company's
future overall performance. Readers are cautioned that any forward-looking
statements, including those predicting or forecasting future events or results,
which depend on future events for their accuracy, embody projections or
assumptions, or express the intent, belief or current expectations of the
company or management, are not guarantees of future performance and involve
risks and uncertainties. Actual results may differ materially as a result of
various factors, some of which are out of our control, including, but not
limited to those factors discussed in our Annual Report on Form 10-K and in our
other reports filed with and available from the Securities and Exchange
Commission
Reconciliation of GAAP Financial Information to Non-GAAP Financial Information
The company believes that the presentation of the non-GAAP financial measures,
revenues from ongoing operations and income (loss) from ongoing operations, is
useful to investors because it is more indicative of the company's operating
performance. Management has provided this information to assist the reader in
understanding the impact of large charges and credits on the company's reported
financial results. Management of the company uses this information to evaluate
the performance of its business unit managers because it represents performance
over which business unit managers exercise control. Decisions made at the
corporate level regarding acquisitions or dispositions of businesses, closure of
locations or business units, spin-offs of subsidiaries and liquidation of
non-operating assets are not generally under the control of the business unit
manager and do not reflect the ongoing operating strengths or weaknesses of the
business. Revenues from ongoing operations and income (loss) from ongoing
operations should be considered in addition to, rather than as a substitute for,
GAAP revenues, pre-tax income and net income.
(In thousands)
3 months 3 months Fiscal Year Fiscal Year
ended ended ended ended
6/27/03 6/28/02 6/27/03 6/28/02
Revenues, net of interest $ 46,134 $ 49,687 $ 166,177 $ 207,031
Gain on sale of MDB accounts (4,200) -- (4,200) --
Spin-off of Westwood Holdings -- (5,371) -- (20,574)
Sale of NITE stock -- (4,463) -- (24,251)
Sale of First Consumer Credit -- -- -- (1,163)
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Revenues from ongoing operations $ 41,934 $ 39,853 $ 161,977 $ 161,043
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3 months 3 months Fiscal Year Fiscal Year
ended ended ended ended
6/27/03 6/28/02 6/27/03 6/28/02
Net income (loss) before extraordinary item $ 2,594 $ (10,420) $ 2,423 $ (7,184)
Gain on sale of MDB accounts (2,730) -- (2,730) --
Impairment charges 624 6,778 624 6,778
Spin-off of Westwood Holdings -- (1,092) -- (648)
Sale of NITE stock -- (2,901) -- (15,763)
Sale of First Consumer Credit -- -- -- (756)
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Income (loss) from ongoing operations $ 488 $ (7,635) $ 317 $ (17,573)
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The following information shall not be deemed to be "filed" for the
purposes of Section 18 of the Securities and Exchange Act of 1934, as amended,
and shall not be incorporated by reference in any filing under the Securities
Act of 1933, as amended:
A copy of the press release issued by SWS on July 31, 2003 is attached
hereto as Exhibit 99.1.
Item 7. Exhibits.
(c) Exhibits.
Exhibit 99.1 SWS Group, Inc. Press Release issued July 31, 2003.
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 hereunto duly authorized.
SWS GROUP, INC.
Date: July 31, 2003
By: /s/ Kenneth R. Hanks
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Kenneth R. Hanks
Executive Vice President, Chief Financial
Officer and Treasurer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
99.1 SWS Group, Inc. Press Release issued July 31, 2003