AGE Edwards AG

A.G. Edwards Announces Results for the Third Quarter and First Nine Months of Fiscal 2005 Year-To-Date Net Earnings Up 29% Over Year-Ago Period ST. LOUIS, Dec. 22 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the third quarter and first nine months of fiscal 2005, which ended Nov. 30, 2004. Net earnings for the quarter were $49 million, or $0.63 diluted earnings per share, on net revenues of $638 million. For the same quarter last year, net earnings were $40 million, or $0.49 diluted earnings per share, on net revenues of $629 million. For the first nine months of fiscal 2005, net earnings were $136 million, or $1.72 diluted earnings per share, on net revenues of $1.9 billion. For the same period last year, net earnings were $105 million, or $1.30 diluted earnings per share, on net revenues of $1.8 billion. "Our third-quarter and nine-month results reflect the continued strong growth in our asset-management revenues as we deliver on our ability to provide clients a broad and high-quality array of fee-based products and services," said Robert L. Bagby, chairman and chief executive officer. "We reached all-time highs in total client assets and assets in fee-based accounts thanks to the hard work of our financial consultants. "We also were pleased to show solid expense control during the quarter. In reviewing our communication and technology expenses, we are starting to see the benefits of a more disciplined approach to our technology-spending strategy over the past three years while still in the midst of implementing our Gateway Initiative, the largest technology-infrastructure effort in our firm's history. "We also remain committed to the current efforts of our long-term strategy to increase investors' recognition of our brand and the special qualities of our client-first business model." RESULTS OF OPERATIONS Commissions - Commission revenues for the third quarter decreased 8 percent ($21 million) versus last year's third quarter, primarily reflecting a broad-based decline in transaction-based investment activity. When comparing the first nine months of fiscal 2005 versus the same period last year, commission revenues decreased 1 percent ($9 million) resulting in part from decreased investor interest in insurance products partially offset by greater interest in managed futures. Asset management and service fees - Asset-management and service-fee revenues for the third quarter increased 25 percent ($46 million) versus the third quarter last year. For the first nine months of fiscal 2005, revenues in this category increased 30 percent ($152 million) versus last year's first nine months. Results in both periods reflect greater client interest in fee-based programs and services as well as increased client-asset values. Additionally, the third-quarter and nine-month results reflect increased revenue from money fund distribution fees after the removal in November 2003 of expense caps previously imposed by certain money funds. Principal transactions - Revenues from principal transactions decreased 23 percent ($16 million) compared to the year-ago quarter. Versus the first nine months of last fiscal year, principal-transaction revenues decreased 13 percent ($29 million). The decreases in both periods reflect lower overall demand for fixed-income products. Investment banking - Investment-banking revenues for the third quarter decreased 24 percent ($19 million) versus the same three-month period last year. For the first nine months of fiscal 2005, investment-banking revenues decreased 27 percent ($64 million) compared to the same period last year. Both periods reflect lower volume in fixed-income securities and closed-end funds. Net interest revenue - Interest revenue net of interest expense in the third quarter increased 45 percent ($10 million) from the year-ago quarter. For the first nine months, net interest revenue increased 31 percent ($21 million) over last year's first nine months. Both the third-quarter and nine-month results reflect a change by A.G. Edwards effective January 2004 in the base rates charged on