AGE Edwards AG

A.G. Edwards Announces First-Quarter Results for Fiscal 2006 Net Earnings Increase 18% Over Last Year's First Quarter ST. LOUIS, June 23 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the first quarter of fiscal 2006, which ended May 31, 2005. Net earnings for the quarter were $55 million, or $0.71 per diluted share, on net revenues of $653 million. For the same quarter last year, net earnings were $46 million, or $0.57 per diluted share, on net revenues of $666 million. The company previously disclosed its March 1, 2005 early adoption of Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share Based Payment" ("SFAS 123R"). As a result of this adoption, the company was required to recognize in the first quarter of fiscal 2006 a one-time, $2.8 million after-tax benefit, or $0.03 per diluted share net of incentive compensation and income taxes, related to estimated future forfeitures of previously issued restricted-stock awards that were unvested as of March 1, 2005. Additionally, the adoption of SFAS 123R resulted in no expense for stock awards being recognized in the first quarter of fiscal 2006. Fiscal year 2006 stock awards to be granted at year's end will be expensed over their vesting period, generally three years, beginning in fiscal 2007. The operating results for the first and fourth quarters of fiscal year 2005 included restricted stock-award expense of $8.8 million, or $0.05 per diluted share, and $12.4 million, or $0.07 per diluted share, respectively. The fiscal 2006 first-quarter results additionally reflect a $1.2 million benefit, or $0.02 per diluted share, resulting from the resolution of certain tax matters. "While revenues overall were more challenging to come by during the quarter, we were pleased with our asset-management revenues reaching another all-time quarterly record thanks to continued growth of our fee-based programs and services," said Robert L. Bagby, chairman and chief executive officer. "Meanwhile, our communication and technology expenses continued to decline, and we took a big step forward in May with our technology-infrastructure changes when we completed the migration of our core trade-processing operations to an application service provider. "During the quarter, we also rolled out the newest round of our national advertising, which incorporates the nest egg theme," Bagby said. "The positive response from our clients and employees confirms that we have found the right symbol to signify what we do for clients as well as help us build and strengthen awareness of the A.G. Edwards brand. We believe our branding effort along with our other key initiatives are continuing to improve shareholder value." RESULTS OF OPERATIONS Commissions - Commission revenues during the first quarter decreased 12 percent ($33 million) versus the same quarter last year, reflecting decreased client activity in all commission-revenue categories, particularly equities and mutual funds. Asset-management and service fees - Asset-management and service-fee revenues in the first quarter of fiscal 2006 increased 14 percent ($31 million) over last year's first quarter and reached a new quarterly record. The results for the first quarter continued to reflect growing client interest in the firm's fund-advisory programs and other fee-based programs and services, as well as increased client-asset values. Principal transactions - Revenues from principal transactions in the first quarter decreased 26 percent ($18 million) compared to a year ago. These results reflect a lower volume of fixed-income transactions, with more transactions in shorter-term securities given the current interest-rate environment. The results additionally reflect decreased client activity in the over-the-counter equity markets. Investment banking - The first quarter's investment-banking revenues decreased 3 percent ($2 million) versus the first quarter of fiscal 2005. Lower underwriting revenues from corporate and government debt issues were partially offset by higher revenues from municipal-issuer refinancings. Revenues from equity underwriting and management fees were essentially flat. Net interest revenue - Interest revenue net of interest expense increased 37 percent ($10 million) during the first quarter of fiscal 2006 mainly from an increased prime rate resulting in higher interest rates charged on client- margin balances. Other revenue - Other revenue declined $2 million in the first quarter of fiscal 2006 primarily because last year's first quarter included a $6 million September 11, 2001 business-interruption settlement. Non-interest expenses - Total non-interest expenses during the first quarter of fiscal 2006 declined 3 percent ($20 million) versus the first quarter last year. Compensation and benefits in the first quarter of fiscal 2006 declined 3 percent ($11 million) from the same quarter in fiscal 2005. The first quarter of fiscal 2005 included approximately $8.8 million of restricted stock-award expense as discussed above. Compensation and benefits in the first quarter of fiscal 2006 additionally reflect lower commissionable revenue. Non-compensation-related expenses declined 5 percent ($9 million) from the same quarter last year. The decline was driven largely by decreased communication and technology expenses that resulted from the completion of major projects under the company's Gateway Initiative and lower amortization of certain technology assets. The decline was partially offset by increased expenses for additional resources needed to address various regulatory changes and legal matters. ADDITIONAL INFORMATION Total client assets at the end of the first quarter