UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From to
Commission file number 1-2967.
UNION ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Missouri 43-0559760
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 Chouteau Avenue, St. Louis, Missouri 63103
(Address of principal executive offices and Zip Code)
Registrant's telephone number,
including area code: (314) 621-3222
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X . No .
Shares outstanding of each of registrant's classes of common stock as of
July 31, 1997:
Common Stock, $5 par value - 102,123,834
(excl. 42,990 treasury shares)
UNION ELECTRIC COMPANY
INDEX
Page No.
Part I Financial Information (Unaudited)
Balance Sheet --
June 30, 1997 and December 31, 1996 2
Statement of Income --
Three Months, Six Months and Twelve
Months Ended June 30, 1997 and 1996 3
Statement of Cash Flows --
Six Months Ended June 30, 1997 and 1996 4
Notes to Financial Statements 5
Management's Discussion and Analysis 6 thru 9
Part II Other Information
UNION ELECTRIC COMPANY Page 2
----------------------
BALANCE SHEET
-------------
UNAUDITED
---------
ASSETS: (Thousands of Dollars) June 30, December 31,
1997 1996
-------- ------------
Property and plant, at original cost
Electric $8,746,956 $8,630,628
Gas 190,738 185,867
Other 35,975 35,965
--------- ---------
8,973,669 8,852,460
Less accumulated depreciation and amortization 3,776,716 3,656,890
--------- ---------
5,196,953 5,195,570
Construction work in progress:
Nuclear fuel in process 106,651 96,147
Other 100,022 90,953
--------- ---------
Total property and plant, net 5,403,626 5,382,670
Regulatory assets:
Deferred income taxes 665,397 692,171
Other 171,387 178,760
--------- ---------
Total regulatory assets 836,784 870,931
Deferred charges:
Nuclear decommissioning trust fund 112,578 96,601
Unamortized debt expense 10,256 10,591
Other 25,930 27,377
--------- ---------
Total deferred charges 148,764 134,569
Current assets:
Cash 12,960 4,897
Accounts receivable - trade (less allowance for doubtful
accounts of $5,368 and $5,195 at respective dates) 181,070 192,868
Unbilled revenue 102,894 76,190
Other accounts and notes receivable 35,907 37,190
Materials and supplies, at average cost -
Fossil fuel 51,737 63,651
Construction and maintenance 94,584 94,517
Other 8,206 13,326
--------- ---------
Total current assets 487,358 482,639
--------- ---------
Total Assets $6,876,532 $6,870,809
========= =========
CAPITAL AND LIABILITIES:
- ------------------------
Capitalization:
Common stock, $5 par value, authorized 150,000,000 shares-
102,123,834 outstanding (excl. 42,990 at par value in treasury) $ 510,619 $ 510,619
Other paid-in capital 716,879 717,669
Retained earnings 1,093,678 1,126,513
--------- ---------
Total common stockholders' equity 2,321,176 2,354,801
Preferred stock not subject to mandatory redemption 155,197 218,497
Preferred stock subject to mandatory redemption -- 624
Long-term debt, net 1,943,186 1,798,671
--------- ---------
Total capitalization 4,419,559 4,372,593
Accumulated deferred income taxes 1,310,922 1,318,404
Accumulated deferred investment tax credits 157,257 160,342
Regulatory liability 193,227 203,822
Accumulated provision for nuclear decommissioning 115,924 98,274
Other deferred credits and liabilities 159,759 156,913
Current and accrued liabilities:
Current maturity of long-term debt 32,734 73,966
Accounts payable 79,237 170,383
Wages payable 34,494 39,966
Bank loans 68,000 11,300
Accumulated deferred income taxes 34,509 43,933
Income taxes accrued 63,383 35,505
Other taxes accrued 62,526 16,040
Interest accrued 44,808 45,173
Dividends accrued 2,204 3,004
Other 97,989 121,191
--------- ---------
Total current and accrued liabilities 519,884 560,461
--------- ---------
Total Capital and Liabilities $6,876,532 $6,870,809
========== ==========
Page 3
UNION ELECTRIC COMPANY
----------------------
STATEMENT OF INCOME
-------------------
(UNAUDITED)
(Thousands of Dollars Except Shares and Per Share Amounts)
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
------------------ ------------------ --------------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
Operating revenues:
Electric $537,494 $531,412 $978,461 $982,277 $2,157,000 $2,165,395
