AGE Edwards AG

Fourth-Quarter Net Earnings Increase 58% Over Year-Ago Quarter; Fourth Straight Fiscal Year of Higher Earnings ST. LOUIS, March 30 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the fiscal year and fourth quarter ended February 28, 2006. Net earnings for fiscal 2006 were $238 million, or $3.10 per diluted share, on net revenues of $2.7 billion. For the prior fiscal year, net earnings were $186 million, or $2.37 diluted earnings per share, on net revenues of $2.6 billion. For the fourth quarter of fiscal 2006, net earnings were $80 million, or $1.04 per diluted share, on net revenues of $741 million. Net earnings for the fourth quarter last year were $50 million, or $0.65 per diluted share, on net revenues of $690 million. "The dedication and hard work of our financial consultants and entire staff helped lead to our improved performance in fiscal 2006," said Robert L. Bagby, chairman and chief executive officer. "For the first time in our history, asset-management and service-fee revenues surpassed commission revenues on an annual basis. As clients continue to migrate toward the fee- based programs and services we offer, these fee revenues now account for 39 percent of our net revenues, compared to 24 percent just five years ago. "For the fourth consecutive year we lowered our communication and technology expenses. In addition, the successful conversion of our securities-processing operations to an application service provider and the completion of several technology projects under our Gateway Initiative should lead to a more efficient technology infrastructure. "Our branding initiative took an exciting step forward in fiscal 2006 when we incorporated the nest-egg theme into our advertising along with the recent introduction of our Nest Egg Index and Nest Egg Score. The positive feedback from clients, employees and others lets us know we are creating the brand awareness we need to enhance our business opportunities. We believe these and other efforts, along with our continued commitment to our client-first philosophy, are improving our competitive position and helping us deliver greater value to our shareholders." Results for the fourth quarter include $14.6 million in other revenue, or $0.09 per diluted share, for gains on the sale of shares in the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT), a gain on the sale of real estate, and the mark-to-market on other CME shares the firm currently holds. RESULTS OF OPERATIONS Commissions - Commission revenues decreased 2 percent ($16 million) in fiscal 2006 and decreased 1 percent ($4 million) in the fourth quarter versus the respective time periods last year. The results in both periods reflect decreased client activity in individual equities and mutual funds, partially offset by increased client activity in variable annuities. Asset Management and Service Fees - Asset-management and service-fee revenues reached an annual record, surpassing the $1 billion mark in fiscal 2006 and increasing 16 percent ($144 million) versus fiscal 2005. These revenues for the fourth quarter increased 16 percent ($38 million) over last year's fourth quarter. Both the full-year and fourth-quarter results largely reflect greater client interest in the firm's fund-advisory programs and other fee-based programs and services, as well as increased client-asset values in mutual funds. Principal Transactions - Revenues from principal transactions in fiscal 2006 decreased 17 percent ($44 million) compared to fiscal 2005. For the fourth quarter this year, principal-transaction revenues decreased 3 percent ($2 million) compared to the fourth quarter last year. Both time periods reflect a lower volume of fixed-income transactions, with more transactions in shorter-term securities given the current interest-rate environment. The decreases in both periods were partially offset by increased client activity in over-the-counter equity markets. Investment Banking - Investment banking revenues decreased 5 percent ($11 million) in fiscal 2006 and decreased 28 percent ($20 million) in the fourth quarter versus the same time periods last year. The full-year results largely reflected lower revenue from corporate and government debt issues and related management fees, partially offset by increased revenue from municipal underwritings of new issues and refinancings. The fourth-quarter decline primarily resulted from lower underwriting revenue and related management fees from closed-end funds. Net Interest Revenue - Interest revenue net of interest expense increased 37 percent ($46 million) in fiscal 2006 and increased 33 percent ($12 million) in the fourth quarter compared to the same periods in fiscal 2005. Both time periods reflect an increased prime rate resulting in higher interest rates charged on client-margin balances, partially offset by slightly lower average margin balances. Additionally, higher interest rates in both time periods resulted in greater revenue from the fixed-income inventory held for sale to clients. Other revenue - Other revenue increased $14 million in fiscal 2006 and increased $26 million for the fourth quarter versus the same periods last year. The full-year and fourth-quarter results reflect the previously described gains on the sales of CME and CBOT shares, the gain on the sale of real estate, and the mark-to-market on other CME shares the firm currently holds. Both periods also reflect a dividend from a private-equity investment and increases in private-equity valuations. Non-Interest Expenses - Non-interest expenses increased 3 percent ($66 million) during fiscal 2006 compared to fiscal 2005. For the fourth quarter, non-interest expenses increased 2 percent ($10 million) compared to the same quarter last year. Compensation and benefits increased 2 percent ($42 million) in fiscal 2006 versus fiscal 2005, largely reflecting higher commissionable revenue and increases in administrative salaries and related benefits. For the fourth quarter, compensation and benefits decreased 1 percent ($3 million) compared to the same quarter last year as lower accruals for incentive compensation were partially offset by increases in commissionable revenue. As a result of its early adoption of Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-Based Payment" ("SFAS No. 123R"), the firm did not recognize an expense for stock awards in either period for fiscal 2006. Last year's fourth-quarter and full-year results respectively included restricted stock-award expense of approximately $12.4 million, or $0.07 per diluted share, and $34.7 million, or $0.20 per diluted share. Non-compensation-related expenses increased 4 percent ($24 million) for fiscal 2006 and increased 8 percent ($12 million) during the fourth quarter compared to the same periods last year. The increase in the full-year results reflected increased expenses for addressing various regulatory changes and legal and regulatory matters, partially offset by a decline in technology consulting expenses associated with the completion of various projects under the firm's Gateway Initiative. The fourth-quarter results reflected an increase from securities-processing expenses paid to an application service provider for securities-processing operations, coupled with an increase in expenses associated with the firm's branding initiative. The results for both the full year and fourth quarter last year included an $8 million credit in other expenses to correctly recognize state- registration fees for the firm's financial consultants over the registration period. The results for both time periods last year also included a $10 million charge in occupancy and equipment expenses representing the cumulative effect of correcting the recognition period for rent-escalation clauses and free-rent periods included in certain branch-office leases. EVENT AFFECTING FUTURE PERIODS As disclosed in its most recent Form 10-Q filing with the Securities and Exchange Commission, the firm owned four New York Stock Exchange ("NYSE") membership seats. The NYSE closed a merger agreement with Archipelago Holdings Inc. on March 7, 2006 