AGE Edwards AG

Quarterly Net Earnings Increase 40% Above Last Year's Second Quarter, ST. LOUIS, Sept. 21 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the second quarter and first half of fiscal 2007, which ended August 31, 2006. Net earnings for the quarter were $66 million, or $0.86 per diluted share, on net revenues of $713 million. For the same quarter last year, net earnings were $47 million, or $0.61 per diluted share, on net revenues of $673 million. For the first six months of fiscal 2007, net earnings were $144 million, or $1.88 per diluted share, on net revenues of $1.48 billion. For the same period last year, net earnings were $99 million, or $1.28 per diluted share, on net revenues of $1.33 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 strong year-over-year results reinforce our ability to serve the needs and best interests of our clients while improving the performance we deliver to our shareholders," said Robert L. Bagby, chairman and chief executive officer. "Additionally, the recent announcements of our mortgage joint venture and our FDIC-insured bank deposit program are two of the latest examples of how A.G. Edwards continues to expand its services to provide a comprehensive approach toward helping clients reach their financial goals and objectives. I want to thank our financial consultants and all of our employees for their dedication and hard work. Most importantly, I want to thank our clients for choosing A.G. Edwards for their investment advice." RESULTS OF OPERATIONS Asset management and service fees -- Asset-management and service-fee revenues for the second quarter increased 18 percent ($47 million) versus the second quarter last year. For the first six months of fiscal 2007, these revenues increased 20 percent ($104 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. Commissions -- Commission revenues for the second quarter decreased 5 percent ($12 million) versus last year's second quarter, primarily resulting from decreased investor activity in individual mutual funds and equities. When comparing the first half of fiscal 2007 to the same period last year, commission revenues increased 3 percent ($17 million) mainly as a result of increased investor activity in individual equities and insurance products, partially offset by decreased activity in individual mutual funds. Principal transactions -- Revenues from principal transactions increased 5 percent ($3 million) compared to the year-ago quarter. Compared to the first six months of last fiscal year, principal-transaction revenues increased 4 percent ($4 million). The increases in both periods reflected increased client activity in treasury securities. The six-month results additionally reflected increased investor activity in the over-the-counter equity markets. Investment banking -- Investment-banking revenues for the second quarter decreased 16 percent ($11 million) versus the same three-month period last year. For the first six months of fiscal 2007, investment-banking revenues decreased 17 percent ($22 million) compared to the same period last year. Both periods primarily reflect lower volume of closed-end fund underwritings. Net interest revenue -- Interest revenue net of interest expense in the second quarter increased 36 percent ($14 million) from the year-ago quarter. For fiscal 2007's first half, net interest revenue increased 33 percent ($26 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, 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 decreased $1 million in the second quarter and increased $23 million for the first half of fiscal 2007 compared to the same periods last year. The decrease in other revenues for the second quarter was mainly due to smaller private-equity gains in the current year. The increase in other revenue for the first half of fiscal 2007 largely resulted from $17 million in 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. Non-interest expenses -- During the second quarter, non-interest expenses increased 2 percent ($11 million) compared to last year's second quarter. For the first six months of fiscal 2007, non-interest expenses increased 6 percent ($76 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 2 percent ($10 million) in this year's second quarter versus last year's second quarter as adjusted, largely reflecting higher accruals for incentive compensation based on increased profitability. Comparing the first half of fiscal 2007 to the same period last year, compensation and benefits increased 8 percent ($67 million). The results in both periods mainly reflect higher commissionable revenue as well as higher incentive compensation due to increased firm profitability. Non-compensation-related expenses for the second quarter this year were essentially flat compared to the same quarter last year. For this year's first six months, non-compensation-related expenses increased 3 percent ($9 million) versus last year's first six months. Both periods reflect higher technology consulting expenses as well as higher training and business- development expenses, partially offset by lower branding-related expenses and lower expenses for addressing various regulatory changes and legal matters. The six-month results additionally reflect increased securities-processing expenses. ADDITIONAL STOCKHOLDER INFORMATION Total client assets at the end of the second quarter were $354 billion, a 9 percent increase when compared to the end of the second quarter last year. Client assets in fee-based accounts at the end of the second quarter of fiscal 2007 were $40 billion, a 21 percent increase when compared to the end of the second quarter of fiscal 2006. As of August 31, 2006, stockholders' equity was $2.0 billion, for a book value per share of $26.40. Diluted per share earnings for the second quarter were based on 76.7 million average common and common equivalent shares outstanding compared to 77.5 million in the prior year. Diluted per share earnings for the current six-month period were based on 76.6 million average common and common equivalent shares outstanding compared to 77.5 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 6,666 financial consultants in 742 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, 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, approval by the Office of Thrift Supervision of the expansion of powers of A.G. Edwards Trust Company FSB, 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/ % 2006 2005 (Decrease) Chg. (as adjusted) REVENUES: Asset management and service fees $305,084 $257,874 $47,210 18.3 Commissions 237,702 249,840 (12,138) (4.9) Principal transactions 55,156 52,319 2,837 5.4 Investment banking 56,712 67,821 (11,109) (16.4) Interest 59,050 42,184 16,866 40.0 Other 4,206 4,759 (553) (11.6) TOTAL REVENUES 717,910 674,797 43,113 6.4 Interest expense 4,682 2,261 2,421 107.1 NET REVENUES 713,228 672,536 40,692 6.1 NON-INTEREST EXPENSES: Compensation and benefits 451,366 441,280 10,086 2.3 Communication and technology 63,347 60,493 2,854 4.7 Occupancy and equipment 37,845 37,281 564 1.5 Marketing and business development 17,870 18,072 (202) (1.1) Floor brokerage and clearance 5,548 4,673 875 18.7 Other 32,890 36,410 (3,520) (9.7) TOTAL NON-INTEREST EXPENSES 608,866 598,209 10,657 1.8 EARNINGS BEFORE INCOME TAXES 104,362 74,327 30,035 40.4 INCOME TAXES 38,136 27,122 11,014 40.6 NET EARNINGS $66,226 $47,205 $19,021 40.3 DILUTED EARNINGS PER SHARE $0.86 $0.61 $0.25 41.0 AVERAGE DILUTED COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: 76,691 77,519 STOCKHOLDERS' EQUITY $2,009,699 $1,849,793 BOOK VALUE PER SHARE $26.40 $24.10 TOTAL SHARES OUTSTANDING (end of period) 76,115 76,763 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 Six Months Ended August 31, August 31, Increase/ % 2006 2005 (Decrease) Chg. (as adjusted) REVENUES: Asset management and service fees $612,163 $508,169 $103,994 20.5 Commissions 514,028 496,966 17,062 3.4 Principal transactions 108,304 103,829 4,475 4.3 Investment banking 104,799 126,582 (21,783) (17.2) Interest 112,691 82,928 29,763 35.9 Other 34,399 11,475 22,924 199.8 TOTAL REVENUES 1,486,384 1,329,949 156,435 11.8 Interest expense 8,463 4,474 3,989 89.2 NET REVENUES 1,477,921 1,325,475 152,446 11.5 NON-INTEREST EXPENSES: Compensation and benefits 932,294 865,276 67,018 7.7 Communication and technology 123,236 115,850 7,386 6.4 Occupancy and equipment 73,861 71,386 2,475 3.5 Marketing and business development 43,419 39,096 4,323 11.1 Floor brokerage and clearance 9,100 9,929 (829) (8.3) Other 69,227 73,734 (4,507) (6.1) TOTAL NON-INTEREST EXPENSES 1,251,137 1,175,271 75,866 6.5 EARNINGS BEFORE INCOME TAXES 226,784 150,204 76,580 51.0 INCOME TAXES 82,935 53,988 28,947 53.6 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 143,849 96,216 47,633 49.5 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET 2,768 (2,768) (100.0) NET EARNINGS $143,849 $98,984 $44,865 45.3 DILUTED EARNINGS PER SHARE: Earnings before cumulative effect of accounting change $1.88 $1.24 $0.64 51.6 Cumulative effect of accounting change, net 0.04 (0.04) $1.88 $1.28 $0.60 46.9 AVERAGE DILUTED COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: 76,633 77,519 STOCKHOLDERS' EQUITY $2,009,699 $1,849,793 BOOK VALUE PER SHARE $26.40 $24.10 TOTAL SHARES OUTSTANDING (end of period) 76,115 76,763 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 August May February November August 31, 2006 31, 2006 28, 2006 30, 2005 31, 2005 (as (as (as adjusted) adjusted) adjusted) REVENUES: Asset management and service fees $305,084 $307,079 $284,914 $269,789 $257,874 Commissions 237,702 276,326 273,541 247,209 249,840 Principal transactions 55,156 53,148 56,017 50,264 52,319 Investment banking 56,712 48,087 49,841 57,974 67,821 Interest 59,050 53,641 50,245 48,164 42,184 Other 4,206 30,193 28,893 3,966 4,759 TOTAL REVENUES 717,910 768,474 743,451 677,366 674,797 Interest expense 4,682 3,781 2,898 3,281 2,261 NET REVENUES 713,228 764,693 740,553 674,085 672,536 NON-INTEREST EXPENSES: Compensation and benefits 451,366 480,928 461,492 434,431 441,280 Communication and technology 63,347 59,889 63,591 56,938 60,493 Occupancy and equipment 37,845 36,016 36,305 36,423 37,281 Marketing and business development 17,870 25,549 15,985 16,554 18,072 Floor brokerage and clearance 5,548 3,552 6,049 5,095 4,673 Other 32,890 36,337 42,176 48,795 36,410 TOTAL NON-INTEREST EXPENSES 608,866 642,271 625,598 598,236 598,209 EARNINGS BEFORE INCOME TAXES 104,362 122,422 114,955 75,849 74,327 INCOME TAXES 38,136 44,799 39,517 24,179 27,122 NET EARNINGS $66,226 $77,623 $75,438 $51,670 $47,205 DILUTED EARNINGS PER SHARE $0.86 $1.01 $0.99 $0.67 $0.61 AVERAGE DILUTED COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 76,691 76,690 76,562 77,189 77,519 STOCKHOLDERS' EQUITY $2,009,699 $1,971,895 $1,887,012 $1,855,663 $1,849,793 BOOK VALUE PER SHARE $26.40 $25.81 $24.96 $24.40 $24.10 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) 2Q FY07 1Q FY07 4Q FY06 3Q FY06 2Q FY06 (as (as (as adjusted) adjusted) adjusted) Net Revenues $713,228 $764,693 $740,553 $674,085 $672,536 Earnings Before Income Taxes $104,362 $122,422 $114,955 $75,849 $74,327 Net Earnings $66,226 $77,623 $75,438 $51,670 $47,205 Net Earnings as a Percent of Net Revenues 9.3% 10.2% 10.2% 7.7% 7.0% Average Diluted Shares- (000's Omitted) 76,691 76,690 76,562 77,189 77,519 Earnings Per Share (Diluted) $0.86 $1.01 $0.99 $0.67 $0.61 Dividends Per Share $0.20 $0.20 $0.20 $0.20 $0.16 Stockholders' Equity $2,009,699 $1,971,895 $1,887,012 $1,855,663 $1,849,793 Book Value Per Share $26.40 $25.81 $24.96 $24.40 $24.10 Return On Average Equity- (Quarter Results Annualized) 13.3% 16.1% 16.1% 11.2% 10.3% Financial Consultants 6,666 6,745 6,824 6,844 6,796 Full-time Employees 15,323 15,420 15,480 15,472 15,357 Locations 744 745 738 734 727 Total Client Assets (in millions) $354,000 $345,000 $343,000 $331,000 $325,000 Assets In Fee-based Accounts (in millions) $40,000 $38,000 $37,000 $34,000 $33,000 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