AGE Edwards AG

Quarterly Net Earnings 23% Higher Than Last Year's Second Quarter, First-Half Net Earnings Increase 20% Over Year-Ago Period ST. LOUIS, Sept. 22 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the second quarter and first half of fiscal 2006, which ended August 31, 2005. Net earnings for the quarter were $50 million, or $0.64 per diluted share, on net revenues of $673 million. For the same quarter last year, net earnings were $41 million, or $0.52 per diluted share, on net revenues of $614 million. For the first six months of fiscal 2006, net earnings were $104 million, or $1.35 per diluted share, on net revenues of $1.33 billion. For the same period last year, net earnings were $87 million, or $1.09 per diluted share, on net revenues of $1.28 billion. "We were pleased that our second-quarter performance reflected solid growth from several key revenue areas, including greater client activity in equities, a strong performance from investment banking, and continued client interest in our fee-based services," said Robert L. Bagby, chairman and chief executive officer. "As we look to make more investors aware of A.G. Edwards' client-first approach, our national advertising featuring the nest-egg theme will be seen more frequently in the third quarter. We believe this campaign is resonating well with investors, and we want to maintain the momentum we have built since introducing the nest-egg campaign this year. "Finally and most important, I am relieved all of our Gulf Coast-area employees are safe. They have displayed great courage and determination to help clients while personally contending with the effects of Hurricane Katrina. While three offices are still unusable, we are serving clients of those offices in other offices nearby and through our Home Office in St. Louis. Our thoughts and prayers continue to go out to our clients, our employees and everyone impacted by this tragedy." RESULTS OF OPERATIONS Commissions - Commission revenues for the second quarter increased 8 percent ($18 million) versus last year's second quarter, primarily resulting from increased investor activity in individual equities. When comparing the first half of fiscal 2006 to the same period last year, commission revenues decreased 3 percent ($15 million) mainly as a result of lower investor interest in individual mutual funds and insurance products. Asset management and service fees - Asset-management and service-fee revenues for the second quarter reached another quarterly record, increasing 18 percent ($39 million) versus the second quarter last year. For the first six months of fiscal 2006, these revenues increased 16 percent ($70 million) versus last year's first six months. Results in both periods continued to reflect greater client interest in the firm's fee-based programs and services, particularly its fund-advisory programs, as well as increased client-asset values in mutual funds. Principal transactions - Revenues from principal transactions decreased 26 percent ($19 million) compared to the year-ago quarter. Compared to the first six months of last fiscal year, principal-transaction revenues decreased 26 percent ($37 million). The decreases in both periods continued to reflect a lower volume of fixed-income transactions, with more transactions in shorter-term securities given the current interest-rate environment. The second-quarter decrease was partially offset by increased investor activity in over-the-counter equity markets. Investment banking - Investment-banking revenues for the second quarter increased 17 percent ($10 million) versus the same three-month period last year. For the first six months of fiscal 2006, investment-banking revenues increased 7 percent ($8 million) compared to the same period last year. Both periods reflect higher revenues from equity underwritings in a number of sectors as well as municipal underwritings of new issues and refinancings. These increases were partially offset by lower revenues from corporate and government debt issues. Net interest revenue - Interest revenue net of interest expense in the second quarter increased 36 percent ($11 million) from the year-ago quarter. For fiscal 2006's first half, net interest revenue increased 36 percent ($21 million) over last year's first half. Both the second-quarter and six- month results reflect an increased prime rate resulting in higher interest rates charged on margin balances. Other revenue - Other revenue was essentially flat in the second quarter and decreased $2 million for the first half of fiscal 2006 compared to the same periods last year. The decrease in other revenues for the