AGE Edwards AG

A.G. Edwards Announces Results for the Second Quarter and First Half of Fiscal 2005 First-Half Net Earnings Increase 33% Over Year-Ago Period ST. LOUIS, Sept. 23 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the second quarter and first half of fiscal 2005, which ended August 31, 2004. Net earnings for the quarter were $41 million, or $0.52 diluted earnings per share, on net revenues of $614 million. For the same quarter last year, net earnings were $37 million, or $0.46 diluted earnings per share, on net revenues of $639 million. For the first six months of fiscal 2005, net earnings were $87 million, or $1.09 diluted earnings per share, on net revenues of $1.3 billion. For the same period last year, net earnings were $65 million, or $0.81 diluted earnings per share, on net revenues of $1.2 billion. "We were pleased to see our second-quarter results improve over last year's second quarter. This improvement came despite an environment that was less favorable for the equity markets compared to the year-ago quarter," said Robert L. Bagby, chairman and chief executive officer. "Much of our growth in the second quarter and first half can be credited to our asset-management and service-fee revenues as we continued to strengthen our platform of fee-based products and services. "Our national advertising will be more visible in the third quarter as part of our branding strategy. Our initial efforts enhanced brand awareness among investors, and I am confident our branding initiative will provide long- term benefits by distinguishing the uniqueness of our personal-relationship model." RESULTS OF OPERATIONS Commissions -- Commission revenues for the second quarter decreased 12 percent ($31 million) versus last year's second quarter, primarily reflecting decreased investor activity in individual equities. When comparing the first six months of fiscal 2005 versus the same period last year, commission revenues increased 2 percent ($12 million) primarily as a result of greater investor interest in mutual funds and managed futures funds. Asset management and service fees -- Asset-management and service-fee revenues for the second quarter increased 27 percent ($46 million) versus the second quarter last year. For the first six months of fiscal 2005, these revenues increased 33 percent ($106 million) versus last year's first six months. Results in both periods reflect greater client interest in fee-based programs and services as well as increased asset values in mutual funds. Additionally, the second-quarter and six-month results reflect increased revenue from money fund distribution fees after the removal last November of expense caps previously imposed by certain money funds. Principal transactions -- Revenues from principal transactions decreased 14 percent ($11 million) compared to the year-ago quarter. Versus the first six months of last fiscal year, principal-transaction revenues decreased 8 percent ($12 million). The decreases in both periods reflect lower demand for fixed-income products. Investment banking -- Investment-banking revenues for the second quarter decreased 39 percent ($37 million) versus the same three-month period last year. For the first six months of fiscal 2005, investment-banking revenues decreased 28 percent ($46 million) compared to the same period last year. Both periods reflect lower volume in many interest-rate-sensitive sectors. Net interest revenue -- Interest revenue net of interest expense in the second quarter increased 27 percent ($6 million) from the year-ago quarter. For the first six months, net interest revenue increased 24 percent ($11 million) over last year's first six months. Both the second-quarter and six-month results reflect a change by A.G. Edwards in the base rates charged on client-margin balances along with a higher interest-rate environment. The current six-month period additionally reflects slightly higher average balances. Other revenue -- Other revenue increased $2 million in the second quarter and increased $13 million for the first six months of fiscal 2005 versus the like periods last year. Both periods reflect net increases in private-equity valuations. The six-month results additionally reflect a Sept. 11, 2001 business-interruption settlement. Non-interest expenses -- During the second quarter, non-interest expenses decreased 5 percent ($30 million) compared to last year's second quarter. For the first six months of fiscal 2005, non-interest expenses increased 4 percent ($48 million) compared to the same period last fiscal year. Compensation and benefits in the second quarter decreased 4 percent ($17 