AGE Edwards AG

A.G. Edwards, Inc. Announces Fourth-Quarter and Full-Year Results for Fiscal 2005 Full-Year Net Earnings 17% Higher Than Last Year; Record Highs In Total Client Assets and Fee-Based Assets ST. LOUIS, March 31 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the fiscal year and fourth quarter ended February 28, 2005. Net earnings for fiscal 2005 were $186 million, or $2.37 diluted earnings per share, on net revenues of $2.6 billion. For the prior fiscal year, net earnings were $159 million, or $1.97 diluted earnings per share, on net revenues of $2.5 billion. For the fourth quarter of fiscal 2005, net earnings were $50 million, or $0.65 diluted earnings per share, on net revenues of $690 million. Net earnings for the fourth quarter last year were $54 million, or $0.67 diluted earnings per share, on net revenues of $697 million. "Our employees did a tremendous job of building upon last year's results even though the financial markets were more subdued in fiscal 2005," said Robert L. Bagby, chairman, chief executive officer and president. "The significant growth in our asset-management revenues reinforces our belief that more clients are increasingly interested in fee-based products and services and that we are providing an attractive lineup to satisfy this demand. We were pleased to reach all-time highs in client assets in fee-based accounts as well as total client assets. On the expense side, our communication and technology expenses were at their lowest level since fiscal 2000 and demonstrated our continued discipline and efficiency in this area. "Going into fiscal 2006, we are excited to begin the next phase of our branding initiative. With a new campaign that will begin in mid-April, we will enhance awareness of our brand as the firm that puts the clients' interests at the forefront of everything we do. The positive feedback we have already received from our clients and financial consultants makes us confident that our branding effort is leading us in the right direction. We believe our client-first approach is the key to creating greater value for our shareholders." The results for both the full year and the fourth quarter include a $10 million charge in occupancy and equipment expenses, or $.06 diluted earnings per share, and represent the cumulative effect of correcting the recognition period for rent-escalation clauses and free-rent periods included in certain branch-office leases. The results for both periods also include an $8 million credit in other expenses, or $.04 diluted earnings per share, to correctly recognize state-registration fees for the firm's financial consultants over the registration period. The correcting entries were recorded in the fourth quarter and were not material to the quarter, the year, or any prior period's consolidated financial information. RESULTS OF OPERATIONS Commissions -- Commission revenues decreased 4 percent ($47 million) in fiscal 2005 and decreased 10 percent ($30 million) in the fourth quarter when compared to the same time periods last year. The results in both periods reflect decreased client activity in individual equities. The full-year results additionally reflect reduced interest in variable annuities. Asset Management and Service Fees -- Asset-management and service-fee revenues reached an annual record-high $919 million in fiscal 2005, increasing 27 percent ($196 million) versus fiscal 2004. For the fourth quarter, these revenues increased 17 percent ($35 million) over the year-ago quarter. Both the full-year and fourth-quarter results benefited in part from greater client interest in our fund-advisory programs and other fee-based programs and services, as well as increased client-asset values. Client assets in fee- based accounts also reached a record-high $31 billion, increasing 13 percent over last year. Principal Transactions -- Revenues from principal transactions in fiscal 2005 declined 14 percent ($43 million) compared to fiscal 2004. For the fourth quarter this year, principal-transaction revenues declined 20 percent ($14 million) compared to the fourth quarter last year. Both time periods reflect decreased investor demand for fixed-income products and individual equities. Investment Banking -- Investment-banking revenues decreased 24 percent ($76 million) in fiscal 2005 and 14 percent ($12 million) in the fourth quarter versus comparable periods, primarily as a result of lower volume in closed-end fund underwriting. The fourth-quarter decline was partially offset by increased revenues from management fees. Net Interest Revenue -- Interest revenue net of interest expense