AGE Edwards AG

First-Quarter Net Earnings Up 50% Over Last Year's First Quarter, Net Revenues Up 17%; Asset-Management and Service-Fee Revenues Set Quarterly Record ST. LOUIS, June 22 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the first quarter of fiscal 2007, which ended May 31, 2006. Net earnings for the quarter were $78 million, or $1.01 per diluted share, on net revenues of $765 million. Net earnings for the first quarter last year were $52 million, or $0.67 per diluted share, on net revenues of $653 million. Results for the prior period have been adjusted to reflect a change in accounting method for stock awards to retirement-eligible employees under Statement of Financial Accounting Standards No. 123 (Revised 2004) "Share Based Payment" ("SFAS No. 123R"). The first-quarter fiscal 2007 results include $17 million in other revenue, or $0.10 per diluted share, for gains related to the merger of the New York Stock Exchange and Archipelago Holdings, Inc. to form NYSE Group, Inc. ("NYSE Group"), including the mark-to-market on NYSE Group shares the firm currently holds. "We are pleased that our first-quarter results showed improved profitability as well as solid revenue growth from several areas of our business," said Robert L. Bagby, chairman and chief executive officer. "We maintained the trend of attracting assets to our fee-based services, all the while giving clients the flexibility to decide whether to pay for their services on a fee basis or a per-transaction basis. This flexibility is one of many examples of how we keep our clients' interests at the forefront of our business approach. "During the quarter, we were honored that Training magazine named A.G. Edwards University to its list of the top 100 corporate-education programs in the country for the sixth consecutive year. We believe our commitment to training provides our financial consultants the knowledge to add real value to their client relationships while helping our firm improve its financial performance for the benefit of our shareholders." RESULTS OF OPERATIONS Asset Management and Service Fees - Asset-management and service-fee revenues reached a new quarterly record of $307 million and increased 23 percent ($57 million) versus last year's first quarter. The results reflect increases in all of the firm's asset-management and service-fee categories, led mainly by greater client interest in the firm's fund-advisory programs and higher client-asset values in mutual funds and insurance products. Commissions - Commission revenues increased 12 percent ($29 million) in the first quarter versus the same time period last year. The results reflect increases in all of the firm's commission categories, led by increased client activity in individual equities and mutual funds and including recent changes to the firm's commission schedule for equity and options transactions. Principal Transactions - Revenues from principal transactions in the first quarter of fiscal 2007 increased 3 percent ($2 million) compared to the first quarter of fiscal 2006. The increase was driven by increased client activity in over-the-counter equity markets, partially offset by lower revenue from fixed-income products. Investment Banking - Investment banking revenues decreased 18 percent ($11 million) in the first quarter versus the same quarter last year. The results largely reflected lower underwriting revenue from closed-end funds and municipal issues. Net Interest Revenue - Interest revenue net of interest expense increased 29 percent ($11 million) in fiscal 2007's first quarter compared to last year's first quarter. The improvement in these revenues reflects an increased prime rate resulting in higher interest rates charged on client margin balances, higher interest payments on the fixed-income inventory held for sale to clients, and higher revenue from short-term investments. The results were partially offset by lower average client margin balances. Other revenue - Other revenue increased $23 million in this year's first quarter