AGE Edwards AG

Year-to-Date Net Earnings 17% Higher Than Same Period Last Year 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 2006, which ended November 30, 2005. Net earnings for the quarter were $54 million, or $0.71 per diluted share, on net revenues of $674 million. For the same quarter last year, net earnings were $49 million, or $0.63 per diluted share, on net revenues of $638 million. For the first nine months of fiscal 2006, net earnings were $159 million, or $2.06 per diluted share, on net revenues of $2.0 billion. For the same period last year, net earnings were $136 million, or $1.72 per diluted share, on net revenues of $1.9 billion. Results for the third quarter of fiscal 2006 included an $11 million increase in non-compensation expenses, or $0.07 per diluted share, for reserves and settlements for various legal and regulatory matters when compared to the same quarter last year. Additionally, the third-quarter results reflected a $3.5 million benefit, or $0.05 per diluted share, resulting from the resolution of certain tax matters related to technology research and development tax credits. "Our third-quarter results maintained the trend of growing client interest in our fee-based programs and services, which have enhanced the value our financial consultants bring to their client relationships and have contributed to our improved performance," said Robert L. Bagby, chairman and chief executive officer. "We continue to focus on our technology expenses and achieving the benefits of our Gateway Initiative. "During the quarter, we saw a meaningful increase in our financial consultant workforce. The recent changes in our industry and the appeal of our client-first culture have created opportunities for us to attract both experienced financial consultants and trainees to A.G. Edwards for the benefit of our clients and our firm. "We were pleased with the positive feedback we received regarding our recent dividend increase. We believe it is important for our shareholders to participate in our improved financial results." RESULTS OF OPERATIONS Commissions -- Commission revenues for the third quarter increased 1 percent ($2 million) compared to last year's third quarter, primarily due to increased investor interest in annuities. For this year's first nine months versus the same period last year, commission revenues decreased 2 percent ($13 million), mainly reflecting a shift in investor interest from individual mutual funds to fee-based, fund-advisory programs. Asset management and service fees -- Reaching another new quarterly record, asset-management and service-fee revenues for the third quarter increased 15 percent ($36 million) versus the third quarter last year. For fiscal 2006's first nine months, these revenues increased 16 percent ($105 million) versus last year's first nine months. Results in both periods continued to reflect greater client interest in fee-based programs and services, particularly the firm's fund-advisory programs, as well as increased client-asset values in mutual funds. Principal transactions -- Revenues from principal transactions in the third quarter fell 10 percent ($6 million) compared to the same quarter last year. Compared to the first nine months of fiscal 2005, principal-transaction revenues in this year's first nine months decreased 22 percent ($42 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 third-quarter decline was partially offset by increased investor activity in over-the- counter equity markets. Investment banking -- Investment-banking revenues for the third quarter of fiscal 2006 were essentially flat compared to the same quarter last year, as greater revenues from management fees and municipal underwritings were offset by lower revenues from corporate and government debt issues. For the first nine months, investment-banking revenues increased 5 percent ($8 million) versus the same period last year. This period reflects higher revenues from equity underwritings in a number of sectors, along with higher revenues from municipal underwritings of new issues and refinancings. Net interest revenue -- Interest revenue net of interest expense in the third quarter increased 43 percent ($13 million) from the year-ago quarter. For the first nine months, net interest revenue increased 39 percent ($34 million) over last year's first nine months. Both the third-quarter and nine- month results reflect an increased prime rate resulting in higher interest rates charged on margin balances. The third-quarter results additionally reflect an increase in average inventory of securities held for sale to clients. Other revenue -- Other revenue decreased 71 percent ($10 million) in the third quarter and decreased 43 percent ($12 million) for the first nine months compared to the same periods last year. Last year's third-quarter and nine- month results included gains of $8 million and $10 million, respectively, on the sale of shares in the Chicago Mercantile Exchange and the mark-to-market on other shares in this exchange the firm held at that time. Additionally, the decrease in the nine-month period reflects a $6 million Sept. 11, 2001 business-interruption settlement received in the first half of last year, partially offset by increases in private-equity investment valuations. Non-interest expenses -- During the third quarter, non-interest expenses increased 6 percent ($34 million) compared to last year's third quarter. For the first nine months of fiscal 2006, non-interest expenses increased 3 percent ($57 million) compared to the same period last fiscal year. Compensation and benefits increased 5 percent ($20 million) in the third quarter and increased 4 percent ($45 million) in the first nine months of fiscal 2006 versus the respective periods last year. The results in both periods mainly reflect higher commissionable revenue as well as higher incentive compensation due to increased firm profitability. The nine-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 firm did not recognize an expense for stock awards in either period for fiscal 2006. Last year's third quarter and first nine months respectively included restricted stock-award expense of approximately $6.6 million, or $0.04 per diluted share, and $22.3 million, or $0.13 per diluted share. Non-compensation-related expenses increased 9 percent ($14 million) in the third quarter and increased 2 percent ($11 million) in the first nine months compared to the respective time periods last year. The increases in both periods predominately reflect increases in reserves and settlements for various legal and regulatory matters. These increases were partially offset in both periods by lower technology consulting expenses associated with the completion of various projects under the firm's Gateway Initiative. ADDITIONAL STOCKHOLDER INFORMATION Total client assets at the end of the third quarter were $331 billion, a 6 percent increase when compared to the end of the third quarter last year. As of November 30, 2005, stockholders' equity was $1.86 billion, for a book value per share of $24.51. Diluted per share earnings for the third quarter were based on 76.9 million average common and common equivalent shares outstanding compared to 77.8 million in the prior year. Diluted per share earnings for the current nine-month period were based on 77.2 million average common and common equivalent shares outstanding compared to 79.3 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 6,844 financial consultants in 732 offices nationwide and two European locations in London and Geneva. More information can be found on 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 November 30, November 30, Increase/ % 2005 2004 (Decrease) Chg. REVENUES: Commissions $247,209 $245,002 $2,207 0.9 Asset management and service fees 269,789 234,284 35,505 15.2 Principal transactions 50,264 55,969 (5,705) (10.2) Investment banking 57,974 57,809 165 0.3 Interest 48,164 32,858 15,306 46.6 Other 3,966 13,510 (9,544) (70.6) TOTAL REVENUES 677,366 639,432 37,934 5.9 Interest expense 3,281 1,443 1,838 127.4 NET REVENUES 674,085 637,989 36,096 5.7 NON-INTEREST EXPENSES: Compensation and benefits 430,125 410,421 19,704 4.8 Communication and technology 56,938 59,429 (2,491) (4.2) Occupancy and equipment 36,423 35,476 947 2.7 Marketing and business development 16,554 15,424 1,130 7.3 Floor brokerage and clearance 5,095 5,307 (212) (4.0) Other 48,795 34,075 14,720 43.2 TOTAL NON-INTEREST EXPENSES 593,930 560,132 33,798 6.0 EARNINGS BEFORE INCOME TAXES 80,155 77,857 2,298 3.0 INCOME TAXES 25,798 28,684 (2,886) (10.1) NET EARNINGS $54,357 $49,173 $5,184 10.5 EARNINGS PER SHARE: Diluted $0.71 $0.63 $0.08 12.7 Basic $0.71 $0.64 $0.07 10.9 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 76,917 77,844 Basic 76,635 76,781 STOCKHOLDERS' EQUITY $1,863,828 $1,712,738 BOOK VALUE PER SHARE $24.51 $22.53 TOTAL SHARES OUTSTANDING (end of period) 76,048 76,034 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 Nine Months Ended November 30, November 30, Increase/ % 2005 2004 (Decrease) Chg. REVENUES: Commissions $744,175 $757,049 $(12,874) (1.7) Asset management and service fees 777,958 672,511 105,447 15.7 Principal transactions 154,093 196,369 (42,276) (21.5) Investment banking 184,556 