increased 34 percent ($31 million) in fiscal 2005 and increased 42 percent ($11 million) in the fourth quarter compared to the same periods in fiscal 2004. Both the full-year and fourth-quarter 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, the full-year results reflect slightly higher average client-margin balances. Other revenue -- Other revenue increased $24 million in fiscal 2005 and increased $2 million for the fourth quarter versus the like periods last year. The full-year results reflect a gain of $10 million 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 full-year results also reflect a Sept. 11, 2001 business-interruption settlement of $6 million. Both periods reflect increases in private-equity valuations. Non-Interest Expenses -- Non-interest expenses increased 2 percent ($36 million) during fiscal 2005 compared to fiscal 2004. For the fourth quarter, non-interest expenses decreased 1 percent ($4 million) compared to the same quarter a year ago. Compensation and benefits for fiscal 2005 increased 3 percent ($56 million) versus fiscal 2004, largely reflecting higher incentive compensation as a result of increased revenues and earnings. For the fourth quarter, compensation and benefits increased 1 percent ($3 million) compared to the same quarter last year. Non-compensation-related expenses decreased 3 percent ($20 million) for fiscal 2005 and decreased 4 percent ($7 million) during the fourth quarter compared to the same periods last year. Decreases in both time periods are due largely to a decline in communication and technology expenses along with lower accruals for contingent liabilities. Decreases in the full-year results were partially offset by increased expenses related to the firm's branding initiative. ADDITIONAL SHAREHOLDER INFORMATION Total client assets at the end of fiscal 2005 were $319 billion, a 6 percent increase when compared to the end of fiscal 2004. As of February 28, 2005, shareholders' equity was $1.75 billion, for a book value per share of $22.96. Diluted per-share earnings for fiscal 2005 were based on 78.8 million average common and common equivalent shares outstanding compared to 81.0 million in fiscal 2004. Diluted per share earnings for the fourth quarter were based on 77.3 million average common and common equivalent shares outstanding compared to 81.3 million in the year-ago quarter. ANNUAL STOCKHOLDERS MEETING The Annual Meeting of Stockholders will be held at the firm's St. Louis headquarters on Thursday, June 23, 2005 at 10:00 a.m. A record date of May 2, 2005 was established for determining those shareholders entitled to vote at the meeting. 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 115 years, individuals and businesses have turned to A.G. Edwards to develop strong personal relationships with financial professionals who are dedicated to providing sound investment advice and long-term financial strategies. By adhering to a client-first philosophy, the firm carefully tailors these strategies to fit each client's individual needs. A.G. Edwards and its affiliates encompass 6,890 financial consultants in 719 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 marketing strategies, client interest in specific products and services, 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 February 28, February 29, Increase/ % 2005 2004 (Decrease) Chg. REVENUES: Commissions $277,117 $306,619 $(29,502) (9.6) Asset management and service fees 246,566 211,125 35,441 16.8 Principal transactions 57,530 71,894 (14,364) (20.0) Investment banking 69,500 81,243 (11,743) (14.5) Interest 37,029 25,645 11,384 44.4 Other 3,099 723 2,376 328.6 TOTAL REVENUES 690,841 697,249 (6,408) (0.9) Interest expense 1,308 458 850 185.6 NET REVENUES 689,533 696,791 (7,258) (1.0) NON-INTEREST EXPENSES: Compensation and benefits 457,714 454,641 3,073 0.7 Communication and technology 57,356 68,841 (11,485) (16.7) Occupancy and equipment 45,906 31,715 14,191 44.7 Marketing and business development 12,785 14,298 (1,513) (10.6) Floor brokerage and clearance 5,111 6,126 (1,015) (16.6) Other 30,561 37,474 (6,913) (18.4) TOTAL NON-INTEREST EXPENSES 609,433 613,095 (3,662) (0.6) EARNINGS BEFORE INCOME TAXES 80,100 83,696 (3,596) (4.3) INCOME TAXES 29,691 29,292 399 1.4 NET EARNINGS $50,409 $54,404 $(3,995) (7.3) EARNINGS PER SHARE: Diluted $0.65 $0.67 $(0.02) (3.0) Basic $0.66 $0.68 $(0.02) (2.9) AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,306 81,329 Basic 76,362 80,385 STOCKHOLDERS' EQUITY $1,752,991 $1,778,319 BOOK VALUE PER SHARE $22.96 $22.08 TOTAL SHARES OUTSTANDING (end of period) 76,345 80,527 Note: Where appropriate, prior