were $316 billion, a 7 percent increase when compared to the end of the first quarter of fiscal 2005. As of May 31, 2005, stockholders' equity was $1.82 billion, for a book value per share of $23.71. Diluted per-share earnings for the first quarter were based on 77.5 million average common and common equivalent shares outstanding compared to 81.0 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 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 6,791 financial consultants in 721 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, the impact of outsourcing agreements, the adoption of Statement of Financial Accounting Standards No. 123 (Revised 2004) "Share Based Payment," 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 May 31, May 31, Increase/ % 2005 2004 (Decrease) Chg. REVENUES: Commissions $247,126 $280,009 $(32,883) (11.7) Asset management and service fees 250,295 218,923 31,372 14.3 Principal transactions 51,510 69,401 (17,891) (25.8) Investment banking 58,761 60,441 (1,680) (2.8) Interest 40,744 28,854 11,890 41.2 Other 6,716 8,926 (2,210) (24.8) TOTAL REVENUES 655,152 666,554 (11,402) (1.7) Interest expense 2,213 664 1,549 233.3 NET REVENUES 652,939 665,890 (12,951) (1.9) NON-INTEREST EXPENSES: Compensation and benefits 419,438 430,931 (11,493) (2.7) Communication and technology 55,357 66,131 (10,774) (16.3) Occupancy and equipment 34,105 34,776 (671) (1.9) Marketing and business development 21,024 23,123 (2,099) (9.1) Floor brokerage and clearance 5,256 5,200 56 1.1 Other 37,324 32,403 4,921 15.2 TOTAL NON-INTEREST EXPENSES 572,504 592,564 (20,060) (3.4) EARNINGS BEFORE INCOME TAXES 80,435 73,326 7,109 9.7 INCOME TAXES 28,580 27,062 1,518 5.6 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 51,855 46,264 5,591 12.1 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 2,768 100.0 NET EARNINGS $54,623 $46,264 $8,359 18.1 EARNINGS PER SHARE: Diluted: Earnings before cumulative effect of accounting change, net $0.67 $0.57 $0.10 Cumulative effect of accounting change, net 0.04 0.04 $0.71 $0.57 $0.14 24.6 Basic: Earnings before cumulative effect of accounting change, net $0.67 $0.58 $0.09 Cumulative effect of accounting change, net 0.04 0.04 $0.71 $0.58 $0.13 22.4 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,471 80,951 Basic 77,214 80,183 STOCKHOLDERS' EQUITY $1,823,376 $1,782,281 BOOK VALUE PER SHARE $23.71 $22.38 TOTAL SHARES OUTSTANDING (end of period) 76,897 79,640 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 May 31, February 28, November 30, August 31, May 31, 2005 2005 2004 2004 2004 REVENUES: Commissions $247,126 $277,117 $245,002 $232,038 $280,009 Asset management and service fees 250,295 246,566 234,284 219,304 218,923 Principal transactions 51,510 57,530 55,969 70,999 69,401 Investment banking 58,761 69,500 57,809 57,872 60,441 Interest 40,744 37,029 32,858 30,002 28,854 Other 6,716 3,099 13,510 4,753 8,926 TOTAL REVENUES 655,152 690,841 639,432 614,968 666,554 Interest expense 2,213 1,308 1,443 699 664 NET REVENUES 652,939 689,533 637,989 614,269 665,890 NON-INTEREST EXPENSES: Compensation and benefits 419,438 457,714 410,421 400,090 430,931 Communication and technology 55,357 57,356 59,429 58,914 66,131 Occupancy and equipment 34,105 45,906 35,476 35,268 34,776 Marketing and business development 21,024 12,785 15,424 14,350 23,123 Floor brokerage and clearance 5,256 5,111 5,307 5,723 5,200 Other 37,324 30,561 34,075 36,800 32,403 TOTAL NON-INTEREST EXPENSES 572,504 609,433 560,132 551,145 592,564 EARNINGS BEFORE INCOME TAXES 80,435 80,100 77,857 63,124 73,326 INCOME TAXES 28,580 29,691 28,684 22,496 27,062 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 51,855 50,409 49,173 40,628 46,264 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 NET EARNINGS $54,623 $50,409 $49,173 $40,628 $46,264 EARNINGS PER SHARE: Diluted: Earnings before cumulative effect of accounting change, net $0.67 $0.65 $0.63 $0.52 $0.57 Cumulative effect of accounting change, net 0.04 $0.71 $0.65 $0.63 $0.52 $0.57 Basic: Earnings before cumulative effect of accounting change, net $0.67 $0.66 $0.64 $0.52 $0.58 Cumulative effect of accounting change, net 0.04 $0.71 $0.66 $0.64 $0.52 $0.58 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,471 77,306 77,844 79,156 80,951 Basic 77,214 76,362 76,781 78,305 80,183 STOCKHOLDERS' EQUITY $1,823,376 $1,787,691 $1,712,738 $1,720,332 $1,782,281 BOOK VALUE PER SHARE $23.71 $23.21 $22.53 $22.37 $22.38 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) 1Q FY06 4Q FY05 3Q FY05 2Q FY05 1Q FY05 Net Revenues $652,939 $689,533 $637,989 $614,269 $665,890 Earnings Before Income Taxes $80,435 $80,100 $77,857 $63,124 $73,326 Net Earnings $54,623 $50,409 $49,173 $40,628 $46,264 Net Earnings as a Percent of Net Revenues 8.4% 7.3% 7.7% 6.6% 6.9% Average Diluted Shares- (000's Omitted) 77,471 77,306 77,844 79,156 80,951 Earnings Per Share (Diluted) $0.71 $0.65 $0.63 $0.52 $0.57 Dividends Per Share $0.16 $0.16 $0.16 $0.16 $0.16 Stockholders' Equity $1,823,376 $1,787,691 $1,712,738 $1,720,332 $1,782,281 Book Value Per Share $23.71 $23.21 $22.53 $22.37 $22.38 Return On Average Equity- (Quarter Results Annualized) 12.1% 11.5% 11.5% 9.3% 10.4% Financial Consultants 6,791 6,890 6,898 6,872 6,899 Full-time Employees 15,295 15,390 15,412 15,413 15,392 Locations 723 721 717 717 713 Total Client Assets (in millions) $316,000 $319,000 $311,000 $296,000 $294,000 Assets In Fee-based Accounts (in millions) $30,647 $30,752 $29,235 $27,420 $27,164 Note: Where appropriate, prior periods' 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 Web site: http://www.agedwards.com/

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