first half resulted mainly from a $6 million Sept. 11, 2001 business-interruption settlement received in the first half of last year, partially offset by increased private-equity valuations. Non-interest expenses - During the second quarter, non-interest expenses increased 8 percent ($43 million) compared to last year's second quarter. For the first six months of fiscal 2006, non-interest expenses increased 2 percent ($23 million) compared to the same period last fiscal year. Compensation and benefits in the second quarter increased 9 percent ($37 million) from the same quarter last year. Comparing the first half of fiscal 2006 to the same period last year, compensation and benefits increased 3 percent ($25 million). The results in both periods mainly reflect higher commissionable revenue as well as higher incentive compensation due to increased firm profitability. The six-month results also reflect increases in administrative salaries and related benefits. Additionally, as a result of its early adoption of Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-Based Payment," the company did not recognize an expense for stock awards in either period for fiscal 2006. Last year's second quarter and first half respectively included restricted stock-award expense of approximately $6.9 million, or $0.04 per diluted share, and $15.7 million, or $0.09 per diluted share. Non-compensation-related expenses for the second quarter this year increased 4 percent ($6 million) from the same quarter last year, reflecting in part higher expenses associated with the company's branding initiative. For this year's first six months, non-compensation-related expenses were essentially flat versus last year's first six months, reflecting in part lower technology consulting expenses. Both periods reflect increased expenses for addressing various regulatory changes and legal matters. ADDITIONAL STOCKHOLDER INFORMATION Total client assets at the end of the second quarter were $325 billion, a 10 percent increase when compared to the end of the second quarter last year. As of August 31, 2005, stockholders' equity was $1.86 billion, for a book value per share of $24.17. Diluted per share earnings for the second quarter were based on 77.4 million average common and common equivalent shares outstanding compared to 79.2 million in the prior year. Diluted per share earnings for the current six-month period were based on 77.4 million average common and common equivalent shares outstanding compared to 80.1 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. Drawn to the firm's client-first philosophy, individuals and businesses have turned to A.G. Edwards for sound advice and access to a wide array of investment products and services that can help them meet their financial goals and objectives. Founded in 1887, A.G. Edwards and its affiliates employ 6,796 financial consultants in 725 offices nationwide and two European locations in London and Geneva. More information can be found on 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 August 31, August 31, Increase/ % 2005 2004 (Decrease) Chg. REVENUES: Commissions $249,840 $232,038 $17,802 7.7 Asset management and service fees 257,874 219,304 38,570 17.6 Principal transactions 52,319 70,999 (18,680) (26.3) Investment banking 67,821 57,872 9,949 17.2 Interest 42,184 30,002 12,182 40.6 Other 4,759 4,753 6 0.1 TOTAL REVENUES 674,797 614,968 59,829 9.7 Interest expense 2,261 699 1,562 223.5 NET REVENUES 672,536 614,269 58,267 9.5 NON-INTEREST EXPENSES: Compensation and benefits 437,060 400,090 36,970 9.2 Communication and technology 60,493 58,914 1,579 2.7 Occupancy and equipment 37,281 35,268 2,013 5.7 Marketing and business development 18,072 14,350 3,722 25.9 Floor brokerage and clearance 4,673 5,723 (1,050) (18.3) Other 36,410 36,800 (390) (1.1) TOTAL NON-INTEREST EXPENSES 593,989 551,145 42,844 7.8 EARNINGS BEFORE INCOME TAXES 78,547 63,124 15,423 24.4 INCOME TAXES 28,709 22,496 6,213 27.6 NET EARNINGS $49,838 $40,628 $9,210 22.7 EARNINGS PER SHARE: Diluted $0.64 $0.52 $0.12 23.1 Basic $0.65 $0.52 $0.13 25.0 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,358 79,156 Basic 77,052 78,305 STOCKHOLDERS' EQUITY $1,855,271 $1,720,332 BOOK VALUE PER SHARE $24.17 $22.37 TOTAL SHARES OUTSTANDING (end of period) 76,763 76,920 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 Six Months Ended August 31, August 31, Increase/ % 2005 2004 (Decrease) Chg. REVENUES: Commissions $496,966 $512,047 $(15,081) (2.9) Asset management and service fees 508,169 438,227 69,942 16.0 Principal transactions 103,829 140,400 (36,571) (26.0) Investment banking 126,582 118,313 