AGE Edwards AG

Achieves Annual and Quarterly Records in Net Revenues, Earnings Per Share; 47% Increase in Full-Year Net Earnings ST. LOUIS, March 29 /PRNewswire-FirstCall/ -- A.G. Edwards, Inc. (NYSE:AGE) today announced results for the fiscal year and fourth quarter ended February 28, 2007. Net earnings for fiscal 2007 were $331 million, or $4.34 per diluted share, on net revenues of $3.1 billion. For the prior fiscal year, net earnings were $226 million, or $2.93 per diluted share, on net revenues of $2.7 billion. For the fourth quarter of fiscal 2007, net earnings were $109 million, or $1.44 per diluted share, on net revenues of $865 million. Net earnings for the fourth quarter last year were $75 million, or $0.99 per diluted share, on net revenues of $741 million. 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." "We were pleased to end fiscal 2007 on a strong note, with every revenue category posting increases for the full year," said Robert L. Bagby, chairman and chief executive officer. "The continued client migration to our fund- advisory and other fee-based programs helped our asset-management and service- fee revenues set new records throughout the year and account for 41 percent of our fiscal 2007 net revenues. We also received an excellent performance from our investment-banking area, particularly in the latter part of the year, to help bolster revenue growth. These were some of the many efforts that show how we can keep our clients' interests first while delivering greater value to our shareholders, as we posted our fifth consecutive year of increased net earnings, earnings per share, pre-tax profit margin and return on average equity. "I continue to appreciate all of our employees whose hard work is the reason for our clients' and our firm's success." Results for the fourth quarter include $13.6 million in other revenue, or $0.08 per diluted share, for gains on the sale of shares in the Intercontinental Exchange (ICE) and Chicago Mercantile Exchange (CME) and the mark-to-market on ICE, CME, New York Mercantile Exchange (NYMEX) and NYSE Group shares the firm currently holds. RESULTS OF OPERATIONS Asset Management and Service Fees -- Asset-management and service-fee revenues reached a new annual record of $1.3 billion in fiscal 2007, increasing 19 percent ($203 million) versus fiscal 2006. These revenues for the fourth quarter increased 18 percent ($51 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 and other individual investments. Commissions -- Commission revenues increased 1 percent ($14 million) in fiscal 2007 mainly resulting from increased activity in individual equities and insurance products. For the fourth quarter of fiscal 2007, commission revenues decreased 1 percent ($3 million) compared to the same quarter last year. The decline was largely due to decreased activity in individual equities compared to last year's fourth quarter, partially offset by increased activity in individual mutual funds. The results in both periods reflect decreased client activity in futures and options. Principal Transactions -- Revenues from principal transactions in fiscal 2007 increased 2 percent ($5 million) versus fiscal 2006 largely due to increased client activity in over-the-counter equity markets. For the fourth quarter this year, principal-transaction revenues decreased 5 percent ($3 million) compared to the fourth quarter last year. The results in both periods reflect lower overall volume in fixed-income transactions. Investment Banking -- Investment banking posted its second-best-ever annual revenue performance, increasing 24 percent ($55 million) to $290 million in fiscal 2007. For the fourth quarter, these revenues reached an all-time quarterly record of $112 million, an increase of 126 percent ($63 million) versus the year-ago quarter. Both the full-year and fourth- quarter results primarily reflected greater underwriting revenue and related management and advisory fees from closed-end fund offerings. Net Interest Revenue -- Interest revenue net of interest expense increased 26 percent ($45 million) in fiscal 2007 and increased 21 percent ($10 million) in the fourth quarter