versus the same period last year. The results reflect previously described gains related to the merger of the New York Stock Exchange and Archipelago Holdings, Inc. and subsequent mark-to-market on NYSE Group shares the firm currently holds. The first-quarter results also reflect increases in the value of certain private-equity investments. Non-Interest Expenses - Non-interest expenses increased 11 percent ($65 million) during the first quarter of fiscal 2007 compared to the first quarter of fiscal 2006. As previously disclosed in the firm's latest Annual Report on Form 10-K, the firm changed its accounting method for stock awards to retirement-eligible employees effective March 1, 2006. As a result, compensation and benefits expense in the prior period has been adjusted to reflect this change. Compensation and benefits increased 13 percent ($57 million) in this year's first quarter versus last year's first quarter as adjusted, largely reflecting higher commissionable revenue and higher accruals for incentive compensation based on increased profitability. Non-compensation-related expenses increased 5 percent ($8 million) for the first quarter compared to the same period last year. The results reflect increased expenses for securities processing due to increased activity along with higher training and business-development expenses. These results were partially offset by a decrease in expenses for addressing various regulatory changes and legal and regulatory matters. ADDITIONAL SHAREHOLDER INFORMATION Total client assets at the end of the first quarter of fiscal 2007 were $345 billion, a 9 percent increase when compared to the end of the first quarter of fiscal 2006. Client assets in fee-based accounts at the end of the first quarter of fiscal 2007 were $38 billion, a 23 percent increase when compared to the end of the first quarter of fiscal 2006. As of May 31, 2006, stockholders' equity was $2.0 billion, for a book value per share of $25.81. Diluted per-share earnings for the first quarter were based on 76.7 million average common and common equivalent shares outstanding compared to 77.5 million in the first quarter last 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 6,745 financial consultants in 743 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, price adjustments, the impact of outsourcing agreements, the adoption of SFAS No. 123R including the timing of the recognition of expenses and the treatment of expenses for retirement-eligible employees, the impact and value of the firm's investments including NYSE Group, implementation and effects of expense-reduction strategies, and efforts to make more of non-compensation expenses variable in nature. 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/ % 2006 2005 (Decrease) Chg. (as adjusted) REVENUES: Asset management and service fees $307,079 $250,295 $56,784 22.7 Commissions 276,326 247,126 29,200 11.8 Principal transactions 53,148 51,510 1,638 3.2 Investment banking 48,087 58,761 (10,674) (18.2) Interest 53,641 40,744 12,897 31.7 Other 30,193 6,716 23,477 349.6 TOTAL REVENUES 768,474 655,152 113,322 17.3 Interest expense 3,781 2,213 1,568 70.9 NET REVENUES 764,693 652,939 111,754 17.1 NON-INTEREST EXPENSES: Compensation and benefits 480,928 423,996 56,932 13.4 Communication and technology 59,889 55,357 4,532 8.2 Occupancy and equipment 36,016 34,105 1,911 5.6 Marketing and business development 25,549 21,024 4,525 21.5 Floor brokerage and clearance 3,552 5,256 (1,704) (32.4) Other 36,337 37,324 (987) (2.6) TOTAL NON-INTEREST EXPENSES 642,271 577,062 65,209 11.3 EARNINGS BEFORE INCOME TAXES 122,422 75,877 46,545 61.3 INCOME TAXES 44,799 26,866 17,933 66.7 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 77,623 49,011 28,612 58.4 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 (2,768) (100.0) NET EARNINGS $77,623 $51,779 $25,844 49.9 DILUTED EARNINGS PER SHARE: Earnings before cumulative effect of accounting change $1.01 $0.63 $0.38 60.3 Cumulative effect of accounting change, net 0.04 (0.04) (100.0) $1.01 $0.67 $0.34 50.7 AVERAGE DILUTED COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: 76,690 77,548 STOCKHOLDERS' EQUITY $1,971,895 $1,820,531 BOOK VALUE PER SHARE $25.81 $23.67 TOTAL SHARES OUTSTANDING (end of period) 76,414 76,897 Note: Results for the prior period have been adjusted to reflect a change in accounting method for stock awards to retirement-eligible employees under Statement of Financial Accounting Standards No. 123 (Revised 2004) "Share Based Payment". 