Gas 12,359 13,930 58,469 58,478 99,055 94,678
Steam 101 102 282 259 508 452
------- -------- --------- --------- --------- ---------
Total operating revenues 549,954 545,444 1,037,212 1,041,014 2,256,563 2,260,525
Operating expenses:
Operations
Fuel and purchased power 114,329 124,757 230,520 249,021 494,331 521,594
Other 108,419 106,645 231,405 220,774 454,284 427,740
------- ------- ------- ------- ------- -------
222,748 231,402 461,925 469,795 948,615 949,334
Maintenance 61,722 61,828 110,920 110,462 224,090 220,982
Depreciation and decommissioning 61,220 59,700 122,664 119,285 244,677 236,745
Income taxes 48,293 44,644 69,628 72,865 194,132 208,336
Other taxes 51,887 52,224 102,404 103,207 212,463 212,299
------- ------- ------- ------- --------- ---------
Total operating expenses 445,870 449,798 867,541 875,614 1,823,977 1,827,696
Operating income 104,084 95,646 169,671 165,400 432,586 432,829
Other income and deductions:
Allowance for equity funds used
during construction 953 2,121 1,830 3,823 4,499 7,742
Miscellaneous, net (1,760) (2,481) (2,841) (1,586) (5,549) (9,099)
-------- -------- -------- -------- -------- --------
Total other income/deductions, net (807) (360) (1,011) 2,237 (1,050) (1,357)
Income before interest charges 103,277 95,286 168,660 167,637 431,536 431,472
Interest charges:
Interest 35,453 33,670 70,633 67,528 135,749 134,282
Allowance for borrowed funds
used during construction (1,818) (2,331) (3,245) (3,978) (6,274) (6,744)
-------- -------- -------- -------- -------- --------
Net interest charges 33,635 31,339 67,388 63,550 129,475 127,538
Net income 69,642 63,947 101,272 104,087 302,061 303,934
Preferred stock dividends 2,205 3,313 4,409 6,625 11,033 13,249
------- ------- ------- ------- ------- -------
Earnings on common stock $67,437 $60,634 $96,863 $97,462 $291,028 $290,685
======= ======= ======= ======= ======== ========
Earnings per share of common stock
(based on average shares outstanding) $0.66 $0.59 $0.95 $0.95 $2.85 $2.85
===== ===== ===== ===== ===== =====
Dividends per share of common stock $0.635 $0.625 $1.27 $1.25 $2.53 $2.485
====== ====== ===== ===== ===== ======
Average number of common shares
outstanding (in thousands) 102,124 102,124 102,124 102,124 102,124 102,124
======= ======= ======= ======= ======= =======
Page 4
UNION ELECTRIC COMPANY
----------------------
STATEMENT OF CASH FLOWS
-----------------------
UNAUDITED
---------
(Thousands of Dollars)
Six Months Ended
June 30,
------------------
1997 1996
---- ----
Cash Flows From Operating:
Net income $101,272 $104,087
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 118,107 114,464
Amortization of nuclear fuel 19,901 21,219
Allowance for funds used during construction (5,075) (7,801)
Deferred income taxes, net (728) 5,303
Deferred investment tax credits, net (3,085) (3,094)
Changes in assets and liabilities:
Receivables, net (13,623) (46,598)
Materials and supplies 11,847 (11,839)
Accounts and wages payable (96,619) (63,353)
Taxes accrued 74,364 52,700
Interest and dividends accrued or declared (1,165) (1,211)
Other, net (7,384) 58,440
------- -------
Net cash provided by operating activities 197,812 222,317
Cash Flows From Investing:
Construction expenditures (146,079) (175,383)
Allowance for funds used during construction 5,075 7,801
Nuclear fuel expenditures (10,401) (24,334)
--------- ---------
Net cash used in investing activities (151,405) (191,916)
Cash Flows From Financing:
Dividends on preferred stock (4,409) (6,625)
Dividends on common stock (129,697) (127,655)
Redemptions -
Nuclear fuel lease (12,717) (16,901)
Long-term debt (45,000) (35,000)
Preferred stock (63,924) (26)
Issuances -
Nuclear fuel lease 20,703 30,351
Short-term debt 56,700 50,400
Long-term debt 140,000 90,000
------- --------
Net cash used in financing activities (38,344) (15,456)
Net change in cash and cash equivalents 8,063 14,945
Cash and cash equivalents at beginning of period 4,897 1,025
------- -------
Cash and cash equivalents at end of period $ 12,960 $ 15,970
======== ========
Supplemental disclosure of cash flow information:
Cash and cash equivalents include cash on hand and temporary
investments purchased with a maturity of three months or less.
