Net Income Totals $1 Million on Revenues of $77.5 million DALLAS, April 25 /PRNewswire-FirstCall/ -- SWS Group, Inc. (NYSE: SWS) today announced earnings of $1.05 million, or diluted earnings per share (EPS) of 6 cents, on revenues of $77.5 million for its third fiscal quarter ended March 28, 2002. In the same quarter a year ago, SWS earned $3.6 million, or diluted EPS of 20 cents, on revenues of $110.9 million. "We believe the trend in our businesses reversed direction this quarter, and that we're seeing the start of an upward cycle," said SWS Chairman and CEO Don A. Buchholz. "We can see a number of positive developments on the horizon." Mr. Buchholz said the conversion to SWS Securities' CSS clearing platform of the 166,000 accounts acquired last year in a SIPC proceeding went smoothly. Until the conversion in early April, this business had been cleared through another subsidiary using a service bureau and independent contractors in Minneapolis. The transition to SWS Securities added 47 correspondents and $12 billion in assets to SWS Securities and will result in a significant reduction in expenses. "This was a major milestone," Mr. Buchholz said. He noted that a national accounting and consulting firm has been retained to certify the readiness of the CSS software system and added that the company is now processing more than 99 percent of its daily work on the new system. Mr. Buchholz said that in addition to the expense reduction program the company has implemented over the past few quarters and the expected savings from more efficient clearing operations, a number of business units appear to have begun an upward trend in the past two months. He said Equity Trading, for example, began the quarter with losses but produced a pre-tax profit in the final month. Fixed Income sales and trading had a good quarter, as did Institutional Sales, Public Finance and First Savings Bank. "We think the news is that we've bottomed out and are on the way back up," Mr. Buchholz said. "If we can continue to improve customer service, we think the growth in our clearing business will accelerate, and we are working very hard to improve customer service in every area of our business. This is the company's Number 1 priority." SWS is moving ahead with plans to spin-off its Westwood Holdings Group, Inc. subsidiary as a separate public company. Mr. Buchholz said SWS and Westwood are awaiting SEC comments on Westwood's Form 10 filing and hope to be able to announce record and distribution dates for the spin-off soon. SWS shareholders will receive one share of Westwood common stock for every four shares of SWS common stock held as of the yet-to-be-determined record date. The spin-off will not change the number of SWS Group common shares that a stockholder owns. Westwood, principally engaged in asset management, plans to list its stock on the New York Stock Exchange under the symbol, WHG. During the quarter, SWS sold 100,000 shares of its investment in Knight Trading Group, Inc. (Nasdaq: NITE), recording cash gains of $697,000 and non-cash gains of $3.6 million on the sale. SWS held 480,000 shares of NITE at quarter's end. There were four fewer trading days in the March quarter than in the December quarter and three fewer than in the prior year's March quarter. For the nine-month period, SWS earned $4.8 million, or diluted EPS of 28 cents, on revenues of $255.9 million, compared with net income of $14.1 million, or diluted EPS of 80 cents, on revenues of $368.1 million in the same period of the prior fiscal year. For the nine-month period, NITE sales resulted in cash gains of $4.4 million and non-cash gains of $15.5 million. Fiscal-year-to-date transactions processed by SWS Securities, Inc. totaled 42.1 million compared with 45.8 million in the prior year period. Tangible book value per share was $16.29 compared with $17.07 a year ago. 