EXHIBIT 99
For Immediate Release
SWS Announces Fiscal 2002 Financial Results
Net Loss of 42 Cents Reported for the Year
DALLAS, August 6, 2002 - SWS Group, Inc. (NYSE: SWS - news) today announced
financial results for the fiscal year and fourth quarter ended June 28, 2002.
For the fiscal year, SWS recorded a net loss of $7.2 million, or 42 cents per
share, on revenues of $332.2 million, as a result of $20.3 million of pre-tax
charges taken in the fourth quarter. A year ago, the company reported net income
of $18.4 million, or diluted earnings per share of $1.05, on revenues of $470.7
million. SWS officials said the charges partially resulted from actions taken to
streamline the company. They also cited difficult business conditions and
challenging financial markets as a contributor to the decline in year-over-year
results.
For the fourth quarter ended June 28, SWS recorded a net loss of $10.4 million,
or 60 cents per share, on revenues of $76.3 million, compared with net income of
$4.9 million, or diluted earnings per share of 28 cents, on revenues of $102.6
million in the fourth quarter of the prior fiscal year.
"As we stated in our January conference call, we have refocused on our core
businesses and are positioning the company for renewed growth and
profitability," said Chairman and CEO Don A. Buchholz.
Fourth quarter results reflect the impact of $6.4 million in charges, including
leasehold impairment and severance charges, resulting from consolidating and
reorganizing certain business units. SWS is consolidating the personnel and
infrastructure of its Mydiscountbroker and SWS Financial Services subsidiaries
back to the company's main offices in downtown Dallas to achieve space and
facilities efficiencies. The company is exiting the business of providing
technology services to companies that are not in the securities business. SWS
also closed an equity trading office in New Jersey. The anticipated annualized
pre-tax savings as a result of these actions is $4.7 million.
SWS converted its investment in Comprehensive Software Systems, Ltd. to the
equity method of accounting and recorded an impairment of the investment. CSS is
a Colorado-based software company. SWS took a charge of $7.3 million in fiscal
2002 and also booked a loss of $1.4 million back to fiscal 2001 for the software
company investment as dictated by the equity method of accounting standards.
Part of the $20.3 million in total charges taken in fiscal 2002 included $2
million to settle litigation related to the company's prior trust operations.
The settlement occurred just prior to the spin-off of Westwood Holdings Group to
SWS shareholders at the end of June. SWS officials anticipate that the spin-off
will provide enhanced shareholder value over the long term. Other components of
the total charges included $4.6 million of charges reflecting the deterioration
of business and market conditions, including a $1 million loss recorded on
MCI-WorldCom bonds.
"Since we have declared the CSS system to be our books and records, we have
given notice to our previous vendor to remove our legacy mainframe system," said
Mr. Buchholz. "This will save approximately $200,000 per month in operating
expenses beginning October 1."
"The strong capabilities of the new system give our marketing people a lot of
ammunition to use in sales calls on potential clearing correspondents," he
continued. "The clearing services marketing staff is demonstrating the new
system to potential clearing customers on a daily basis, and the feedback has
been very positive."
SWS Securities cleared or executed 52.3 million securities transactions in
fiscal 2002, a 15 percent decline from the 61.3 million transactions processed
in the prior year. Book value per share declined to $14.43 at the end of June
following the Westwood spin-off, compared with $16.83 at the end of the prior
fiscal year.
"There is no doubt that this is one of the toughest financial years the company
has faced," Mr. Buchholz said. "However, we believe the actions we have taken to
remedy leasehold impairments and `downsize' certain operations will add
stability and help us weather the bad times. If business conditions improve,
these actions should allow us to grow."
Mr. Buchholz also noted that the company was authorized by the Board in late
2000 to repurchase up to one million shares of the company's stock in the open
market. Seven hundred thousand of that authorization still remains.
During the quarter SWS sold approximately 106,000 shares of its investment in
Knight Trading Group common stock recording cash gains of $607,000 and non-cash
gains of $3.9 million. At the end of fiscal 2002, SWS owned approximately
374,000 shares of Knight Trading Group common stock compared with approximately
906,000 shares at the end of the prior fiscal year.
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 SWS Securities, Inc., Mydiscountbroker.com,
First Savings Bank and its online division MyBankUSA.com, SWS Financial
Services, Inc., SWS Capital Corporation and May Financial Corporation.
This news release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that
any forward-looking statements, including those regarding intent, belief or
current expectations of the company or its management, are not guarantees of
future performance and involve risks and uncertainties. Actual results may
differ materially from those in the forward-looking statements as a result of
various factors. Such factors include, but are not limited to, general economic
conditions and competitive pressures in the markets in which the company
operates, regulatory changes, one-time events and other risks detailed from time
to time in the company's Securities and Exchange Commission filings.