Cash paid during the period:
Interest (net of amount capitalized) $ 62,799 $ 61,883
Income taxes 45,536 63,289
Page 5
UNION ELECTRIC COMPANY
----------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Financial statement note disclosures, normally included
in financial statements prepared in conformity with generally
accepted accounting principles, have been omitted in this
Form 10-Q pursuant to the Rules and Regulations of the
Securities and Exchange Commission. However, in the opinion
of the registrant, the disclosures contained in this
Form 10-Q are adequate to make the information presented not
misleading. See Notes to Financial Statements included in
the 1996 Annual Report on Form 10-K for information relevant
to the financial statements contained in this Form 10-Q,
including information as to the significant accounting
policies of the registrant.
Note 2 - In the opinion of the registrant the interim financial
statements filed as part of this Form 10-Q reflect all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the periods
presented. Registrant's financial statements were prepared
to permit the information required in the Financial Data
Schedule (FDS), Exhibit 27, to be directly extracted from the
filed statements. The FDS amounts correspond to or are
calculable from the amounts reported in the financial
statements or notes thereto.
Note 3 - Due to the effect of weather on sales and other factors
which are characteristic of public utility operations,
financial results for the periods ended June 30, 1997 and
1996 are not necessarily indicative of trends for any
three-month, six-month or twelve-month period.
Note 4 - On July 21, 1995, the Missouri Public Service Commission
approved an agreement involving the registrant's Missouri
electric rates. The Agreement included a three-year
experimental alternative regulation plan that provides that
earnings in excess of a 12.61 percent regulatory return on
equity (ROE) will be shared equally between customers and
shareholders and earnings above a 14 percent ROE will be
credited to customers. The formula for computing the credit
uses twelve-month results ending June 30, rather than
calendar year earnings. During the six months ended June 30,
1997, the registrant recorded an estimated $20 million credit
for the second year of the plan compared to a $47 million
credit recorded for the first year of the plan in 1996. This
credit, which the registrant expects to pay to Missouri
customers later this year, was reflected as a reduction in
electric revenues.
Note 5 - On April 30, 1997, the Federal Energy Regulatory Commission
(FERC) administrative law judge issued an Initial Decision
finding that, subject to certain conditions, the merger
between the registrant and CIPSCO Incorporated is in the
public interest and should be approved. The conditions
relate to issues associated with certain power and
transmission service agreements with other utilities. A
final order from the FERC is expected later this year.
On July 25, 1997, a Hearing Examiner for the Illinois
Commerce Commission issued a second proposed order in
connection with the registrant and CIPSCO's merger
proceedings. In the July 1997 proposed order, the Hearing
Examiner affirmed the recommendations made in the November
1996 proposed order, including that the merger between the
registrant and CIPSCO be approved. In addition, the July 1997
proposed order addressed market power issues, as well as
issues associated with affiliate transactions. In the July
1997 proposed order, the Hearing Examiner concluded that the
proposed merger does not create any significant retail market
power issues and that the registrant and CIPSCO's proposed
treatment of affiliate transactions is reasonable.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, required review of the proposed merger by the
Federal Trade Commission and the Department of Justice. On
May 18, 1997, the waiting period established by the Act expired
without action by either agency thus clearing the merger from
federal antitrust review.
Note 6 - Certain reclassifications were made to prior-year financial
statements to conform with current-period presentation.
Page 6
UNION ELECTRIC COMPANY
----------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS
The registrant and CIPSCO Incorporated entered into a Merger
Agreement dated August 11, 1995, which was approved by the shareholders
of both companies in December 1995. The merged entity is expected to realize
$644 million in net savings over 10 years from combining certain operations
of the two companies and is expected to adopt Union Electric's dividend
payment level. However, the merger is conditioned upon, among other things,
receipt of certain regulatory and governmental approvals. The merger is
expected to be consummated by the end of 1997. (See Note 5 to the Financial
Statements of this report.)
Results of Operations
Second quarter 1997 common stock earnings increased $7 million, or 7
cents per share, from 1996's second quarter to $67 million, or 66 cents per
share. Common stock earnings for the six months ended June 30, 1997 and
1996, totaled $97 million, or 95 cents per share. Common stock earnings for
the twelve months ended June 30, 1997, were $291 million, or $2.85 per share,
unchanged from the comparable prior-year period.