176,122 8,434 4.8 Interest 131,092 91,714 39,378 42.9 Other 15,441 27,189 (11,748) (43.2) TOTAL REVENUES 2,007,315 1,920,954 86,361 4.5 Interest expense 7,755 2,806 4,949 176.4 NET REVENUES 1,999,560 1,918,148 81,412 4.2 NON-INTEREST EXPENSES: Compensation and benefits 1,286,623 1,241,442 45,181 3.6 Communication and technology 172,788 184,474 (11,686) (6.3) Occupancy and equipment 107,809 105,520 2,289 2.2 Marketing and business development 55,650 52,897 2,753 5.2 Floor brokerage and clearance 15,024 16,230 (1,206) (7.4) Other 122,529 103,278 19,251 18.6 TOTAL NON-INTEREST EXPENSES 1,760,423 1,703,841 56,582 3.3 EARNINGS BEFORE INCOME TAXES 239,137 214,307 24,830 11.6 INCOME TAXES 83,087 78,242 4,845 6.2 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 156,050 136,065 19,985 14.7 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 2,768 n.m. NET EARNINGS $158,818 $136,065 $22,753 16.7 EARNINGS PER SHARE: Diluted: Earnings before cumulative effect of accounting change $2.02 $1.72 $0.30 17.4 Cumulative effect of accounting change, net 0.04 0.04 $2.06 $1.72 $0.34 19.8 Basic: Earnings before cumulative effect of accounting change $2.02 $1.74 $0.28 16.1 Cumulative effect of accounting change, net 0.04 0.04 $2.06 $1.74 $0.32 18.4 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 77,248 79,252 Basic 76,967 78,423 STOCKHOLDERS' EQUITY $1,863,828 $1,712,738 BOOK VALUE PER SHARE $24.51 $22.53 TOTAL SHARES OUTSTANDING (end of period) 76,048 76,034 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 November 30, August 31, May 31, February 28, November 30, 2005 2005 2005 2005 2004 REVENUES: Commissions $247,209 $249,840 $247,126 $277,117 $245,002 Asset management and service fees 269,789 257,874 250,295 246,566 234,284 Principal transactions 50,264 52,319 51,510 57,530 55,969 Investment banking 57,974 67,821 58,761 69,500 57,809 Interest 48,164 42,184 40,744 37,029 32,858 Other 3,966 4,759 6,716 3,099 13,510 TOTAL REVENUES 677,366 674,797 655,152 690,841 639,432 Interest expense 3,281 2,261 2,213 1,308 1,443 NET REVENUES 674,085 672,536 652,939 689,533 637,989 NON-INTEREST EXPENSES: Compensation and benefits 430,125 437,060 419,438 457,714 410,421 Communication and technology 56,938 60,493 55,357 57,356 59,429 Occupancy and equipment 36,423 37,281 34,105 45,906 35,476 Marketing and business development 16,554 18,072 21,024 12,785 15,424 Floor brokerage and clearance 5,095 4,673 5,256 5,111 5,307 Other 48,795 36,410 37,324 30,561 34,075 TOTAL NON- INTEREST EXPENSES 593,930 593,989 572,504 609,433 560,132 EARNINGS BEFORE INCOME TAXES 80,155 78,547 80,435 80,100 77,857 INCOME TAXES 25,798 28,709 28,580 29,691 28,684 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 54,357 49,838 51,855 50,409 49,173 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 NET EARNINGS $ 54,357 $ 49,838 $ 54,623 $ 50,409 $ 49,173 EARNINGS PER SHARE: Diluted: Earnings before cumulative effect of accounting change $0.71 $0.64 $0.67 $0.65 $0.63 Cumulative effect of accounting change, net 0.04 $0.71 $0.64 $0.71 $0.65 $0.63 Basic: Earnings before cumulative effect of accounting change $0.71 $0.65 $0.67 $0.66 $0.64 Cumulative effect of accounting change, net 0.04 $0.71 $0.65 $0.71 $0.66 $0.64 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 76,917 77,358 77,471 77,306 77,844 Basic 76,635 77,052 77,214 76,362 76,781 STOCKHOLDERS' EQUITY $1,863,828 $1,855,271 $1,823,376 $1,787,691 $1,712,738 BOOK VALUE PER SHARE $24.51 $24.17 $23.71 $23.21 $22.53 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) 3Q FY06 2Q FY06 1Q FY06 4Q FY05 3Q FY05 Net Revenues $674,085 $672,536 $652,939 $689,533 $637,989 Earnings Before Income Taxes $ 80,155 $ 78,547 $ 80,435 $ 80,100 $ 77,857 Net Earnings $ 54,357 $ 49,838 $ 54,623 $ 50,409 $ 49,173 Net Earnings as a Percent of Net Revenues 8.1% 7.4% 8.4% 7.3% 7.7% Average Diluted Shares- (000's Omitted) 76,917 77,358 77,471 77,306 77,844 Earnings Per Share (Diluted) $0.71 $0.64 $0.71 $0.65 $0.63 Dividends Per Share $0.20 $0.16 $0.16 $0.16 $0.16 Stockholders' Equity$ 1,863,828 $1,855,271 $1,823,376 $1,787,691 $1,712,738 Book Value Per Share $24.51 $24.17 $23.71 $23.21 $22.53 Return On Average Equity- (Quarter Results Annualized) 11.7% 10.8% 12.1% 11.5% 11.5% Financial Consultants 6,844 6,796 6,791 6,890 6,898 Full-time Employees 15,472 15,357 15,295 15,390 15,412 Locations 734 727 723 721 717 Total Client Assets (in millions) $331,000 $325,000 $316,000 $319,000 $311,000 Assets In Fee-based Accounts (in millions)$ 34,382 $ 32,637 $ 30,647 $ 30,752 $ 29,235 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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