EXHIBIT 99.1
The following summarizes pro forma financial information of the Registrant
assuming the distribution of 80.18% of the outstanding shares of Westwood
Holdings Group, Inc. ("Westwood Group") had been completed as of March 28, 2002.
SWS GROUP, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Financial Condition
March 28, 2002
(In thousands, except par values and share amounts)
(Unaudited)
Registrant Pro Forma Pro
Historical Adjustments /(2)/ Forma
---------------------------------------------------------
Assets
Cash $ 21,346 $ (1,013) $ 20,333
Assets segregated for regulatory purposes 439,733 -- 439,733
Marketable equity securities available for sale 5,220 -- 5,220
Receivable from brokers, dealers and clearing organizations 1,952,408 3 1,952,411
Receivable from clients, net 592,908 (2,794) 590,114
Loans held for sale, net 118,007 -- 118,007
Loans, net 348,826 -- 348,826
Securities owned, at market value 116,834 (11,285) 105,549
Other assets 105,832 (2,667) 103,165
-------------------- ------------------ ---------------
$ 3,701,114 $ (17,756) $ 3,683,358
==================== ================== ===============
Liabilities and Stockholders' Equity
Short-term borrowings $ 169,050 $ -- $ 169,050
Payable to brokers, dealers and clearing organizations 1,909,599 -- 1,909,599
Payable to clients 760,842 -- 760,842
Deposits 291,147 -- 291,147
Securities sold, not yet purchased, at market value 19,994 -- 19,994
Drafts payable 29,941 -- 29,941
Advances from Federal Home Loan Bank 155,400 -- 155,400
Other liabilities 66,219 (2,034) 64,185
Exchangeable subordinated notes 7,473 -- 7,473
-------------------- ------------------ ---------------
3,409,665 (2,034) 3,407,631
Minority interest in consolidated subsidiaries 1,779 (268) 1,511
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 17,588,027 and outstanding 17,230,566
shares 1,758 -- 1,758
Additional paid-in capital 257,475 (15,454) 242,021
Retained earnings 20,559 -- 20,559
Accumulated other comprehensive income - unrealized
holding gain, net of tax 15,024 -- 15,024
Deferred compensation, net 1,434 -- 1,434
Treasury stock, at cost (6,580) -- (6,580)
-------------------- ------------------ ---------------
Total stockholders' equity 289,670 (15,454) 274,216
Commitments and contingencies
-------------------- ------------------ ---------------
$ 3,701,114 $ (17,756) $ 3,683,358
==================== ================== ===============
See accompanying notes to unaudited pro forma consolidated financial statements.
The following pro forma consolidated income statements summarize pro forma
financial information of the Registrant assuming the distribution of 80.18% of
the outstanding shares of Westwood Group had been completed as of July 1, 2000.
SWS GROUP, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Income (Loss)
For the three months ended March 28, 2002
(In thousands, except per share and share amounts)
(Unaudited)
Registrant Pro Forma Pro
Historical Adjustments /(3)/ Forma
----------------------------------------------------
Net revenues from clearing operations $ 8,247 $ -- $ 8,247
Commissions 19,477 -- 19,477
Interest 26,996 (308) 26,688
Investment banking, advisory and administrative fees 10,352 (5,142) 5,210
Net gains on principal transactions 8,968 16 8,984
Other 3,479 (84) 3,395
----------------------------------------------------
77,519 (5,518) 72,001
----------------------------------------------------
Commissions and other employee compensation 32,554 (2,228) 30,326
Interest 12,748 -- 12,748
Occupancy, equipment and computer service costs 12,456 (338) 12,118
Communications 5,226 (94) 5,132
Floor brokerage and clearing organization charges 2,225 -- 2,225
Advertising and promotional 1,065 (112) 953
Other 8,850 (606) 8,244
----------------------------------------------------
75,124 (3,378) 71,746
----------------------------------------------------
Income before income taxes and minority interest in
consolidated subsidiaries 2,395 (2,140) 255
Income taxes 920 (754) 166
----------------------------------------------------
Income before minority interest in consolidated subsidiaries 1,475 (1,386) 89
Minority interest in consolidated subsidiaries (428) 275 (153)
----------------------------------------------------
Net income (loss) $ 1,047 $ (1,111) $ (64)
====================================================
Earnings per share /(4)/
Earnings per share - basic & diluted $ .06 $ .00
================= ================
Weighted average shares outstanding - basic 17,225,307 17,225,307
================= ================
Weighted average shares outstanding - diluted 17,312,879 17,312,879
================= ================
See accompanying notes to unaudited pro forma consolidated financial statements.
