AGE Edwards AG

Quarterly Earnings Per Share Up 54% From Same Quarter Last Year; Client Assets Reach $370 Billion ST. LOUIS, Dec. 21 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the third quarter and first nine months of fiscal 2007, which ended November 30, 2006. Net earnings for the quarter were $78 million, or $1.03 per diluted share, on net revenues of $768 million. For the same quarter last year, net earnings were $52 million, or $0.67 per diluted share, on net revenues of $674 million. For the first nine months of fiscal 2007, net earnings were $222 million, or $2.90 per diluted share, on net revenues of $2.2 billion. For the same period last year, net earnings were $151 million, or $1.95 per diluted share, on net revenues of $2.0 billion. 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." "Our third-quarter performance maintained the year-over-year trends of steady client-asset growth and solid earnings growth," said Robert L. Bagby, chairman and chief executive officer. "I want to again thank all of our employees for producing such strong results while always staying focused on our clients' best interests. "Along with these results, we are pleased to announce the Office of Thrift Supervision has approved the expansion of powers of A.G. Edwards Trust Company FSB, which will be able to accept clients' cash deposits from our FDIC-insured bank deposit program. We believe this program and other recent initiatives reinforce our commitment to enhance the value we provide our clients while developing new revenue streams to enhance value for our shareholders." RESULTS OF OPERATIONS Asset management and service fees - Asset-management and service-fee revenues for the third quarter increased 18 percent ($48 million) versus the third quarter last year. For the first nine months of fiscal 2007, these revenues increased 20 percent ($152 million) versus last year's first nine 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. Commissions - Commission revenues for the third quarter were essentially flat when compared to the year-ago quarter, as decreased client activity in individual equities was offset by increased client activity in insurance products and individual mutual funds. For the first nine months of fiscal 2007 compared to the same period last year, commission revenues increased 2 percent ($17 million) mainly as a result of increased client activity in individual equities and insurance products. Principal transactions - Revenues from principal transactions increased 7 percent ($3 million) compared to last year's third quarter. Versus the first nine months of last fiscal year, principal-transaction revenues increased 5 percent ($8 million). The increases in both periods reflected increased client activity in the over-the-counter equity markets. Investment banking - Investment-banking revenues for the third quarter increased 25 percent ($15 million) versus the same three-month period last year, largely resulting from greater volume of equity underwritings and related management fees. For the first nine months of fiscal 2007, investment-banking revenues decreased 4 percent ($7 million) compared to the same period last year, primarily reflecting lower volume of closed-end fund and municipal-debt underwritings. Net interest revenue - Interest revenue net of interest expense in the third quarter increased 20 percent ($9 million) from the year-ago quarter. For fiscal 2007's first nine months, net interest revenue increased 28 percent ($35 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, higher interest payments on the fixed-income inventory held for sale to clients and higher revenue from short- term investments. The results in both periods were partially offset by lower average client margin balances. Other revenue - Other revenue increased $17 million in the third quarter and increased $40 million for the first nine months of fiscal 2007 compared to the same periods last year. The increases in both periods reflect higher private-equity gains along with the mark-to-market on NYSE Group shares the firm currently holds. Through the first nine months, the firm recorded $26 million in revenue related to its investment in NYSE Group. Non-interest expenses - During the third quarter, non-interest expenses increased 8 percent ($45 million) compared to last year's third quarter. For the first nine months of fiscal 2007, non-interest expenses increased 7 percent ($121 million) compared to the same period last fiscal year. 