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, 2006 2006 2005 2005 2005 (as (as (as (as adjusted) adjusted) adjusted) adjusted) REVENUES: Asset management and service fees $307,079 $284,914 $269,789 $257,874 $250,295 Commissions 276,326 273,541 247,209 249,840 247,126 Principal transactions 53,148 56,017 50,264 52,319 51,510 Investment banking 48,087 49,841 57,974 67,821 58,761 Interest 53,641 50,245 48,164 42,184 40,744 Other 30,193 28,893 3,966 4,759 6,716 TOTAL REVENUES 768,474 743,451 677,366 674,797 655,152 Interest expense 3,781 2,898 3,281 2,261 2,213 NET REVENUES 764,693 740,553 674,085 672,536 652,939 NON-INTEREST EXPENSES: Compensation and benefits 480,928 461,492 434,431 441,280 423,996 Communication and technology 59,889 63,591 56,938 60,493 55,357 Occupancy and equipment 36,016 36,305 36,423 37,281 34,105 Marketing and business development 25,549 15,985 16,554 18,072 21,024 Floor brokerage and clearance 3,552 6,049 5,095 4,673 5,256 Other 36,337 42,176 48,795 36,410 37,324 TOTAL NON-INTEREST EXPENSES 642,271 625,598 598,236 598,209 577,062 EARNINGS BEFORE INCOME TAXES 122,422 114,955 75,849 74,327 75,877 INCOME TAXES 44,799 39,517 24,179 27,122 26,866 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 77,623 75,438 51,670 47,205 49,011 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 NET EARNINGS $77,623 $75,438 $51,670 $47,205 $51,779 DILUTED EARNINGS PER SHARE: Earnings before cumulative effect of accounting change $1.01 $0.99 $0.67 $0.61 $0.63 Cumulative effect of accounting change, net 0.04 $1.01 $0.99 $0.67 $0.61 $0.67 AVERAGE DILUTED COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: 76,690 76,562 77,189 77,519 77,548 STOCKHOLDERS' EQUITY $1,971,895 $1,887,012 $1,855,663 $1,849,793 $1,820,531 BOOK VALUE PER SHARE $25.81 $24.96 $24.40 $24.10 $23.67 Note: Results for the prior periods have been adjusted to reflect a change in accounting method for stock awards to retirement-eligible employees under Statement of Financial Accounting Standards No. 123 (Revised 2004) "Share Based Payment". A.G. EDWARDS, INC. QUARTERLY STATISTICAL INFORMATION (Dollars in thousands, except per share amounts) (Unaudited) 1Q FY07 4Q FY06 3Q FY06 2Q FY06 1Q FY06 (as (as (as (as adjusted) adjusted) adjusted) adjusted) Net Revenues $764,693 $740,553 $674,085 $672,536 $652,939 Earnings Before Income Taxes $122,422 $114,955 $75,849 $74,327 $75,877 Net Earnings $77,623 $75,438 $51,670 $47,205 $51,779 Net Earnings as a Percent of Net Revenues 10.2% 10.2% 7.7% 7.0% 7.9% Average Diluted Shares- (000's Omitted) 76,690 76,562 77,189 77,519 77,548 Earnings Per Share (Diluted) $1.01 $0.99 $0.67 $0.61 $0.67 Dividends Per Share $0.20 $0.20 $0.20 $0.16 $0.16 Stockholders' Equity $1,971,895 $1,887,012 $1,855,663 $1,849,793 $1,820,531 Book Value Per Share $25.81 $24.96 $24.40 $24.10 $23.67 Return On Average Equity- (Quarter Results Annualized) 16.1% 16.1% 11.2% 10.3% 11.5% Financial Consultants 6,745 6,824 6,844 6,796 6,791 Full-time Employees 15,420 15,480 15,472 15,357 15,295 Locations 745 738 734 727 723 Total Client Assets (in millions) $345,000 $343,000 $331,000 $325,000 $316,000 Assets In Fee-based Accounts (in millions) $38,000 $37,000 $34,000 $33,000 $31,000 Note: Results for the prior periods have been adjusted to reflect a change in accounting method for stock awards to retirement-eligible employees under Statement of Financial Accounting Standards No. 123 (Revised 2004) "Share Based Payment". 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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