8,269 7.0 Interest 82,928 58,856 24,072 40.9 Other 11,475 13,679 (2,204) (16.1) TOTAL REVENUES 1,329,949 1,281,522 48,427 3.8 Interest expense 4,474 1,363 3,111 228.2 NET REVENUES 1,325,475 1,280,159 45,316 3.5 NON-INTEREST EXPENSES: Compensation and benefits 856,498 831,021 25,477 3.1 Communication and technology 115,850 125,045 (9,195) (7.4) Occupancy and equipment 71,386 70,044 1,342 1.9 Marketing and business development 39,096 37,473 1,623 4.3 Floor brokerage and clearance 9,929 10,923 (994) (9.1) Other 73,734 69,203 4,531 6.5 TOTAL NON-INTEREST EXPENSES 1,166,493 1,143,709 22,784 2.0 EARNINGS BEFORE INCOME TAXES 158,982 136,450 22,532 16.5 INCOME TAXES 57,289 49,558 7,731 15.6 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 101,693 86,892 14,801 17.0 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 2,768 n.m. NET EARNINGS $104,461 $86,892 $17,569 20.2 EARNINGS PER SHARE: Diluted: Earnings before cumulative effect of accounting change, net $1.31 $1.09 $0.22 20.2 Cumulative effect of accounting change, net 0.04 0.04 $1.35 $1.09 $0.26 23.9 Basic: Earnings before cumulative effect of accounting change, net $1.31 $1.10 $0.21 19.1 Cumulative effect of accounting change, net 0.04 0.04 $1.35 $1.10 $0.25 22.7 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,414 80,053 Basic 77,133 79,188 STOCKHOLDERS' EQUITY $1,855,271 $1,720,332 BOOK VALUE PER SHARE $24.17 $22.37 TOTAL SHARES OUTSTANDING (end of period) 76,763 76,920 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 August 31, May 31, February 28, November 30, August 31, 2005 2005 2005 2004 2004 REVENUES: Commissions $249,840 $247,126 $277,117 $245,002 $232,038 Asset management and service fees 257,874 250,295 246,566 234,284 219,304 Principal transactions 52,319 51,510 57,530 55,969 70,999 Investment banking 67,821 58,761 69,500 57,809 57,872 Interest 42,184 40,744 37,029 32,858 30,002 Other 4,759 6,716 3,099 13,510 4,753 TOTAL REVENUES 674,797 655,152 690,841 639,432 614,968 Interest expense 2,261 2,213 1,308 1,443 699 NET REVENUES 672,536 652,939 689,533 637,989 614,269 NON-INTEREST EXPENSES: Compensation and benefits 437,060 419,438 457,714 410,421 400,090 Communication and technology 60,493 55,357 57,356 59,429 58,914 Occupancy and equipment 37,281 34,105 45,906 35,476 35,268 Marketing and business development 18,072 21,024 12,785 15,424 14,350 Floor brokerage and clearance 4,673 5,256 5,111 5,307 5,723 Other 36,410 37,324 30,561 34,075 36,800 TOTAL NON-INTEREST EXPENSES 593,989 572,504 609,433 560,132 551,145 EARNINGS BEFORE INCOME TAXES 78,547 80,435 80,100 77,857 63,124 INCOME TAXES 28,709 28,580 29,691 28,684 22,496 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 49,838 51,855 50,409 49,173 40,628 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 NET EARNINGS $49,838 $54,623 $50,409 $49,173 $40,628 EARNINGS PER SHARE: Diluted: Earnings before cumulative effect of accounting change, net $0.64 $0.67 $0.65 $0.63 $0.52 Cumulative effect of accounting change, net 0.04 $0.64 $0.71 $0.65 $0.63 $0.52 Basic: Earnings before cumulative effect of accounting change, net $0.65 $0.67 $0.66 $0.64 $0.52 Cumulative effect of accounting change, net 0.04 $0.65 $0.71 $0.66 $0.64 $0.52 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,358 77,471 77,306 77,844 79,156 Basic 77,052 77,214 76,362 76,781 78,305 STOCKHOLDERS' EQUITY $1,855,271 $1,823,376 $1,787,691 $1,712,738 $1,720,332 BOOK VALUE PER SHARE $24.17 $23.71 $23.21 $22.53 $22.37 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) 2Q FY06 1Q FY06 4Q FY05 3Q FY05 2Q FY05 Net Revenues $672,536 $652,939 $689,533 $637,989 $614,269 Earnings Before Income Taxes $78,547 $80,435 $80,100 $77,857 $63,124 Net Earnings $49,838 $54,623 $50,409 $49,173 $40,628 Net Earnings as a Percent of Net Revenues 7.4% 8.4% 7.3% 7.7% 6.6% Average Diluted Shares- (000's Omitted) 77,358 77,471 77,306 77,844 79,156 Earnings Per Share (Diluted) $0.64 $0.71 $0.65 $0.63 $0.52 Dividends Per Share $0.16 $0.16 $0.16 $0.16 $0.16 Stockholders' Equity $1,855,271 $1,823,376 $1,787,691 $1,712,738 $1,720,332 Book Value Per Share $24.17 $23.71 $23.21 $22.53 $22.37 Return On Average Equity- (Quarter Results Annualized) 10.8% 12.1% 11.5% 11.5% 9.3% Financial Consultants 6,796 6,791 6,890 6,898 6,872 Full-time Employees 15,357 15,295 15,390 15,412 15,413 Locations 727 723 721 717 717 Total Client Assets (in millions) $325,000 $316,000 $319,000 $311,000 $296,000 Assets In Fee-based Accounts (in millions) $32,637 $30,647 $30,752 $29,235 $27,420 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, Inc. Web site: http://www.agedwards.com/

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