compared to the same periods in fiscal 2006. Both the full-year and fourth-quarter results reflect an increased prime rate resulting in higher interest rates charged on margin balances, higher interest rates earned on the fixed-income inventory held for sale to clients and higher balances and rates earned on short-term investments. The results in both periods were partially offset by lower average client margin balances. Other revenue -- Other revenue increased 107 percent ($47 million) in fiscal 2007 and increased 24 percent ($7 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 ICE and CME shares and the mark-to-market on ICE, CME and NYMEX shares the firm currently holds. Both periods also reflect a dividend from a private-equity investment and increases in private-equity valuations. The full-year results additionally reflect $23 million in gains on the sale of NYSE Group shares and the mark-to- market on other NYSE Group shares the firm currently holds. Last year's fourth quarter included $12 million in gains on the sale of shares in CME and the Chicago Board of Trade and the mark-to-market on other CME shares the firm held. Non-Interest Expenses -- Non-interest expenses increased 8 percent ($191 million) during fiscal 2007 compared to fiscal 2006. For the fourth quarter, non-interest expenses increased 11 percent ($70 million) compared to the same quarter last 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 expenses in the prior periods have been adjusted to reflect this change. Compensation and benefits increased 10 percent ($171 million) in fiscal 2007 and increased 13 percent ($62 million) in the fourth quarter compared to the same periods last year. 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 increased 3 percent ($20 million) in fiscal 2007 and increased 5 percent ($8 million) in the fourth quarter versus the same time periods last year. Both periods reflect higher technology consulting expenses and general rent increases for branch offices, partially offset by lower expenses for branding efforts and for addressing various regulatory changes and legal matters. The full-year results additionally reflect increased securities-processing expenses as well as higher training and business-development expenses. EVENT AFFECTING FUTURE PERIODS - AGE BANK DEPOSIT PROGRAM In mid-February 2007, the firm introduced its FDIC-insured bank deposit program ("AGE Bank Deposit Program") to certain clients as part of a multi- stage rollout to all eligible clients. The AGE Bank Deposit Program offers up to $1 million in FDIC insurance, competitive interest rates and the opportunity to earn higher interest rates based on household asset values and account type. Additionally, in December 2006 A.G. Edwards Trust Company FSB ("Trust Company") received approval from the Office of Thrift Supervision to expand its powers to be able to accept deposits so it can participate, along with several other FDIC-insured banks, in the AGE Bank Deposit Program. The Trust Company is expected to begin accepting client deposits in the second quarter of fiscal 2008. Given the timing of the AGE Bank Deposit Program's start, the amount of client assets deposited in this program as of February 28, 2007 did not have a material impact on fiscal 2007's results of operations. As of March 28, 2007, approximately $2 billion in client assets had been deposited into this program. The revenue impact of this program in fiscal 2008 cannot be determined with certainty and will depend, among other things, on the amount of assets clients move into the AGE Bank Deposit Program, the amount of assets deposited in the Trust Company, the amount of new assets brought to the firm as a result of this program, and competitive and economic factors. ADDITIONAL SHAREHOLDER INFORMATION Total client assets at the end of fiscal 2007 were $374 billion, a 9 percent increase when compared to the end of fiscal 2006. Client assets in fee-based accounts at the end of fiscal 2007 were $44 billion, an 18 percent increase when compared to the end of fiscal 2006. As of February 28, 2007, stockholders' equity was $2.1 billion, for a book value per share of $27.91. Diluted earnings per share for fiscal 2007 were based on 76.4 million average common and common equivalent shares outstanding compared to 77.2 million in fiscal 2006. Diluted earnings per share for the fourth quarter were based on 76.0 million average common and common equivalent shares outstanding compared to 76.6 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 6,618 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, the results of the AGE Bank Deposit Program and 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 February February Increase/ % 28, 2007 28, 2006 (Decrease) Chg. (As Adjusted) Revenues Asset management and service fees: Distribution fees $181,395 $152,390 $29,005 19.0 Fee-based accounts 127,383 104,745 22,638 21.6 Service fees 26,927 27,779 (852) (3.1) Total 335,705 284,914 50,791 17.8 Commissions: Equities 136,456 139,921 (3,465) (2.5) Mutual funds 69,527 66,926 2,601 3.9 Insurance 53,110 52,415 695 1.3 Futures and options 10,968 14,097 (3,129) (22.2) Other 247 182 65 35.7 Total 270,308 273,541 (3,233) (1.2) Principal transactions: Debt securities 30,161 33,368 (3,207) (9.6) Equities 23,005 22,649 356 1.6 Total 53,166 56,017 (2,851) (5.1) Investment banking: Underwriting fees and selling concessions 70,974 36,733 34,241 93.2 Management fees 41,495 13,108 28,387 216.6 Total 112,469 49,841 62,628 125.7 Interest: Margin account balances 33,671 36,204 (2,533) (7.0) Securities owned and deposits 26,936 14,041 12,895 91.8 Total 60,607 50,245 10,362 20.6 Other 35,954 28,893 7,061 24.4 Total Revenues 868,209 743,451 124,758 16.8 Interest expense 3,199 2,898 301 10.4 Net Revenues 865,010 740,553 124,457 16.8 Non-Interest Expenses Compensation and benefits 523,368 461,492 61,876 13.4 Communication and technology 69,866 63,591 6,275 9.9 Occupancy and equipment 39,019 36,305 2,714 7.5 Marketing and business development 15,862 15,985 (123) (0.8) Floor brokerage and clearance 5,106 6,049 (943) (15.6) Other 42,026 42,176 (150) (0.4) Total Non-Interest Expenses 695,247 625,598 69,649 11.1 Earnings Before Income Taxes 169,763 114,955 54,808 47.7 Income Taxes 60,586 39,517 21,069 53.3 Net Earnings $109,177 $75,438 $33,739 44.7 Earnings per diluted share $1.44 $0.99 $0.45 45.5 Average Common and Common Equivalent Shares Outstanding (Diluted) 76,024 76,562 Stockholders' Equity $2,102,039 $1,887,012 Book Value per share $27.91 $24.96 Total Shares Outstanding (end of period) 75,316 75,590 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 Twelve Months Ended February February Increase/ % 28, 2007 28, 2006 (Decrease) Chg. (As Adjusted) Revenues Asset management and service fees: Distribution fees $684,290 $571,573 $112,717 19.7 Fee-based accounts 474,532 386,585 87,947 22.7 Service fees 107,240 104,714 2,526 2.4 Total 1,266,062 1,062,872 203,190 19.1 Commissions: Equities 539,208 530,052 9,156 1.7 Mutual funds 244,031 242,883 1,148 0.5 Insurance 200,956 195,476 5,480 2.8 Futures and options 46,689 48,411 (1,722) (3.6) Other 1,073 894 179 20.0 Total 1,031,957 1,017,716 14,241 1.4 Principal transactions: Debt securities 127,720 131,284 (3,564) (2.7) Equities 87,410 78,826 8,584 10.9 Total 215,130 210,110 5,020 2.4 Investment banking: Underwriting fees and selling concessions 196,593 168,963 27,630 16.4 Management fees 93,295 65,434 27,861 42.6 Total 289,888 234,397 55,491 23.7 Interest: Margin account balances 146,194 138,466 7,728 5.6 Securities owned and deposits 85,103 42,871 42,232 98.5 Total 231,297 181,337 49,960 27.6 Other 91,743 44,334 47,409 106.9 Total Revenues 3,126,077 2,750,766 375,311 13.6 Interest expense 15,617 10,653 4,964 46.6 Net Revenues 3,110,460 2,740,113 370,347 13.5 Non-Interest Expenses Compensation and benefits 1,931,870 1,761,199 170,671 9.7 Communication and technology 257,838 236,379 21,459 9.1 Occupancy and equipment 150,464 144,114 6,350 4.4 Marketing and business development 76,950 71,635 5,315 7.4 Floor brokerage and clearance 19,101 21,073 (1,972) (9.4) Other 153,644 164,705 (11,061) (6.7) Total Non-Interest Expenses 2,589,867 2,399,105 190,762 8.0 Earnings Before Income Taxes 520,593 341,008 179,585 52.7 Income Taxes 189,240 117,684 71,556 60.8 Earnings Before