client-margin balances along with a higher interest-rate environment. Additionally, both periods reflect slightly higher average client-margin balances. Other revenue - Other revenue increased $9 million in the third quarter and increased $22 million for the first nine months of fiscal 2005 versus the like periods last year. Both periods reflect increases in private-equity valuations. Both periods also include gains on the sale of shares in the Chicago Mercantile Exchange and the mark-to-market on other shares in this exchange the firm currently holds. The nine-month results additionally reflect a Sept. 11, 2001 business-interruption settlement. Non-interest expenses - During the third quarter, non-interest expenses decreased 1 percent ($8 million) compared to last year's third quarter. For the first nine months of fiscal 2005, non-interest expenses increased 2 percent ($39 million) compared to the same period last fiscal year. Compensation and benefits in the third quarter increased 3 percent ($11 million) from the same quarter last year. Comparing the first nine months of fiscal 2005 to the same period last year, compensation and benefits increased 5 percent ($54 million). Increases in both time periods are mainly a result of increased accruals for incentive-related compensation as well as general salary and benefit increases. The nine-month time period additionally reflects increases in commissionable revenue. Non-compensation-related expenses for the third quarter this year decreased 11 percent ($19 million) from the same quarter last year. For this fiscal year's first nine months, non-compensation-related expenses decreased 3 percent ($14 million) versus last year's first nine months. Decreases in both time periods are due largely to a decline in communication and technology expenses along with lower accruals for contingent liabilities, which were partially offset by increased expenses related to the firm's branding initiative. ADDITIONAL STOCKHOLDER INFORMATION Total client assets at the end of the third quarter were $311 billion, a 10 percent increase when compared to the end of the third quarter last year. As of Nov. 30, 2004, stockholders' equity was $1.71 billion, for a book value per share of $22.53. Diluted per share earnings for the third quarter were based on 77.8 million average common and common equivalent shares outstanding compared to 81.4 million in the prior year. Diluted per share earnings for the current nine-month period were based on 79.3 million average common and common equivalent shares outstanding compared to 80.9 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 6,898 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 November 30, November 30, Increase/ % 2004 2003 (Decrease) Chg. REVENUES: Commissions $252,091 $272,704 $(20,613) (7.6) Asset management and service fees * 227,195 181,409 45,786 25.2 Principal transactions 55,969 72,418 (16,449) (22.7) Investment banking 57,809 76,377 (18,568) (24.3) Interest 32,642 22,051 10,591 48.0 Other 13,510 4,765 8,745 183.5 TOTAL REVENUES 639,216 629,724 9,492 1.5 Interest expense 1,227 403 824 204.5 NET REVENUES 637,989 629,321 8,668 1.4 NON-INTEREST EXPENSES: Compensation and benefits 411,574 400,878 10,696 2.7 Communication and technology 59,429 69,892 (10,463) (15.0) Occupancy and equipment 35,476 37,391 (1,915) (5.1) Marketing and business development 14,271 13,604 667 4.9 Floor brokerage and clearance 5,307 5,720 (413) (7.2) Other * 34,075 40,988 (6,913) (16.9) TOTAL NON-INTEREST EXPENSES 560,132 568,473 (8,341) (1.5) EARNINGS BEFORE INCOME TAXES 77,857 60,848 17,009 28.0 INCOME TAXES 28,684 21,131 7,553 35.7 NET EARNINGS $49,173 $39,717 $9,456 23.8 EARNINGS PER SHARE: Diluted $0.63 $0.49 $0.14 28.6 Basic $0.64 $0.49 $0.15 30.6 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,844 81,401 Basic 76,781 80,047 STOCKHOLDERS' EQUITY $1,712,738 $1,734,603 BOOK VALUE PER SHARE $22.53 $21.58 TOTAL SHARES OUTSTANDING (end of period) 76,034 80,379 * 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 Nine Months Ended November 30, November 30, Increase/ % 2004 2003 (Decrease) Chg. REVENUES: Commissions $774,083 $782,897 $(8,814) (1.1) Asset management and service fees * 655,477 503,772 151,705 30.1 Principal transactions 196,369 224,992 (28,623) (12.7) Investment banking 176,122 240,618 (64,496) (26.8) Interest 91,336 70,223 21,113 30.1 Other 27,189 5,661 21,528 380.3 TOTAL REVENUES 1,920,576 1,828,163 92,413 5.1 Interest expense 2,428 2,137 291 13.6 NET REVENUES 1,918,148 1,826,026 92,122 5.0 NON-INTEREST EXPENSES: Compensation and benefits 1,246,529 1,192,827 53,702 4.5 Communication and technology 184,474 203,206 (18,732) (9.2) Occupancy and equipment 105,520 105,902 (382) (0.4) Marketing and business development 47,810 34,495 13,315 38.6 Floor brokerage and clearance 16,230 16,369 (139) (0.8) Other * 103,278 111,649 (8,371) (7.5) TOTAL NON-INTEREST EXPENSES 1,703,841 1,664,448 39,393 2.4 EARNINGS BEFORE INCOME TAXES 214,307 161,578 52,729 32.6 INCOME TAXES 78,242 56,497 21,745 38.5 NET EARNINGS $136,065 $105,081 $30,984 29.5 EARNINGS PER SHARE: Diluted $1.72 $1.30 $0.42 32.3 Basic $1.74 $1.31 $0.43 32.8 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 79,252 80,869 Basic 78,423 79,926 STOCKHOLDERS' EQUITY $1,712,738 $1,734,603 BOOK VALUE PER SHARE $22.53 $21.58 TOTAL SHARES OUTSTANDING (end of period) 76,034 80,379 * 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 November August May February November 30, 31, 31, 29, 30, 2004 2004 2004 2004 2003 REVENUES: Commissions $252,091 $237,119 $284,873 $310,325 $272,704 Asset management and service fees * 227,195 214,223 214,059 207,419 181,409 Principal transactions 55,969 70,999 69,401 71,894 72,418 Investment banking 57,809 57,872 60,441 81,243 76,377 Interest 32,642 29,921 28,773 25,569 22,051 Other 13,510 4,753 8,926 723 4,765 TOTAL REVENUES 639,216 614,887 666,473 697,173 629,724 Interest expense 1,227 618 583 382 403 NET REVENUES 637,989 614,269 665,890 696,791 629,321 NON-INTEREST EXPENSES: Compensation and benefits 411,574 401,764 433,191 456,581 400,878 Communication and technology 59,429 58,914 66,131 68,841 69,892 Occupancy and equipment 35,476 35,268 34,776 31,715 37,391 Marketing and business development 14,271 12,676 20,863 12,358 13,604 Floor brokerage and clearance 5,307 5,723 5,200 6,126 5,720 Other * 34,075 36,800 32,403 37,474 40,988 TOTAL NON-INTEREST EXPENSES 560,132 551,145 592,564 613,095 568,473 EARNINGS BEFORE INCOME TAXES 77,857 63,124 73,326 83,696 60,848 INCOME TAXES 28,684 22,496 27,062 29,292 21,131 NET EARNINGS $49,173 $40,628 $46,264 $54,404 $39,717 EARNINGS PER SHARE: Diluted $0.63 $0.52 $0.57 $0.67 $0.49 Basic $0.64 $0.52 $0.58 $0.68 $0.49 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,844 79,156 80,951 81,329 81,401 Basic 76,781 78,305 80,183 80,385 80,047 STOCKHOLDERS' EQUITY $1,712,738 $1,720,332 $1,782,281 $1,778,319 $1,734,603 BOOK VALUE PER SHARE $22.53 $22.37 $22.38 $22.08 $21.58 * 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) 3Q FY05 2Q FY05 1Q FY05 4Q FY04 3Q FY04 Net Revenues * $637,989 $614,269 $665,890 $696,791 $629,321 Earnings Before Income Taxes $77,857 $63,124 $73,326 $83,696 $60,848 Net Earnings $49,173 $40,628 $46,264 $54,404 $39,717 Net Earnings as a Percent of Net Revenues 7.7% 6.6% 6.9% 7.8% 6.3% Average Diluted Shares- (000's Omitted) 77,844 79,156 80,951 81,329 81,401 Earnings Per Share (Diluted) $0.63 $0.52 $0.57 $0.67 $0.49 Dividends Per Share $0.16 $0.16 $0.16 $0.16 $0.16 Stockholders' Equity $1,712,738 $1,720,332 $1,782,281 $1,778,319 $1,734,603 Book Value Per Share $22.53 $22.37 $22.38 $22.08 $21.58 Return On Average Equity- (Quarter Results Annualized) 11.5% 9.3% 10.4% 12.4% 9.3% Total Assets $4,105,297 $4,001,300 $4,110,942 $4,435,059 $4,180,205 Financial Consultants 6,898 6,872 6,899 6,980 6,956 Full-time Employees 15,412 15,413 15,392 15,931 15,887 Locations 717 717 713 710 708 Total Client Assets * $311,000,000 $296,000,000 $294,000,000 $300,000,000 $283,000,000 Assets In Fee-based Accounts $29,235,000 $27,420,000 $27,164,000 $27,275,000 $24,732,000 * 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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