Net Income Totaled $849,000 on Revenues of $66.4 Million DALLAS, Jan. 23 /PRNewswire-FirstCall/ -- SWS Group, Inc. (NYSE: SWS) today reported net income of $849,000, or diluted earnings per share (EPS) of 5 cents, on revenues of $66.4 million for the company's second quarter ended Dec. 31, 2002, compared with net income of $822,000, or diluted EPS of 5 cents, on revenues of $91 million in the prior year's second quarter. Prior year figures include a loss of $2.6 million for Westwood Holdings Group, a subsidiary that was spun-off to shareholders, and a non-cash gain of $3 million, net of tax, on the sale of common stock held in Knight Trading Group, Inc. (Nasdaq: NITE). Prior year results were also restated as a result of converting the firm's investment in a software company to the equity method of accounting. For the first half of fiscal 2003, SWS recorded revenues of $132.1 million, net income of $539,000 and diluted EPS of 3 cents, compared with revenues of $178.4 million, net income of $2.8 million and diluted EPS of 16 cents in the same period of the prior fiscal year. "We continue to face a soft economy, volatile markets and lackluster trading volumes," said Chief Executive Officer Donald W. Hultgren. "However, by the actions we have taken to streamline the company and make it more efficient, we believe we have positioned SWS for success when conditions improve." Mr. Hultgren said results for SWS' fixed income and equity capital markets operations improved over those of the prior year, as the company was successful in recruiting new professionals. "The clearing business remained soft as volumes and margin balances continued to decline," he said. "Below the revenue line, we were able to produce ongoing reductions of almost $9 million by controlling operating expenses." SWS' banking segment produced favorable year-over-year results. Mr. Hultgren said that after a thorough review, the company has concluded that the $3.4 million pre-tax reserve announced in the September quarter will be sufficient to cover the suspect loans that its banking subsidiary had purchased from a New York mortgage bank and that no additional suspect loans were found. "As previously announced, we have implemented additional safeguards to protect against future mortgage purchase losses," he added. Fiscal-year-to-date transactions processed by SWS Securities, Inc. totaled 14.1 million compared with 27.1 million in the prior year period. During the quarter, the company repurchased 94,100 shares of its common stock at an average price of $12.72 per share. The company has 336,200 shares of authorization remaining under the stock buy-back program. Book value per share was $14.71 compared with $16.93 a year ago. Last year's book value figure includes Westwood. 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., First Savings Bank, SWS Financial Services, Inc., SWS Capital Corporation, and Mydiscountbroker. 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. SWS GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition December 31, 2002 and June 28, 2002 (In thousands, except par values and share amounts) December June (Unaudited) Assets Cash $39,039 $24,777 Assets segregated for regulatory purposes 490,488 442,707 Marketable equity securities available for sale 3,728 3,932 Receivable from brokers, dealers and clearing organizations 1,932,180 1,770,055 Receivable from clients, net 316,370 467,131 Loans held for sale, net 200,709 103,124 Loans, net 356,019 345,538 Securities owned, at market value 81,275 103,888 Other assets 106,860 102,501 Total assets $3,526,668 $3,363,653 Liabilities and Stockholders' Equity Short-term borrowings $--- $37,600 Payable to brokers, dealers and clearing organizations 1,917,981 1,764,741 Payable to clients 669,816 747,534 Deposits 425,615 265,370 Securities sold, not yet purchased, at market value 32,049 19,657 Drafts payable 30,069 34,531 Advances from Federal Home Loan Bank 123,400 160,468 Other liabilities 71,231 69,920 Exchangeable subordinated notes 6,624 6,785 Total liabilities 3,276,785 3,106,606 Minority interest in consolidated subsidiaries 1,806 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 17,612,326 and outstanding 16,868,246 shares at December 31, 2002; issued 17,601,705 and outstanding 17,240,570 shares at June 28, 2002 1,761 1,760 Additional paid-in capital 245,017 247,199 Accumulated deficit (533) --- Accumulated other comprehensive income - unrealized holding gain (loss), net of tax 11,403 11,472 Deferred compensation, net 1,449 1,502 Treasury stock (744,080 shares at December 31, 2002 and 361,135 shares at June 28, 2002, at cost) (11,020) (6,648) Total stockholders' equity 248,077 255,285 Commitments and contingencies Total liabilities and stockholders' equity $3,526,668 $3,363,653 SWS GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Income and Comprehensive Income (Loss) For the three and six months ended December 31, 2002 and 2001 (In thousands, except per share and share amounts) (Unaudited) For the three months ended For the six months ended 2001 2001 2002 Restated 2002 Restated Net revenues from clearing operations $4,864 $9,443 $10,174 $16,684 Commissions 22,519 20,035 40,669 36,120 Interest 24,194 31,904 49,011 71,534 Investment banking, advisory and administrative fees 7,025 10,843 13,995 20,299 Net gains on principal transactions 2,804 13,864 9,566 25,079 Other 4,950 4,897 8,730 8,639 Total revenue 66,356 90,986 132,145 178,355 Commissions and other employee compensation 33,184 38,621 64,175 70,919 Interest 10,348 17,207 21,128 41,751 Occupancy, equipment and computer service costs 7,915 13,317 16,744 23,203 Communications 3,869 4,886 7,852 9,256 Floor brokerage and clearing organization charges 1,755 2,338 3,537 3,934 Advertising and promotional 961 2,654 1,708 5,684 Other 7,034 9,278 15,943 17,584 Total expense 65,066 88,301 131,087 172,331 Income before income tax expense and minority interest in consolidated subsidiaries 1,290 2,685 1,058 6,024 Income tax expense 325 2,202 74 3,348 Income before minority interest in consolidated subsidiaries 965 483 984 2,676 Minority interest in consolidated subsidiaries (116) 339 (445) 76 Net income 849 822 539 2,752 Net income (loss) recognized in other comprehensive income (loss), net of tax 310 (2,136) (70) (9,629) Comprehensive income (loss) $1,159 $(1,314) $469 $(6,877) Earnings per share - basic Net income $0.05 $0.05 $0.03 $0.16 Weighted average shares outstanding - basic 16,915,491 17,162,610 17,018,241 17,200,591 Earnings per share - diluted Net income $0.05 $0.05 $0.03 $0.16 Weighted average shares outstanding - diluted 16,922,640 17,237,934 17,030,219 17,259,193 SOURCE SWS Group, Inc. -0- 01/23/2003 /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 firstname.lastname@example.org / /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 NITE) CO: SWS Group, Inc.; Knight Trading Group, Inc. ST: Texas IN: FIN SU: ERN -0- Jan/23/2003 11:59 GMT
SWS Reports Second Quarter Results;
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