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 10 percent ($42 million) in this year's third quarter versus the year-ago quarter. Comparing the first nine months of fiscal 2007 to the same period last year, compensation and benefits increased 8 percent ($109 million). The results in both periods mainly reflect higher commissionable revenue as well as higher incentive-compensation accruals due to increased firm profitability. Non-compensation-related expenses for the third quarter this year increased 2 percent ($3 million) compared to the same quarter last year. For this year's first nine months, non-compensation-related expenses increased 3 percent ($12 million) versus last year's first nine months. Both periods reflect higher technology consulting expenses, partially offset by lower expenses for addressing various regulatory changes and legal matters. The nine-month results additionally reflect increased securities-processing expenses as well as higher training and business-development expenses. ADDITIONAL STOCKHOLDER INFORMATION Total client assets at the end of the third quarter were $370 billion, a 12 percent increase when compared to the end of the third quarter last year. Client assets in fee-based accounts at the end of the third quarter of fiscal 2007 were $42 billion, a 22 percent increase when compared to the end of the third quarter of fiscal 2006. As of November 30, 2006, stockholders' equity was $2.0 billion, for a book value per share of $27.02. Diluted per share earnings for the third quarter were based on 76.4 million average common and common equivalent shares outstanding compared to 77.2 million in the prior year. Diluted per share earnings for the current nine-month period were based on 76.6 million average common and common equivalent shares outstanding compared to 77.4 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 6,628 financial consultants in 744 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, the completion of all contractual, technological, legal and other requirements for the introduction of new products or services, regulatory changes and actions, changes in legislation, risk management, the expansion of powers of A.G. Edwards Trust Company FSB, legal claims, technology changes, compensation changes, the impact of outsourcing agreements, the impact 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/ % 2006 2005 (Decrease) Chg. (As Adjusted) Revenues Asset management and service fees: Distribution fees $172,326 $146,425 $25,901 17.7 Fee-based accounts 119,886 98,108 21,778 22.2 Service fees 25,982 25,256 726 2.9 Total 318,194 269,789 48,405 17.9 Commissions: Equities 132,314 133,817 (1,503) (1.1) Mutual funds 56,343 54,521 1,822 3.3 Insurance 48,050 47,219 831 1.8 Futures & Options 10,696 11,468 (772) (6.7) Other 218 184 34 18.5 Total 247,621 247,209 412 0.2 Principal transactions: Debt securities 31,694 30,655 1,039 3.4 Equities 21,966 19,609 2,357 12.0 Total 53,660 50,264 3,396 6.8 Investment banking: Underwriting fees and selling concessions 52,818 40,216 12,602 31.3 Management fees 19,802 17,758 2,044 11.5 Total 72,620 57,974 14,646 25.3 Interest: Margin account balances 35,546 35,446 100 0.3 Securities owned and deposits 22,453 12,718 9,735 76.5 Total 57,999 48,164 9,835 20.4 Other 21,390 3,966 17,424 439.3 Total Revenues 771,484 677,366 94,118 13.9 Interest expense 3,955 3,281 674 20.5 Net Revenues 767,529 674,085 93,444 13.9 Non-Interest Expenses: Compensation and benefits 476,208 434,431 41,777 9.6 Communication and technology 64,736 56,938 7,798 13.7 Occupancy and equipment 37,584 36,423 1,161 3.2 Marketing and business development 17,669 16,554 1,115 6.7 Floor brokerage and clearance 4,895 5,095 (200) (3.9) Other 42,391 48,795 (6,404) (13.1) Total Non-Interest Expenses 643,483 598,236 45,247 7.6 Earnings Before Income Taxes 124,046 75,849 48,197 63.5 Income Taxes 45,719 24,179 21,540 89.1 Net earnings $78,327 $51,670 $26,657 51.6 Earnings per diluted share $1.03 $0.67 $0.36 53.7 Average Common and Common Equivalent Shares Outstanding (Diluted) 76,411 77,189 Stockholders' Equity $2,039,141 $1,855,663 Book Value per share $27.02 $24.40 Total Shares Outstanding (end of period) 75,477 76,048 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. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share amounts) (Unaudited) For the Nine Months Ended November 30, November 30, Increase/ % 2006 2005 (Decrease) Chg. (As Adjusted) Revenues Asset management and service fees: Distribution fees $502,895 $419,183 $83,712 20.0 Fee-based accounts 347,149 281,840 65,309 23.2 Service fees 80,313 76,935 3,378 4.4 Total 930,357 777,958 152,399 19.6 Commissions: Equities 402,752 390,131 12,621 3.2 Mutual funds 174,504 175,957 (1,453) (0.8) Insurance 147,846 143,061 4,785 3.3 Futures & Options 35,721 34,314 1,407 4.1 Other 826 712 114 16.0 Total 761,649 744,175 17,474 2.3 Principal transactions: Debt securities 97,559 97,916 (357) (0.4) Equities 64,405 56,177 8,228 14.6 Total 161,964 154,093 7,871 5.1 Investment banking: Underwriting fees and selling concessions 125,619 132,230 (6,611) (5.0) Management fees 51,800 52,326 (526) (1.0) Total 177,419 184,556 (7,137) (3.9) Interest: Margin account balances 112,523 102,262 10,261 10.0 Securities owned and deposits 58,167 28,830 29,337 101.8 Total 