SWS GROUP, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Income
For the three months ended March 30, 2001
(In thousands, except per share and share amounts)
(Unaudited)
Registrant Pro Forma Pro
Historical Adjustments /(3)/ Forma
----------------------------------------------------
Net revenues from clearing operations $ 11,974 $ -- $ 11,974
Commissions 16,960 -- 16,960
Interest 58,093 (334) 57,759
Investment banking, advisory and administrative fees 8,722 (4,360) 4,362
Net gains on principal transactions 11,829 21 11,850
Other 3,370 (148) 3,222
----------------------------------------------------
110,948 (4,821) 106,127
----------------------------------------------------
Commissions and other employee compensation 36,766 (2,105) 34,661
Interest 39,963 -- 39,963
Occupancy, equipment and computer service costs 8,973 (359) 8,614
Communications 4,290 (110) 4,180
Floor brokerage and clearing organization charges 1,715 -- 1,715
Advertising and promotional 4,184 (115) 4,069
Other 9,277 (160) 9,117
----------------------------------------------------
105,168 (2,849) 102,319
----------------------------------------------------
Income before income taxes and minority interest in
consolidated subsidiaries 5,780 (1,972) 3,808
Income taxes 1,874 (705) 1,169
----------------------------------------------------
Income before minority interest in consolidated subsidiaries 3,906 (1,267) 2,639
Minority interest in consolidated subsidiaries (349) -- (349)
----------------------------------------------------
Net income $ 3,557 $ (1,267) $ 2,290
====================================================
Earnings per share /(4)/
Earnings per share - basic & diluted $ .20 $ .13
================= ================
Weighted average shares outstanding - basic 17,479,065 17,479,065
================= ================
Weighted average shares outstanding - diluted 17,553,818 17,553,818
================= ================
See accompanying notes to unaudited pro forma consolidated financial statements.
SWS GROUP, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Income
For the nine months ended March 28, 2002
(In thousands, except per share and share amounts)
(Unaudited)
Registrant Pro Forma Pro
Historical Adjustments /(3)/ Forma
---------------------------------------------------
Net revenues from clearing operations $ 24,931 $ -- $ 24,931
Commissions 55,597 -- 55,597
Interest 98,530 (983) 97,547
Investment banking, advisory and administrative fees 30,651 (14,562) 16,089
Net gains on principal transactions 34,047 30 34,077
Other 12,118 (247) 11,871
---------------------------------------------------
255,874 (15,762) 240,112
---------------------------------------------------
Commissions and other employee compensation 103,473 (10,335) 93,138
Interest 54,499 -- 54,499
Occupancy, equipment and computer service costs 35,474 (962) 34,512
Communications 14,482 (293) 14,189
Floor brokerage and clearing organization charges 6,159 -- 6,159
Advertising and promotional 6,749 (330) 6,419
Other 25,150 (1,726) 23,424
---------------------------------------------------
245,986 (13,646) 232,340
---------------------------------------------------
Income before income taxes and minority interest in
consolidated subsidiaries 9,888 (2,116) 7,772
Income taxes 4,782 (1,962) 2,820
---------------------------------------------------
Income before minority interest in consolidated subsidiaries 5,106 (154) 4,952
Minority interest in consolidated subsidiaries (352) (433) (785)
---------------------------------------------------
Net income $ 4,754 $ (587) $ 4,167
===================================================
Earnings per share /(4)/
Earnings per share - basic & diluted $ .28 $ .24
================ ================
Weighted average shares outstanding - basic 17,208,497 17,208,497
================ ================
Weighted average shares outstanding - diluted 17,276,365 17,276,365
================ ================
See accompanying notes to unaudited pro forma consolidated financial statements.
SWS GROUP, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Income
For the nine months ended March 30, 2001
(In thousands, except per share and share amounts)
(Unaudited)
Registrant Pro Forma Pro
Historical Adjustments /(3)/ Forma
---------------------------------------------------
Net revenues from clearing operations $ 39,560 $ -- $ 39,560
Commissions 48,129 -- 48,129
Interest 202,158 (894) 201,264
Investment banking, advisory and administrative fees 26,467 (12,539) 13,928
Net gains on principal transactions 32,264 (48) 32,216
Other 19,518 (269) 19,249
---------------------------------------------------
368,096 (13,750) 354,346
---------------------------------------------------
Commissions and other employee compensation 110,721 (5,786) 104,935
Interest 140,755 -- 140,755
Occupancy, equipment and computer service costs 25,430 (930) 24,500
Communications 11,800 (326) 11,474
Floor brokerage and clearing organization charges 5,006 -- 5,006
Advertising and promotional 11,926 (278) 11,648
Other 34,154 (363) 33,791
---------------------------------------------------
339,792 (7,683) 332,109
---------------------------------------------------
Income before income taxes and minority interest in
consolidated subsidiaries 28,304 (6,067) 22,237
Income taxes 9,366 (2,156) 7,210
---------------------------------------------------
Income before minority interest in consolidated subsidiaries 18,938 (3,911) 15,027
Minority interest in consolidated subsidiaries (1,934) -- (1,934)
---------------------------------------------------
Income before cumulative effect of a change in accounting principle $ 17,004 $ (3,911) $ 13,093
===================================================
Earnings per share - basic /(4)/
Income before cumulative effect of a change in accounting principle $ .97 $ .75
================ ================
Weighted average shares outstanding - basic 17,478,261 17,478,261
================ ================
Earnings per share - diluted /(4)/
Income before cumulative effect of a change in accounting principle $ .96 $ .74
================ ================
Weighted average shares outstanding - diluted 17,582,891 17,582,891
================ ================
See accompanying notes to unaudited pro forma consolidated financial statements.