Earnings and earnings per share fluctuated due to many conditions,
the primary ones being: weather variations, credits to electric customers,
electric rate reductions, sales growth, fluctuating operating expenses and
merger-related expenses. The significant items affecting revenues, expenses and
earnings during the three-month, six-month and twelve-month periods ended
June 30, 1997 and 1996, are detailed below:
Electric Operating Revenues
- ---------------------------
(Millions of Dollars) Variations for periods ended June 30, 1997 from
comparable prior-year periods
--------------------------------------------------
Three Six Twelve
Months Months Months
------ ------ ------
Rate variations $ - $ - $ (4.1)
Credits to customers 24.9 26.4 57.6
Effect of abnormal weather (15.9) (26.7) (78.1)
Growth and other (11.2) (15.0) 5.4
Interchange sales 8.3 11.5 10.8
------- -------- --------
$ 6.1 $ (3.8) $ (8.4)
======= ======== ========
The $6.1 million increase in second quarter electric revenues
compared to the year-ago quarter is primarily due to a lower estimated credit
to customers during the current-year period (see Note 4 to the Financial
Statements of this report) and an increase in interchange revenue, partially
offset by lower revenues from residential and commercial customers primarily
due to milder weather. Interchange sales increased 41 percent compared to
the same prior-year period due to increased available power for resale, while
weather-sensitive residential and commercial sales were down 8 percent and 2
percent, respectively, from the same quarter of 1996. Industrial sales were
up 2 percent compared to the year-ago quarter.
Electric revenues for the first six months of 1997 decreased $3.8
million in part due to significantly milder weather and one less day in the
period due to leap year in 1996, partially offset by the lower customer
credit (see Note 4 to the Financial Statements of this report) and increased
interchange revenues. Weather-sensitive residential and commercial sales
decreased 6 percent and 2 percent, respectively, from the same period of
1996, while interchange and industrial sales increased 29 percent and 1
percent, respectively.
Electric revenues for the twelve months ended June 30, 1997,
decreased $8.4 million due to significantly milder weather offset by the
lower customer credit (see Note 4 to the Financial Statements of this report)
and increased interchange revenues. Weather-sensitive residential and
commercial sales decreased 6 percent and 1 percent, respectively, from the
same period of 1996, while interchange and industrial sales increases 15
percent and 2 percent, respectively.
Page 7
UNION ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS (Continued)
Operating Expenses
- ------------------
Fuel and Purchased Power
- ------------------------
(Millions of Dollars) Variations for periods ended June 30, 1997 from
comparable prior-year periods
--------------------------------------------------
Three Six Twelve
Months Months Months
------ ------ ------
Fuel:
Variation in generation $ 14.8 $ 16.8 $ 21.4
Price (4.4) (6.4) (7.3)
Generation efficiencies
and other (.3) (1.4) (2.0)
Purchased power variation (20.5) (27.5) (39.4)
------- ------- ------
$ (10.4) $ (18.5) $ (27.3)
======= ======= =======
The decline in fuel and purchased power costs for the three months,
six months and twelve months ended June 30, 1997, versus the comparable
prior-year periods was primarily due to reduced purchased power costs,
resulting from lower native load sales, as well as lower fuel prices,
partially offset by increased generation.
Other Operating Expenses
- ------------------------
Other operating expense variations reflect recurring conditions such
as growth, inflation and wage increases.
For the six months and twelve months ended June 30, 1997, operations
expenses other than fuel and purchased power were up $11 million and $27
million, respectively, versus the comparable year-ago period. This increase
is primarily due to an increase in gas purchased for resale (due to higher
gas prices), increased consulting expenses and injuries and damages expenses,
offset in part by lower employee benefit expenses. Maintenance expenses for
the current twelve-month period increased $3 million primarily due to the
fall 1996 refueling at the Callaway nuclear plant.
Depreciation expense for the three-month, six-month and twelve-month
periods ended June 30, 1997, increased $2 million, $3 million and $8 million,
respectively, versus comparable 1996 periods, primarily due to increases in
depreciable property.
Income taxes charged to operating expenses for the three months ended
June 30, 1997, increased $4 million versus the comparable 1996 period
primarily due to higher pretax income. Income taxes charged to operating
expenses for the six months and twelve months ended June 30, 1997, decreased
$3 million and $14 million, respectively, primarily due to lower pretax
income.
Other Income and Deductions
- ---------------------------
Miscellaneous other net income and deductions for the twelve months
ended June 30, 1997, increased $4 million compared to the same period in 1996
primarily due to a decrease in merger-related expenses and lower charitable
contributions.