170,690 131,092 39,598 30.2 Other 55,789 15,441 40,348 261.3 Total Revenues 2,257,868 2,007,315 250,553 12.5 Interest expense 12,418 7,755 4,663 60.1 Net Revenues 2,245,450 1,999,560 245,890 12.3 Non-Interest Expenses: Compensation and benefits 1,408,502 1,299,707 108,795 8.4 Communication and technology 187,972 172,788 15,184 8.8 Occupancy and equipment 111,445 107,809 3,636 3.4 Marketing and business development 61,088 55,650 5,438 9.8 Floor brokerage and clearance 13,995 15,024 (1,029) (6.8) Other 111,618 122,529 (10,911) (8.9) Total Non-Interest Expenses 1,894,620 1,773,507 121,113 6.8 Earnings Before Income Taxes 350,830 226,053 124,777 55.2 Income Taxes 128,654 78,167 50,487 64.6 Earnings Before Cumulative Effect of Accounting Change 222,176 147,886 74,290 50.2 Cumulative Effect of Accounting Change, Net 2,768 (2,768) (100.0) Net earnings $222,176 $150,654 $71,522 47.5 Earnings per diluted share: Earnings before cumulative effect of accounting change $2.90 $1.91 $0.99 51.8 Cumulative effect of accounting change, net 0.04 (0.04) $2.90 $1.95 $0.95 48.7 Average Common and Common Equivalent Shares Outstanding (Diluted) 76,566 77,419 Stockholders' Equity $2,039,141 $1,855,663 Book Value per share $27.02 $24.40 Total Shares Outstanding (end of period) 75,477 76,048 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. CONSOLIDATED FIVE-QUARTER SUMMARY (In thousands, except per share amounts) (Unaudited) November 30, August 31, May 31, February 28, November 30, 2006 2006 2006 2006 2005 (As (As Adjusted) Adjusted) Revenues Asset management and service fees: Distribution fees $172,326 $164,131 $166,438 $152,390 $146,425 Fee-based accounts 119,886 115,203 112,060 104,745 98,108 Service fees 25,982 25,750 28,581 27,779 25,256 Total 318,194 305,084 307,079 284,914 269,789 Commissions: Equities 132,314 126,399 144,039 139,921 133,817 Mutual funds 56,343 51,046 67,115 66,926 54,521 Insurance 48,050 48,529 51,267 52,415 47,219 Futures & Options 10,696 11,386 13,639 14,097 11,468 Other 218 342 266 182 184 Total 247,621 237,702 276,326 273,541 247,209 Principal transactions: Debt securities 31,694 35,871 29,994 33,368 30,655 Equities 21,966 19,285 23,154 22,649 19,609 Total 53,660 55,156 53,148 56,017 50,264 Investment banking: Underwriting fees and selling concessions 52,818 40,003 32,798 36,733 40,216 Management fees 19,802 16,709 15,289 13,108 17,758 Total 72,620 56,712 48,087 49,841 57,974 Interest: Margin account balances 35,546 39,020 37,957 36,204 35,446 Securities owned and deposits 22,453 20,030 15,684 14,041 12,718 Total 57,999 59,050 53,641 50,245 48,164 Other 21,390 4,206 30,193 28,893 3,966 Total Revenues 771,484 717,910 768,474 743,451 677,366 Interest expense 3,955 4,682 3,781 2,898 3,281 Net Revenues 767,529 713,228 764,693 740,553 674,085 Non-Interest Expenses: Compensation and benefits 476,208 451,366 480,928 461,492 434,431 Communication and technology 64,736 63,347 59,889 63,591 56,938 Occupancy and equipment 37,584 37,845 36,016 36,305 36,423 Marketing and business development 17,669 17,870 25,549 15,985 16,554 Floor brokerage and clearance 4,895 5,548 3,552 6,049 5,095 Other 42,391 32,890 36,337 42,176 48,795 Total Non-Interest Expenses 643,483 608,866 642,271 625,598 598,236 Earnings Before Income Taxes 124,046 104,362 122,422 114,955 75,849 Income Taxes 45,719 38,136 44,799 39,517 24,179 Net earnings $78,327 $66,226 $77,623 $75,438 $51,670 Earnings per diluted share $1.03 $0.86 $1.01 $0.99 $0.67 Average Common and Common Equivalent Shares Outstanding (Diluted) 76,411 76,691 76,690 76,562 77,189 Stockholders' Equity $2,039,141 $2,009,699 $1,971,895 $1,887,012 $1,855,663 Book Value per share $27.02 $26.40 $25.81 $24.96 $24.40 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) 3Q FY07 2Q FY07 1Q FY07 4Q FY06 3Q FY06 (As (As Adjusted) Adjusted) Net Revenues $767,529 $713,228 $764,693 $740,553 $674,085 Earnings Before Income Taxes $124,046 $104,362 $122,422 $114,955 $75,849 Net Earnings $78,327 $66,226 $77,623 $75,438 $51,670 Pre-tax Net Earnings as a Percent of Net Revenues 16.2% 14.6% 16.0% 15.5% 11.3% Average Diluted Shares-(000's Omitted) 76,411 76,691 76,690 76,562 77,189 Earnings Per Diluted Share $1.03 $0.86 $1.01 $0.99 $0.67 Dividends Per Share $0.20 $0.20 $0.20 $0.20 $0.20 Total Assets $5,076,078 $4,708,961 $4,413,379 $4,671,643 $4,479,493 Stockholders' Equity $2,039,141 $2,009,699 $1,971,895 $1,887,012 $1,855,663 Book Value Per Share $27.02 $26.40 $25.81 $24.96 $24.40 Return On Average Equity- (Quarter Results Annualized) 15.5% 13.3% 16.1% 16.1% 11.2% Financial Consultants 6,628 6,666 6,745 6,824 6,844 Full-time Employees 15,364 15,323 15,420 15,480 15,472 Locations 746 744 745 738 734 Total Client Assets (in millions) $370,000 $354,000 $345,000 $343,000 $331,000 Assets In Fee-based Accounts (in millions) $42,000 $40,000 $38,000 $37,000 $34,000 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/

Copyright