SWS GROUP, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Income
For the fiscal year ended June 29, 2001
(In thousands, except per share and share amounts)
(Unaudited)
Registrant Pro Forma Pro
Historical Adjustments /(3)/ Forma
---------------------------------------------------
Net revenues from clearing operations $ 50,017 $ -- $ 50,017
Commissions 66,370 -- 66,370
Interest 249,427 (1,210) 248,217
Investment banking, advisory and administrative fees 35,739 (16,988) 18,751
Net gains on principal transactions 45,086 (42) 45,044
Other 24,063 (362) 23,701
---------------------------------------------------
470,702 (18,602) 452,100
---------------------------------------------------
Commissions and other employee compensation 145,000 (7,652) 137,348
Interest 171,578 -- 171,578
Occupancy, equipment and computer service costs 35,088 (1,231) 33,857
Communications 16,216 (434) 15,782
Floor brokerage and clearing organization charges 6,507 -- 6,507
Advertising and promotional 15,429 (371) 15,058
Other 44,482 (715) 43,767
---------------------------------------------------
434,300 (10,403) 423,897
---------------------------------------------------
Income before income taxes and minority interest in
consolidated subsidiaries 36,402 (8,199) 28,203
Income taxes 11,805 (2,909) 8,896
---------------------------------------------------
Income before minority interest in consolidated subsidiaries 24,597 (5,290) 19,307
Minority interest in consolidated subsidiaries (2,384) -- (2,384)
---------------------------------------------------
Income before cumulative effect of a change in accounting principle $ 22,213 $ (5,290) $ 16,923
===================================================
Earnings per share - basic /(4)/
Income before cumulative effect of a change in accounting principle $ 1.27 $ 0.97
================ ================
Weighted average shares outstanding - basic 17,408,922 17,408,922
================ ================
Earnings per share - diluted /(4)/
Income before cumulative effect of a change in accounting principle $ 1.26 $ 0.97
================ ================
Weighted average shares outstanding - diluted 17,500,776 17,500,776
================ ================
See accompanying notes to unaudited pro forma consolidated financial statements.
Notes to Unaudited Pro Forma Consolidated Financial Statements
Note 1 - General:
In June 2002, the Board of Directors of SWS Group, Inc. (the "Company" or "SWS")
declared a dividend payable to the holders of the Company's common stock, par
value $0.10 per share ("SWS common stock"), distributing on a pro-rata basis
(the "Distribution") all of the shares of Westwood Holdings Group, Inc.
("Westwood Group") held by the Company, which equaled 80.18% of the issued and
outstanding shares of the Westwood Group. The Westwood Group includes asset
management subsidiaries Westwood Management Corporation and Westwood Trust. Each
holder of SWS common stock received one share of common stock of the Westwood
Group, par value $0.001 per share ("Westwood common stock"), for every four
shares of SWS common stock held on June 17, 2002 (the "Record Date").
The Company effected the distribution on June 28, 2002 by delivering all of the
shares of Westwood common stock held by the Company to the distribution agent
for distribution to the holders of SWS common stock as of the Record Date.
No consideration was paid by the Company's stockholders for the shares of
Westwood common stock received in the Distribution, nor were stockholders
required to surrender or exchange shares of SWS common stock nor take any other
action to receive the shares of Westwood common stock.
In connection with the Distribution, the Company has adjusted its financial
statements on a pro-forma basis, to reflect the departure of the Westwood Group
businesses from the SWS consolidation.
The accompanying unaudited consolidated statement of financial condition and the
unaudited consolidated statements of income reflect the pro forma impact of
these transactions as if they had occurred as of: 1) March 28, 2002 for
statement of financial condition purposes and 2) July 1, 2000 for statement of
income purposes.
Note 2 - Consolidated Statement of Financial Condition:
Represents the separation of the Westwood Group from the consolidated accounts
of the Registrant as if the transaction had occurred on March 28, 2002. Each of
the Westwood Group's respective asset and liability account components is
removed from the consolidated accounts as a result of the distribution of the
outstanding stock of the Westwood Group to the Company's common stockholders.
Note 3 - Consolidated Statement of Income:
Represents the separation of the Westwood Group from the consolidated accounts
of the Registrant as if the transaction occurred as of July 1, 2000. Each of the
Westwood Group's respective income statement caption amounts is removed from the
consolidated accounts as a result of the distribution of the outstanding stock
of the Westwood Group to the Company's common stockholders.
Note 4 - Earnings per Share:
The earnings per share calculations reflect the impact of the separation of the
results of operations of the Westwood Group from the Company's consolidated
financial statements.