and formed a new holding company called NYSE Group, Inc. ("NYSE Group"). As a result of this merger, the firm elected, and NYSE Group allocated, $1.6 million in cash and 314,404 shares of NYSE Group common stock for the firm's four membership seats, for a total consideration of approximately $26.8 million based on the share price of NYSE Group common stock as of March 29, 2006. The firm currently expects to record a gain in the first quarter of fiscal 2007, with the amount of the gain to be the consideration received discounted for any restrictions on the shares received. Gains or losses will be recorded in future periods as transfer restrictions expire and the share price of NYSE Group common stock fluctuates. ADDITIONAL SHAREHOLDER INFORMATION Total client assets at the end of fiscal 2006 were $343 billion, an 8 percent increase when compared to the end of fiscal 2005. Client assets in fee-based accounts at the end of fiscal 2006 were $37 billion, a 22 percent increase when compared to the end of fiscal 2005. As of February 28, 2006, stockholders' equity was $1.9 billion, for a book value per share of $25.13. Diluted per-share earnings for fiscal 2006 were based on 77.0 million average common and common equivalent shares outstanding compared to 78.8 million in fiscal 2005. Diluted per-share earnings for the fourth quarter were based on 76.2 million average common and common equivalent shares outstanding compared to 77.3 million in the year-ago quarter. 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 6,824 financial consultants in 736 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, price adjustments, the impact of outsourcing agreements, the adoption of Statement of Financial Accounting Standards No. 123 (Revised 2004) "Share-Based Payment" including the timing of the recognition of expenses, the impact of the merger between the New York Stock Exchange and Archipelago Holdings Inc., 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 28, Increase/ % 2006 2005 (Decrease) Chg. REVENUES: Commissions $273,541 $277,117 $(3,576) (1.3) Asset management and service fees 284,914 246,566 38,348 15.6 Principal transactions 56,017 57,530 (1,513) (2.6) Investment banking 49,841 69,500 (19,659) (28.3) Interest 50,245 37,029 13,216 35.7 Other 28,893 3,099 25,794 832.3 TOTAL REVENUES 743,451 690,841 52,610 7.6 Interest expense 2,898 1,308 1,590 121.6 NET REVENUES 740,553 689,533 51,020 7.4 NON-INTEREST EXPENSES: Compensation and benefits 454,965 457,714 (2,749) (0.6) Communication and technology 63,591 57,356 6,235 10.9 Occupancy and equipment 36,305 45,906 (9,601) (20.9) Marketing and business development 15,985 12,785 3,200 25.0 Floor brokerage and clearance 6,049 5,111 938 18.4 Other 42,176 30,561 11,615 38.0 TOTAL NON-INTEREST EXPENSES 619,071 609,433 9,638 1.6 EARNINGS BEFORE INCOME TAXES 121,482 80,100 41,382 51.7 INCOME TAXES 41,971 29,691 12,280 41.4 NET EARNINGS $79,511 $50,409 $29,102 57.7 EARNINGS PER SHARE: Diluted $1.04 $0.65 $0.39 60.0 Basic $1.05 $0.66 $0.39 59.1 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 76,229 77,306 Basic 75,869 76,362 STOCKHOLDERS' EQUITY $1,899,249 $1,787,691 BOOK VALUE PER SHARE $25.13 $23.21 TOTAL SHARES OUTSTANDING (end of period) 75,590 77,021 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 28, Increase/ % 2006 2005 (Decrease) Chg. REVENUES: Commissions $1,017,716 $1,034,166 $(16,450) (1.6) Asset management and service fees 1,062,872 919,077 143,795 15.6 Principal transactions 210,110 253,899 (43,789) (17.2) Investment banking 234,397 245,622 (11,225) (4.6) Interest 181,337 128,743 52,594 40.9 Other 44,334 30,288 14,046 46.4 TOTAL REVENUES 2,750,766 2,611,795 138,971 5.3 Interest expense 10,653 4,114 6,539 158.9 NET REVENUES 2,740,113 2,607,681 132,432 5.1 NON-INTEREST EXPENSES: Compensation and benefits 1,741,588 1,699,156 42,432 2.5 Communication and technology 236,379 241,830 (5,451) (2.3) Occupancy and equipment 144,114 151,426 (7,312) (4.8) Marketing and business development 71,635 65,682 5,953 9.1 Floor brokerage and clearance 21,073 