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., Southwest Clearing Corp., Westwood Holdings Group, Inc. (including Westwood Management Corporation and Westwood Trust), SWS Capital Corporation, May Financial Corporation and SWS Technologies 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. SWS GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition March 28, 2002 and June 29, 2001 (In thousands, except par values and share amounts) March June (unaudited) Assets Cash $21,346 $31,224 Assets segregated for regulatory purposes 439,733 362,071 Marketable equity securities available for sale 5,220 9,687 Receivable from brokers, dealers and clearing organizations 1,952,408 2,221,253 Receivable from clients, net 592,908 437,620 Loans held for sale, net 118,007 155,025 Loans, net 348,826 319,949 Securities owned, at market value 116,834 146,074 Other assets 105,832 101,854 Total assets $3,701,114 $3,784,757 Liabilities and Stockholders' Equity Short-term borrowings $169,050 $--- Payable to brokers, dealers and clearing organizations 1,909,599 2,233,207 Payable to clients 760,842 657,955 Deposits 291,147 336,281 Securities sold, not yet purchased, at market value 19,994 28,650 Drafts payable 29,941 29,620 Advances from Federal Home Loan Bank 155,400 113,477 Other liabilities 66,219 74,831 Exchangeable subordinated notes 7,473 8,568 Total liabilities 3,409,665 3,482,589 Minority interest in consolidated subsidiaries 1,779 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 17,588,027 and outstanding 17,230,566 shares at March 28, 2002; issued 17,509,771 and outstanding 17,247,914 shares at June 29, 2001 1,758 1,751 Additional paid-in capital 257,475 252,225 Retained earnings 20,559 21,269 Accumulated other comprehensive income - unrealized holding gain, net of tax 15,024 27,997 Deferred compensation, net 1,434 1,141 Treasury stock (357,461 shares at March 28, 2002 and 261,857 shares at June 29, 2001, at cost) (6,580) (4,944) Total stockholders' equity 289,670 299,439 Commitments and contingencies Total liabilities and stockholders' equity $3,701,114 $3,784,757 SWS GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Income and Comprehensive Income (Loss) For the three and nine months ended March 28, 2002 and March 30, 2001 (In thousands, except per share and share amounts) (Unaudited) For the For the three months nine months ended ended fiscal fiscal fiscal fiscal 2002 2001 2002 2001 Net revenues from clearing operations $8,247 $11,974 $24,931 $39,560 Commissions 19,477 16,960 55,597 48,129 Interest 26,996 58,093 98,530 202,158 Investment banking, advisory and administrative fees 10,352 8,722 30,651 26,467 Net gains on principal transactions 8,968 11,829 34,047 32,264 Other 3,479 3,370 12,118 19,518 Total revenue 77,519 110,948 255,874 368,096 Commissions and other employee compensation 32,554 36,766 103,473 110,721 Interest 12,748 39,963 54,499 140,755 Occupancy, equipment and computer service costs 12,456 8,973 35,474 25,430 Communications 5,226 4,290 14,482 11,800 Floor brokerage and clearing organization charges 2,225 1,715 6,159 5,006 Advertising and promotional 1,065 4,184 6,749 11,926 Other 8,850 9,277 25,150 34,154 Total expense 75,124 105,168 245,986 339,792 Income before income taxes and minority interest in consolidated subsidiaries 2,395 5,780 9,888 28,304 Income taxes 920 1,874 4,782 9,366 Income before minority interest in consolidated subsidiaries 1,475 3,906 5,106 18,938 Minority interest in consolidated subsidiaries (428) (349) (352) (1,934) Income before cumulative effect of a change in accounting principle 1,047 3,557 4,754 17,004 Cumulative effect of a change in accounting principle, net of tax --- --- --- (2,874) Net income 1,047 3,557 4,754 14,130 Net income (loss) recognized in other comprehensive income (loss), net of tax (3,343) (1,914) (12,972) 3,882 Comprehensive income (loss) $(2,296) $1,643 $(8,218) $18,012 Earnings per share - basic Income before cumulative effect of a change in accounting principle $.06 $.20 $.28 $.97 Cumulative effect of a change in accounting principle, net of tax --- --- --- (.16) Net income $.06 $.20 $.28 $.81 Weighted average shares outstanding - basic 17,225,307 17,479,065 17,208,497 17,478,261 Earnings per share - diluted Income before cumulative effect of a change in accounting principle $.06 $.20 $.28 $.96 Cumulative effect of a change in accounting principle, net of tax --- --- --- (.16) Net income $.06 $.20 $.28 $.80 Weighted average shares outstanding - diluted 17,312,879 17,553,818 17,276,365 17,582,891 MAKE YOUR OPINION COUNT - Click Here http://tbutton.prnewswire.com/prn/11690X36988723 SOURCE SWS Group, Inc. -0- 04/25/2002 /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 email@example.com / /Company News On-Call: http://www.prnewswire.com/comp/118977.html / /Web site: http://www.southwestsecurities.com / (SWS NITE) CO: SWS Group, Inc.; Knight Trading Group, Inc. ST: Texas IN: FIN SU: ERN -0- Apr/25/2002 10:30 GMT
SWS Announces Financial Results for March Quarter;
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