EX-99.1 3 e15363ex99_1.txt PRESS RELEASE 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 / /Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20010628/DATH004LOGO AP Archive: http://photoarchive.ap.org PRN Photo Desk, +1-888-776-6555 or +1-212-782-2840/ /Web site: http://www.swsgroupinc.com / (SWS) CO: SWS Group, Inc. ST: Texas IN: FIN SU: ERN