21,341 (268) (1.3) Other 164,705 133,839 30,866 23.1 TOTAL NON-INTEREST EXPENSES 2,379,494 2,313,274 66,220 2.9 EARNINGS BEFORE INCOME TAXES 360,619 294,407 66,212 22.5 INCOME TAXES 125,058 107,933 17,125 15.9 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 235,561 186,474 49,087 26.3 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 2,768 n.m. NET EARNINGS $238,329 $186,474 $51,855 27.8 EARNINGS PER SHARE: Diluted: Earnings before cumulative effect of accounting change $3.06 $2.37 $0.69 29.1 Cumulative effect of accounting change, net 0.04 0.04 $3.10 $2.37 $0.73 30.8 Basic: Earnings before cumulative effect of accounting change $3.07 $2.39 $0.68 28.5 Cumulative effect of accounting change, net 0.04 0.04 $3.11 $2.39 $0.72 30.1 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 76,993 78,766 Basic 76,693 77,908 STOCKHOLDERS' EQUITY $1,899,249 $1,787,691 BOOK VALUE PER SHARE $25.13 $23.21 TOTAL SHARES OUTSTANDING (end of period) 75,590 77,021 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 28, 2006 2005 2005 2005 2005 REVENUES: Commissions $273,541 $247,209 $249,840 $247,126 $277,117 Asset management and service fees 284,914 269,789 257,874 250,295 246,566 Principal transactions 56,017 50,264 52,319 51,510 57,530 Investment banking 49,841 57,974 67,821 58,761 69,500 Interest 50,245 48,164 42,184 40,744 37,029 Other 28,893 3,966 4,759 6,716 3,099 TOTAL REVENUES 743,451 677,366 674,797 655,152 690,841 Interest expense 2,898 3,281 2,261 2,213 1,308 NET REVENUES 740,553 674,085 672,536 652,939 689,533 NON-INTEREST EXPENSES: Compensation and benefits 454,965 430,125 437,060 419,438 457,714 Communication and technology 63,591 56,938 60,493 55,357 57,356 Occupancy and equipment 36,305 36,423 37,281 34,105 45,906 Marketing and business development 15,985 16,554 18,072 21,024 12,785 Floor brokerage and clearance 6,049 5,095 4,673 5,256 5,111 Other 42,176 48,795 36,410 37,324 30,561 TOTAL NON-INTEREST EXPENSES 619,071 593,930 593,989 572,504 609,433 EARNINGS BEFORE INCOME TAXES 121,482 80,155 78,547 80,435 80,100 INCOME TAXES 41,971 25,798 28,709 28,580 29,691 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 79,511 54,357 49,838 51,855 50,409 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 NET EARNINGS $79,511 $54,357 $49,838 $54,623 $50,409 EARNINGS PER SHARE: Diluted: Earnings before cumulative effect of accounting change $1.04 $0.71 $0.64 $0.67 $0.65 Cumulative effect of accounting change, net 0.04 $1.04 $0.71 $0.64 $0.71 $0.65 Basic: Earnings before cumulative effect of accounting change $1.05 $0.71 $0.65 $0.67 $0.66 Cumulative effect of accounting change, net 0.04 $1.05 $0.71 $0.65 $0.71 $0.66 AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Diluted 76,229 76,917 77,358 77,471 77,306 Basic 75,869 76,635 77,052 77,214 76,362 STOCKHOLDERS' EQUITY $1,899,249 $1,863,828 $1,855,271 $1,823,376 $1,787,691 BOOK VALUE PER SHARE $25.13 $24.51 $24.17 $23.71 $23.21 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 FY06 3Q FY06 2Q FY06 1Q FY06 4Q FY05 Net Revenues $740,553 $674,085 $672,536 $652,939 $689,533 Earnings Before Income Taxes $121,482 $80,155 $78,547 $80,435 $80,100 Net Earnings $79,511 $54,357 $49,838 $54,623 $50,409 Net Earnings as a Percent of Net Revenues 10.7% 8.1% 7.4% 8.4% 7.3% Average Diluted Shares- (000's Omitted) 76,229 76,917 77,358 77,471 77,306 Earnings Per Share (Diluted) $1.04 $0.71 $0.64 $0.71 $0.65 Dividends Per Share $0.20 $0.20 $0.16 $0.16 $0.16 Stockholders' Equity $1,899,249 $1,863,828 $1,855,271 $1,823,376 $1,787,691 Book Value Per Share $25.13 $24.51 $24.17 $23.71 $23.21 Return On Average Equity- (Quarter Results Annualized) 16.9% 11.7% 10.8% 12.1% 11.5% Financial Consultants 6,824 6,844 6,796 6,791 6,890 Full-time Employees 15,480 15,472 15,357 15,295 15,390 Locations 738 734 727 723 721 Total Client Assets (in millions) $343,000 $331,000 $325,000 $316,000 $319,000 Assets In Fee-based Accounts (in millions) $37,446 $34,382 $32,637 $30,647 $30,752 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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