periods' 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 Twelve Months Ended February 28, February 29, Increase/ % 2005 2004 (Decrease) Chg. REVENUES: Commissions $1,034,166 $1,081,027 $(46,861) (4.3) Asset management and service fees 919,077 723,386 195,691 27.1 Principal transactions 253,899 296,886 (42,987) (14.5) Investment banking 245,622 321,861 (76,239) (23.7) Interest 128,743 96,132 32,611 33.9 Other 30,288 6,384 23,904 374.4 TOTAL REVENUES 2,611,795 2,525,676 86,119 3.4 Interest expense 4,114 2,859 1,255 43.9 NET REVENUES 2,607,681 2,522,817 84,864 3.4 NON-INTEREST EXPENSES: Compensation and benefits 1,699,156 1,642,999 56,157 3.4 Communication and technology 241,830 272,047 (30,217) (11.1) Occupancy and equipment 151,426 137,617 13,809 10.0 Marketing and business development 65,682 53,262 12,420 23.3 Floor brokerage and clearance 21,341 22,495 (1,154) (5.1) Other 133,839 149,123 (15,284) (10.2) TOTAL NON-INTEREST EXPENSES 2,313,274 2,277,543 35,731 1.6 EARNINGS BEFORE INCOME TAXES 294,407 245,274 49,133 20.0 INCOME TAXES 107,933 85,789 22,144 25.8 NET EARNINGS $186,474 $159,485 $26,989 16.9 EARNINGS PER SHARE: Diluted $2.37 $1.97 $0.40 20.3 Basic $2.39 $1.99 $0.40 20.1 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 78,766 80,990 Basic 77,908 80,031 STOCKHOLDERS' EQUITY $1,752,991 $1,778,319 BOOK VALUE PER SHARE $22.96 $22.08 TOTAL SHARES OUTSTANDING (end of period) 76,345 80,527 Note: Where appropriate, prior periods' 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 February 28, November 30, August 31, May 31, February 29, 2005 2004 2004 2004 2004 REVENUES: Commissions $ 277,117 $ 245,002 $ 232,038 $ 280,009 $ 306,619 Asset management and service fees 246,566 234,284 219,304 218,923 211,125 Principal transactions 57,530 55,969 70,999 69,401 71,894 Investment banking 69,500 57,809 57,872 60,441 81,243 Interest 37,029 32,858 30,002 28,854 25,645 Other 3,099 13,510 4,753 8,926 723 TOTAL REVENUES 690,841 639,432 614,968 666,554 697,249 Interest expense 1,308 1,443 699 664 458 NET REVENUES 689,533 637,989 614,269 665,890 696,791 NON-INTEREST EXPENSES: Compensation and benefits 457,714 410,421 400,090 430,931 454,641 Communication and technology 57,356 59,429 58,914 66,131 68,841 Occupancy and equipment 45,906 35,476 35,268 34,776 31,715 Marketing and business development 12,785 15,424 14,350 23,123 14,298 Floor brokerage and clearance 5,111 5,307 5,723 5,200 6,126 Other 30,561 34,075 36,800 32,403 37,474 TOTAL NON-INTEREST EXPENSES 609,433 560,132 551,145 592,564 613,095 EARNINGS BEFORE INCOME TAXES 80,100 77,857 63,124 73,326 83,696 INCOME TAXES 29,691 28,684 22,496 27,062 29,292 NET EARNINGS $ 50,409 $ 49,173 $ 40,628 $ 46,264 $ 54,404 EARNINGS PER SHARE: Diluted $ 0.65 $ 0.63 $ 0.52 $ 0.57 $ 0.67 Basic $ 0.66 $ 0.64 $ 0.52 $ 0.58 $ 0.68 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,306 77,844 79,156 80,951 81,329 Basic 76,362 76,781 78,305 80,183 80,385 STOCKHOLDERS' EQUITY $ 1,752,991 $ 1,712,738 $ 1,720,332 $ 1,782,281 $ 1,778,319 BOOK VALUE PER SHARE $ 22.96 $ 22.53 $ 22.37 $ 22.38 $ 22.08 Note: Where appropriate, prior periods' 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) 4Q FY05 3Q FY05 2Q FY05 1Q FY05 4Q FY04 Net Revenues $689,533 $637,989 $614,269 $665,890 $696,791 Earnings Before Income Taxes $80,100 $77,857 $63,124 $73,326 $83,696 Net Earnings $50,409 $49,173 $40,628 $46,264 $54,404 Net Earnings as a Percent of Net Revenues 7.3% 7.7% 6.6% 6.9% 7.8% Average Diluted Shares- (000's Omitted) 77,306 77,844 79,156 80,951 81,329 Earnings Per Share (Diluted) $0.65 $0.63 $0.52 $0.57 $0.67 Dividends Per Share $0.16 $0.16 $0.16 $0.16 $0.16 Stockholders' Equity $1,752,991 $1,712,738 $1,720,332 $1,782,281 $1,778,319 Book Value Per Share $22.96 $22.53 $22.37 $22.38 $22.08 Return On Average Equity- (Quarter Results Annualized) 11.6% 11.5% 9.3% 10.4% 12.4% Total Assets (preliminary) $4,687,797 $4,105,297 $4,001,300 $4,110,942 $4,450,730 Financial Consultants 6,890 6,898 6,872 6,899 6,980 Full-time Employees 15,390 15,412 15,413 15,392 15,931 Locations 721 717 717 713 710 Total Client Assets $319,000,000 $311,000,000 $296,000,000 $294,000,000 $300,000,000 Assets In Fee-based Accounts $30,752,000 $29,235,000 $27,420,000 $27,164,000 $27,275,000 Note: Where appropriate, prior periods' financial information has been reclassified to conform to current year presentation. DATASOURCE: A.G. Edwards CONTACT: Media Relations, Margaret Welch, +1-314-955-5912, , or Investor Relations, Justin Gioia, +1-314-955-2379, , both of A.G. Edwards Web site: http://www.agedwards.com/

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