Financial Statements Follow
SWS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 28, 2002 and June 29, 2001
(In thousands, except par values and share amounts)
2002 2001
-------------- -------------
Assets
Cash $ 24,777 $ 31,224
Assets segregated for regulatory purposes 442,707 362,071
Marketable equity securities available for sale 3,932 9,687
Receivable from brokers, dealers and clearing organizations 1,770,055 2,221,253
Receivable from clients, net 467,131 437,620
Loans held for sale, net 103,124 155,025
Loans, net 345,538 319,949
Securities owned, at market value 103,888 146,074
Other assets 102,501 100,415
-------------- -------------
Total assets $ 3,363,653 $ 3,783,318
============== =============
Liabilities and Stockholders' Equity
Short-term borrowings $ 37,600 $ --
Payable to brokers, dealers and clearing organizations 1,764,741 2,233,207
Payable to clients 747,534 657,955
Deposits 265,370 336,281
Securities sold, not yet purchased, at market value 19,657 28,650
Drafts payable 34,531 29,620
Advances from Federal Home Loan Bank 160,468 113,477
Other liabilities 69,920 74,328
Exchangeable subordinated notes 6,785 8,568
-------------- -------------
Total liabilities 3,106,606 3,482,086
Minority interest in consolidated subsidiaries 1,762 2,729
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 17,601,705 and outstanding 17,240,570 shares at
June 28, 2002; issued 17,509,771 and outstanding
17,247,914 shares at June 29, 2001 1,760 1,751
Additional paid-in capital 241,272 252,225
Retained earnings 5,927 20,333
Accumulated other comprehensive income - unrealized holding
gain, net of tax 11,472 27,997
Deferred compensation, net 1,502 1,141
Treasury stock (361,135 shares at June 28, 2002 and 261,857 shares at
June 29, 2001, at cost) (6,648) (4,944)
-------------- -------------
Total stockholders' equity 255,285 298,503
Commitments and contingencies
-------------- -------------
Total liabilities and stockholders' equity $ 3,363,653 $ 3,783,318
============== =============
(more)
SWS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
For the three and twelve months ended June 28, 2002 and June 29, 2001
(In thousands, except per share and share amounts)
For the three months ended For the twelve months ended
fiscal 2002 fiscal 2001 fiscal 2002 fiscal 2001
-------------- -------------- -------------- --------------
Net revenues from clearing operations $ 6,125 $ 10,457 $ 31,056 $ 50,017
Commissions 19,737 18,241 75,334 66,370
Interest 26,589 47,269 125,119 249,427
Investment banking, advisory and administrative fees 11,564 9,272 42,215 35,739
Net gains on principal transactions 7,493 12,822 41,540 45,086
Other 4,768 4,545 16,886 24,063
-------------- -------------- -------------- --------------
Total revenue 76,276 102,606 332,150 470,702
-------------- -------------- -------------- --------------
Commissions and other employee compensation 35,052 34,279 138,525 145,000
Interest 11,308 30,823 65,807 171,578
Occupancy, equipment and computer service costs 18,157 9,744 53,909 35,390
Communications 5,057 4,416 19,539 16,216
Floor brokerage and clearing organization charges 1,895 1,501 8,054 6,507
Advertising and promotional 1,099 3,503 7,848 15,429
Other 18,646 10,743 45,853 45,620
-------------- -------------- -------------- --------------
Total expense 91,214 95,009 339,535 435,740
-------------- -------------- -------------- --------------
Income (loss) before income tax expense (benefit) and
minority interest in consolidated subsidiaries (14,938) 7,597 (7,385) 34,962
Income tax expense (benefit) (5,317) 2,264 (1,352) 11,301
-------------- -------------- -------------- --------------
Income (loss) before minority interest in consolidated subsidiaries (9,621) 5,333 (6,033) 23,661
Minority interest in consolidated subsidiaries (799) (450) (1,151) (2,384)
-------------- -------------- -------------- --------------
Income (loss) before cumulative effect of a change in accounting
principle (10,420) 4,883 (7,184) 21,277
Cumulative effect of a change in accounting principle, net of tax -- -- -- (2,874)
-------------- -------------- -------------- --------------
Net income (loss) (10,420) 4,883 (7,184) 18,403
Net loss recognized in other comprehensive income (loss), net of tax (3,553) (6,083) (16,525) (2,201)
-------------- -------------- -------------- --------------
Comprehensive income (loss) $ (13,973) $ (1,200) $ (23,709) $ 16,202
============== ============== ============== ==============
Earnings per share - basic
Income (loss) before cumulative effect of a change in accounting
principle $ (.60) $ .28 $ (.42) $ 1.22
Cumulative effect of a change in accounting principle, net of tax -- -- -- (.16)
-------------- -------------- -------------- --------------
Net income (loss) $ (.60) $ .28 $ (.42) $ 1.06
============== ============== ============== ==============
Weighted average shares outstanding - basic 17,236,568 17,263,729 17,215,592 17,408,922
============== ============== ============== ==============
Earnings per share - diluted
Income (loss) before cumulative effect of a change in accounting
principle $ (.60) $ .28 $ (.42) $ 1.21
Cumulative effect of a change in accounting principle, net of tax -- -- -- (.16)
-------------- -------------- -------------- --------------
Net income (loss) $ (.60) $ .28 $ (.42) $ 1.05
============== ============== ============== ==============
Weighted average shares outstanding - diluted 17,236,568 17,308,601 17,215,592 17,500,776
============== ============== ============== ==============
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CONTACT: Jim Bowman, Vice President - Corporate Communications, (214) 859-9335
jbowman@swst.com