Cumulative Effect of Accounting Change 331,353 223,324 108,029 48.4 Cumulative Effect of Accounting Change, Net 2,768 (2,768) (100.0) Net Earnings $331,353 $226,092 $105,261 46.6 Earnings per diluted share: Earnings before cumulative effect of accounting change $4.34 $2.89 $1.45 50.2 Cumulative effect of accounting change, net 0.04 (0.04) $4.34 $2.93 $1.41 48.1 Average Common and Common Equivalent Shares Outstanding (Diluted) 76,431 77,204 Stockholders' Equity $2,102,039 $1,887,012 Book Value per share $27.91 $24.96 Total Shares Outstanding (end of period) 75,316 75,590 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) For the Three Months Ended February November August May February 28, 2007 30, 2006 31, 2006 31, 2006 28, 2006 (As Adjusted) Revenues Asset management and service fees: Distribution fees $181,395 $172,326 $164,131 $166,438 $152,390 Fee-based accounts 127,383 119,886 115,203 112,060 104,745 Service fees 26,927 25,982 25,750 28,581 27,779 Total 335,705 318,194 305,084 307,079 284,914 Commissions: Equities 136,456 132,314 126,399 144,039 139,921 Mutual funds 69,527 56,343 51,046 67,115 66,926 Insurance 53,110 48,050 48,529 51,267 52,415 Futures and options 10,968 10,696 11,386 13,639 14,097 Other 247 218 342 266 182 Total 270,308 247,621 237,702 276,326 273,541 Principal transactions: Debt securities 30,161 31,694 35,871 29,994 33,368 Equities 23,005 21,966 19,285 23,154 22,649 Total 53,166 53,660 55,156 53,148 56,017 Investment banking: Underwriting fees and selling concessions 70,974 52,818 40,003 32,798 36,733 Management fees 41,495 19,802 16,709 15,289 13,108 Total 112,469 72,620 56,712 48,087 49,841 Interest: Margin account balances 33,671 35,546 39,020 37,957 36,204 Securities owned and deposits 26,936 22,453 20,030 15,684 14,041 Total 60,607 57,999 59,050 53,641 50,245 Other 35,954 21,390 4,206 30,193 28,893 Total Revenues 868,209 771,484 717,910 768,474 743,451 Interest expense 3,199 3,955 4,682 3,781 2,898 Net Revenues 865,010 767,529 713,228 764,693 740,553 Non-Interest Expenses Compensation and benefits 523,368 476,208 451,366 480,928 461,492 Communication and technology 69,866 64,736 63,347 59,889 63,591 Occupancy and equipment 39,019 37,584 37,845 36,016 36,305 Marketing and business development 15,862 17,669 17,870 25,549 15,985 Floor brokerage and clearance 5,106 4,895 5,548 3,552 6,049 Other 42,026 42,391 32,890 36,337 42,176 Total Non-Interest Expenses 695,247 643,483 608,866 642,271 625,598 Earnings Before Income Taxes 169,763 124,046 104,362 122,422 114,955 Income Taxes 60,586 45,719 38,136 44,799 39,517 Net Earnings $109,177 $78,327 $66,226 $77,623 $75,438 Earnings per diluted share $1.44 $1.03 $0.86 $1.01 $0.99 Average Common and Common Equivalent Shares Outstanding (Diluted) 76,024 76,411 76,691 76,690 76,562 Stockholders' Equity $2,102,039 $2,039,141 $2,009,699 $1,971,895 $1,887,012 Book Value per share $27.91 $27.02 $26.40 $25.81 $24.96 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) 4Q FY07 3Q FY07 2Q FY07 1Q FY07 4Q FY06 (As Adjusted) Net Revenues $865,010 $767,529 $713,228 $764,693 $740,553 Earnings Before Income Taxes $169,763 $124,046 $104,362 $122,422 $114,955 Net Earnings $109,177 $78,327 $66,226 $77,623 $75,438 Pre-tax Net Earnings as a Percent of Net Revenues 19.6% 16.2% 14.6% 16.0% 15.5% Average Diluted Shares- (000's Omitted) 76,024 76,411 76,691 76,690 76,562 Earnings Per Diluted Share $1.44 $1.03 $0.86 $1.01 $0.99 Dividends Per Share $0.20 $0.20 $0.20 $0.20 $0.20 Total Assets $5,312,118 $5,076,078 $4,708,961 $4,413,379 $4,671,643 Stockholders' Equity $2,102,039 $2,039,141 $2,009,699 $1,971,895 $1,887,012 Book Value Per Share $27.91 $27.02 $26.40 $25.81 $24.96 Return On Average Equity- (Quarter Results Annualized) 21.1% 15.5% 13.3% 16.1% 16.1% Financial Consultants 6,618 6,628 6,666 6,745 6,824 Full-time Employees 15,338 15,364 15,323 15,420 15,480 Locations 744 746 744 745 738 Total Client Assets (in millions) $374,000 $370,000 $354,000 $345,000 $343,000 Assets In Fee-based Accounts (in millions) $44,000 $42,000 $40,000 $38,000 $37,000 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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