Exhibit 99.1
SWS Announces Fiscal 2003 Financial Results;
$2.9 Million in Net Income Reported for the Year
DALLAS, July 31 /PRNewswire-FirstCall/ -- SWS Group, Inc. (NYSE: SWS)
today announced financial results for the fiscal year and fourth quarter ended
June 27, 2003.
For the fourth quarter, 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 for the quarter and year, respectively, in
fiscal 2002.
"While we still have a lot of hard work ahead of us, I believe our
increased focus on providing core financial services has us very well
positioned to grow," said SWS Group CEO Donald W. Hultgren. "There were a
number of positive developments for the quarter."
In reviewing the quarter, Hultgren pointed to increased clearing,
commission and trading revenues. 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, joined in the favorable trend, reporting a 47 percent increase
in net interest revenue over that recorded in the prior year's fourth quarter.
Hultgren attributed the company's improved results to cost reduction
efforts, improved equity markets and continued strength in fixed income.
"We are executing a basic game plan," he said, "of leveraging our
expertise and capabilities to expand our clearing business. We are also
building a strong distribution system in the Southwest, developing the
products and services that distribution system needs and developing the
businesses related to those core products and services."
Hultgren noted that Southwest Securities' Private Client Group added eight
new financial advisors during the quarter. "In the fiscal year just
concluded, the Private Client Group grew from 78 financial advisors to 97,"
Hultgren said, "and we intend to continue and accelerate that growth over the
next several years."
"Although it has been very difficult to add new clearing correspondents in
the market environment of the past three years, that part of our business is
poised for growth as the equity markets show continued improvement."
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.
SWS Group, Inc. is a Dallas-based holding company that offers a broad
range of investment and financial services through its subsidiaries. The
company's common stock is listed and traded on the New York Stock Exchange
under the symbol SWS. SWS Group, Inc. subsidiaries include Southwest
Securities, Inc., First Savings Bank, SWS Financial Services, Inc., SWS
Capital Corporation and Southwest Insurance Agency.
This release 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.
Financial Statements Follow
SWS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 27, 2003 and June 28, 2002
(In thousands, except par values and share amounts)
2003 2002
Assets
Cash and cash equivalents $74,706 $24,777
Assets segregated for regulatory purposes 441,184 442,707
Marketable equity securities available for sale 5,599 3,932
Receivable from brokers, dealers and
clearing organizations 2,488,008 1,770,055
Receivable from clients, net 297,238 467,131
Loans held for sale, net 201,265 103,124
Loans, net 366,008 345,538
Securities owned, at market value 122,693 103,888
Other assets 95,383 102,501
Total assets $4,092,084 $3,363,653
Liabilities and Stockholders' Equity
Short-term borrowings $--- $37,600
Payable to brokers, dealers and clearing
organizations 2,405,427 1,764,741
Payable to clients 705,474 747,534
Deposits 528,515 265,370
Securities sold, not yet purchased,
at market value 40,620 19,657
Drafts payable 29,331 34,531
Advances from Federal Home Loan Bank 49,885 160,468
Other liabilities 73,953 69,920
Exchangeable subordinated notes 7,284 6,785
Total liabilities 3,840,489 3,106,606
Minority interest in consolidated subsidiaries 1,822 1,762
Stockholders' equity:
Preferred stock of $1.00 par value.
Authorized 100,000 shares; none issued --- ---
Common stock of $.10 par value.
Authorized 60,000,000 shares, issued
17,707,998 and outstanding 16,957,287 shares
at June 27, 2003; issued 17,601,705 and
outstanding 17,240,570 shares at
June 28, 2002 1,770 1,760
Additional paid-in capital 243,683 247,199
Retained earnings 1,217 ---
Accumulated other comprehensive income -
unrealized holding gain (loss), net of tax 12,673 11,472
Deferred compensation, net 1,549 1,502
Treasury stock (750,711 shares at
June 27, 2003 and 361,135 shares at
June 28, 2002, at cost) (11,119) (6,648)
Total stockholders' equity 249,773 255,285
Commitments and contingencies
Total liabilities and stockholders' equity $4,092,084 $3,363,653
SWS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
For the three months and fiscal years ended June 27, 2003 and June 28, 2002
(In thousands, except per share and share amounts)
For the For the
three months ended twelve months ended
June 27, June 28, June 27, June 28,
2003 2002 2003 2002
Net revenues from
clearing operations $5,059 $6,125 $19,267 $31,056
Commissions 23,221 19,737 83,591 75,334
Interest 25,941 26,589 97,304 125,119
Investment banking,
advisory and
administrative fees 6,015 11,564 25,589 42,215
Net gains on principal
transactions 4,371 7,493 18,515 41,540
Other 7,468 4,768 19,215 16,886
Total revenue 72,075 76,276 263,481 332,150
Commissions and other
employee compensation 34,110 35,052 128,650 138,525
Interest 10,090 11,308 39,885 65,807
Occupancy, equipment and
computer service costs 9,077 18,157 33,674 53,909
Communications 3,863 5,057 15,305 19,539
Floor brokerage and
clearing organization
charges 1,554 1,895 6,416 8,054
Advertising and
promotional 1,237 1,099 3,708 7,848
Other 7,472 18,646 30,828 45,853
Total expense 67,403 91,214 258,466 339,535
Income (loss) before
income tax expense and
minority interest in
consolidated subsidiaries 4,672 (14,938) 5,015 (7,385)
Income tax expense
(benefit) 1,445 (5,317) 1,041 (1,352)
Income (loss) before
minority interest in
consolidated subsidiaries 3,227 (9,621) 3,974 (6,033)
Minority interest in
consolidated subsidiaries (633) (799) (1,551) (1,151)
Net income (loss) before
extraordinary item 2,594 (10,420) 2,423 (7,184)
Extraordinary gain,
net of tax 445 --- 445 ---
Net income (loss) 3,039 (10,420) 2,868 (7,184)
Net income (loss)
recognized in other
comprehensive income
(loss), net of tax 1,216 (3,553) 1,201 (16,525)
Comprehensive income
(loss) $4,255 $(13,973) $4,069 $(23,709)
Earnings per share - basic
Net income (loss) before
extraordinary item $0.15 $(0.60) $0.14 $(0.42)
Extraordinary gain 0.03 --- 0.03 ---
Net income (loss) $0.18 (0.60) $0.17 (0.42)
Weighted average
shares outstanding -
basic 16,892,583 17,236,568 16,950,561 17,215,592
Earnings per share - diluted
Net income (loss)
before extraordinary
item $0.15 $(0.60) $0.14 $(0.42)
Extraordinary gain 0.03 --- 0.03 ---
Net income (loss) $0.18 $(0.60) $0.17 $(0.42)
Weighted average
shares outstanding -
diluted 17,034,029 17,236,568 16,997,078 17,215,592
Reconciliation of Non-GAAP Financial Information Follows:
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 3months 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)
Revenues from ongoing
operations $41,934 $39,853 $161,977 $161,043
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)
Income (loss) from
ongoing operations $488 $(7,635) $317 $(17,573)
SOURCE SWS Group, Inc.
-0- 07/31/2003
/NOTE TO EDITORS: A Company background is available upon request. Please
call the contact./
/CONTACT: Jim Bowman, Vice President - Corporate Communications of SWS
Group, Inc., +1-214-859-9335, or jbowman@swst.com /
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(SWS)
CO: SWS Group, Inc.
ST: Texas
IN: FIN
SU: ERN