million) from the same quarter last year mainly as a result of lower commissionable revenue. Comparing the first six months of fiscal 2005 to the same period last year, compensation and benefits increased 5 percent ($43 million), primarily reflecting increases in commissionable revenue. Non-compensation-related expenses for the second quarter this year decreased 8 percent ($13 million) from the same quarter last year due largely to a decline in communication and technology expenses. For the current year's first six months, non-compensation-related expenses increased 2 percent ($5 million) versus last year's first six months, reflecting the costs of the firm's branding initiative partially offset by decreases in communication and technology expenses. ADDITIONAL STOCKHOLDER INFORMATION Total client assets at the end of the second quarter were $296 billion, a 10 percent increase when compared to the end of the second quarter last year. As of August 31, 2004, stockholders' equity was $1.72 billion, for a book value per share of $22.37. Diluted per share earnings for the second quarter were based on 79.2 million average common and common equivalent shares outstanding compared to 80.5 million in the prior year. Diluted per share earnings for the current six-month period were based on 80.1 million average common and common equivalent shares outstanding compared to 80.6 million in the prior year. ABOUT A.G. EDWARDS, INC. A.G. Edwards, Inc. is a financial services holding company whose primary subsidiary is the national investment firm of A.G. Edwards & Sons, Inc. For more than 117 years, individuals and businesses have turned to A.G. Edwards to develop strong personal relationships with financial consultants dedicated to a client-first philosophy of providing financial strategies tailored to their clients' individual needs. A.G. Edwards and its affiliates encompass 6,872 financial consultants in 715 offices nationwide and two European locations in London, England and Geneva, Switzerland. For more information on A.G. Edwards, please visit http://www.agedwards.com/ . This material may contain forward-looking statements within the meaning of federal securities laws. Actual results are subject to risks and uncertainties, including both those specific to A.G. Edwards and those to the industry, which could cause results to differ materially from those contemplated. The risks and uncertainties include, but are not limited to, general economic conditions, government monetary and fiscal policy, the actions of competitors, changes in and effects of outsourcing agreements and of marketing strategies, regulatory changes and actions, changes in legislation, risk management, legal claims, technology changes, compensation changes, and implementation and effects of expense-reduction strategies. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this release. A.G. Edwards does not undertake any obligation to publicly update any forward-looking statements. A. G. EDWARDS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) (Unaudited) For the Three Months Ended August 31, August 31, Increase/ % 2004 2003 (Decrease) Chg. REVENUES: Commissions $237,119 $268,393 $(31,274) (11.7) Asset management and service fees * 214,223 168,096 46,127 27.4 Principal transactions 70,999 82,178 (11,179) (13.6) Investment banking 57,872 94,557 (36,685) (38.8) Interest 29,921 23,986 5,935 24.7 Other 4,753 2,515 2,238 89.0 TOTAL REVENUES 614,887 639,725 (24,838) (3.9) Interest expense 618 950 (332) (34.9) NET REVENUES 614,269 638,775 (24,506) (3.8) NON-INTEREST EXPENSES: Compensation and benefits 401,764 419,094 (17,330) (4.1) Communication and technology 58,914 68,795 (9,881) (14.4) Occupancy and equipment 35,268 36,269 (1,001) (2.8) Marketing and business development 12,676 11,099 1,577 14.2 Floor brokerage and clearance 5,723 5,989 (266) (4.4) Other * 36,800 40,134 (3,334) (8.3) TOTAL NON-INTEREST EXPENSES 551,145 581,380 (30,235) (5.2) EARNINGS BEFORE INCOME TAXES 63,124 57,395 5,729 10.0 INCOME TAXES 22,496 19,907 2,589 13.0 NET EARNINGS $40,628 $37,488 $3,140 8.4 EARNINGS PER SHARE: Diluted $0.52 $0.46 $0.06 13.0 Basic $0.52 $0.47 $0.05 10.6 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 79,156 80,488 Basic 78,305 79,394 STOCKHOLDERS' EQUITY $1,720,332 $1,666,738 BOOK VALUE PER SHARE $22.37 $21.13 TOTAL SHARES OUTSTANDING (end of period) 76,920 78,866 * Prior years' financial information has been reclassified to conform to current year presentation. A. G. EDWARDS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) (Unaudited) For the Six Months Ended August 31, August 31, Increase/ % 2004 2003 (Decrease) Chg. REVENUES: Commissions $521,992 $510,193 $11,799 2.3 Asset management and service fees * 428,282 322,363 105,919 32.9 Principal transactions 140,400 152,574 (12,174) (8.0) Investment banking 118,313 164,241 (45,928) (28.0) Interest 58,694 48,172 10,522 21.8 Other 13,679 896 12,783 1,426.7 TOTAL REVENUES 1,281,360 1,198,439 82,921 6.9 Interest expense 1,201 1,734 (533) (30.7) NET REVENUES 1,280,159 1,196,705 83,454 7.0 NON-INTEREST EXPENSES: Compensation and benefits 834,955 791,949 43,006 5.4 Communication and technology 125,045 133,314 (8,269) (6.2) Occupancy and equipment 70,044 68,511 1,533 2.2 Marketing and business development 33,539 20,891 12,648 60.5 Floor brokerage and clearance 10,923 10,649 274 2.6 Other * 69,203 70,661 (1,458) (2.1) TOTAL NON-INTEREST EXPENSES 1,143,709 1,095,975 47,734 4.4 EARNINGS BEFORE INCOME TAXES 136,450 100,730 35,720 35.5 INCOME TAXES 49,558 35,366 14,192 40.1 NET EARNINGS $86,892 $65,364 $21,528 32.9 EARNINGS PER SHARE: Diluted $1.09 $0.81 $0.28 34.6 Basic $1.10 $0.82 $0.28 34.1 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 80,053 80,615 Basic 79,188 79,865 STOCKHOLDERS' EQUITY $1,720,332 $1,666,738 BOOK VALUE PER SHARE $22.37 $21.13 TOTAL SHARES OUTSTANDING (end of period) 76,920 78,866 * Prior years' financial information has been reclassified to conform to current year presentation. A. G. EDWARDS, INC. QUARTERLY CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) (Unaudited) For the Three Months Ended August May February November August 31, 31, 29, 30, 31, 2004 2004 2004 2003 2003 REVENUES: Commissions $237,119 $284,873 $310,325 $272,704 $268,393 Asset management and service fees * 214,223 214,059 207,419 181,409 168,096 Principal transactions 70,999 69,401 71,894 72,418 82,178 Investment banking 57,872 60,441 81,243 76,377 94,557 Interest 29,921 28,773 25,569 22,051 23,986 Other 4,753 8,926 723 4,765 2,515 TOTAL REVENUES 614,887 666,473 697,173 629,724 639,725 Interest expense 618 583 382 403 950 NET REVENUES 614,269 665,890 696,791 629,321 638,775 NON-INTEREST EXPENSES: Compensation and benefits 401,764 433,191 456,581 400,878 419,094 Communication and technology 58,914 66,131 68,841 69,892 68,795 Occupancy and equipment 35,268 34,776 31,715 37,391 36,269 Marketing and business development 12,676 20,863 12,358 13,604 11,099 Floor brokerage and clearance 5,723 5,200 6,126 5,720 5,989 Other * 36,800 32,403 37,474 40,988 40,134 TOTAL NON-INTEREST EXPENSES 551,145 592,564 613,095 568,473 581,380 EARNINGS BEFORE INCOME TAXES 63,124 73,326 83,696 60,848 57,395 INCOME TAXES 22,496 27,062 29,292 21,131 19,907 NET EARNINGS $40,628 $46,264 $54,404 $39,717 $37,488 EARNINGS PER SHARE: Diluted $0.52 $0.57 $0.67 $0.49 $0.46 Basic $0.52 $0.58 $0.68 $0.49 $0.47 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 79,156 80,951 81,329 81,401 80,488 Basic 78,305 80,183 80,385 80,047 79,394 STOCKHOLDERS' EQUITY $1,720,332 $1,782,281 $1,778,319 $1,734,603 $1,666,738 BOOK VALUE PER SHARE $ 22.37 $22.38 $22.08 $21.58 $21.13 * Prior years' financial information has been reclassified to conform to current year presentation. A.G. EDWARDS, INC. QUARTERLY STATISTICAL INFORMATION (Dollars in thousands, except per share amounts) (Unaudited) 2Q FY05 1Q FY05 4Q FY04 3Q FY04 2Q FY04 Net Revenues * $614,269 $665,890 $696,791 $629,321 $638,775 Earnings Before Income Taxes $63,124 $73,326 $83,696 $60,848 $57,395 Net Earnings $40,628 $46,264 $54,404 $39,717 $37,488 Net Earnings as a Percent of Net Revenues 6.6% 6.9% 7.8% 6.3% 5.9% Average Diluted Shares- (000's Omitted) 79,156 80,951 81,329 81,401 80,488 Earnings Per Share (Diluted) $0.52 $0.57 $0.67 $0.49 $0.46 Dividends Per Share $0.16 $0.16 $0.16 $0.16 $0.16 Stockholders' Equity $1,720,332 $1,782,281 $1,778,319 $1,734,603 $1,666,738 Book Value Per Share $22.37 $22.38 $22.08 $21.58 $21.13 Return On Average Equity- (Quarter Results Annualized) 9.3% 10.4% 12.4% 9.3% 9.0% Total Assets $4,001,300 $4,110,942 $4,435,059 $4,180,205 $4,066,745 Financial Consultants 6,872 6,899 6,980 6,956 7,024 Full-time Employees 15,413 15,392 15,931 15,887 15,948 Locations 717 713 710 708 706 Total Client Assets * $296,000,000 $294,000,000 $300,000,000 $283,000,000 $270,000,000 Assets In Fee-based Accounts $27,420,000 $27,164,000 $27,275,000 $24,732,000 $23,405,000 * Prior years' financial information has been reclassified to conform to current year presentation. DATASOURCE: A.G. Edwards, Inc. CONTACT: Media Relations, Margaret Welch, +1-314-955-5912, , or Investor Relations, Justin Gioia, +1-314-955-2379, , both of A.G. Edwards, Inc. Web site: http://www.agedwards.com/

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