Page 8
UNION ELECTRIC COMPANY
----------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS (Continued)
Interest
- --------
Interest charges for the three months, six months and twelve months
ended June 30, 1997, increased $2 million, $3 million and $2 million,
respectively, versus the prior-year period primarily due to increased debt
outstanding.
Allowance for Funds Used During Construction (AFC)
- --------------------------------------------------
Variations in AFC track construction work in progress and changes
were not significant for the reporting periods. During the twelve-month
periods ended June 30, 1997 and 1996, AFC rates averaged 8.7 percent and 9.2
percent, respectively.
Balance Sheet
- -------------
The $15 million increase in accounts receivable and unbilled revenues
is due primarily to higher revenues in May and June 1997 compared to November
and December 1996.
Changes in accounts payable, income taxes accrued and other tax
accruals result from the timing of various payments to taxing authorities and
suppliers.
The $23 million decrease in other current and accrued liabilities at
June 30, 1997, compared to December 31, 1996, is primarily due to the payment
in 1997 of the credit to customers, recorded in 1996, partially offset by the
credit to customers recorded in 1997 which are expected to be paid later this
year. (See Note 4 to the Financial Statements of this report.)
Liquidity and Capital Resources
Cash provided by the registrant's operations totaled $198 million for
the six months ended June 30, 1997, compared to $222 million during the same
1996 period.
Cash flows used in investing activities totaled $151 million and $192
million for the six months ended June 30, 1997 and 1996, respectively.
Construction expenditures for the six months ended June 30, 1997, were for
constructing new or improving existing facilities, purchasing railroad coal
cars and complying with the Clean Air Act. In addition, the registrant
expended $10 million for the acquisition of nuclear fuel. Capital
requirements for the remainder of 1997 are expected to be principally for
construction expenditures and the acquisition of nuclear fuel.
Cash flows used in financing activities were $38 million for the six
months ended June 30, 1997, compared to $15 million of cash flows used for
financing activities during the same 1996 period. The registrant's principal
financing activities for the six months ended June 30, 1997, were the net
issuance of $140 million of long-term debt under a revolving credit agreement
and $57 million of short-term debt; the redemption of $45 million of First
Mortgage Bonds and $64 million of preferred stock; and the payment of
dividends. On April 22, 1997, the registrant's Board of Directors declared a
quarterly dividend of 63.5 cents per common share which was paid to
shareholders June 30, 1997. Common stock dividends paid for the twelve
months ended June 30,1997, resulted in a pay out rate of 89 percent of the
registrant's earnings to common shareholders. Dividends paid to the
registrant's common shareholders relative to net cash provided by operating
activities for the same period were 45 percent.
Page 9
UNION ELECTRIC COMPANY
----------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS (Continued)
The registrant plans to utilize short-term debt as support for normal
operations and other temporary requirements. The registrant is authorized by
the FERC to have outstanding at any one time up to $600 million of short-term
unsecured debt instruments. Short-term borrowings of the registrant consist
of bank loans (maturities generally on an overnight basis) and commercial
paper (maturities generally within 10-45 days). At June 30, 1997, $68
million of bank loans were outstanding. At June 30, 1997, the registrant had
committed bank lines of credit aggregating $179 million (of which $111
million was unused at such date) which make available interim financing at
various rates of interest based on LIBOR, the bank certificate of deposit
rate, or other options. These lines of credit are renewable annually at
various dates throughout the year. The registrant also has bank credit
agreements due 1999 which permit the registrant to borrow up to $300 million
and $200 million, respectively, on a long-term basis. At June 30, 1997, $140
million of such borrowings were outstanding.
Additionally, the registrant has a lease agreement which provides for
the financing of nuclear fuel. At June 30, 1997, the maximum amount which
could be financed under the agreement was $120 million. Cash provided from
financing for the six months ended June 30, 1997, included issuances for
nuclear fuel of $21 million offset by $13 million of redemptions. At June 30,
1997, $114 million was financed under the lease.
Rate Matters
See Notes 4 and 5 under Notes to Financial Statements of this report.
Accounting Matters
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 129, "Disclosure of Information about Capital Structure" (FAS 129).
This statement establishes standards for disclosing information about an
entity's capital structure. In June 1997, the Financial Accounting Standards
Board issued SFAS No. 130, "Reporting Comprehensive Income" (FAS 130) and
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (FAS 131). FAS 130 establishes standards for reporting and
display of comprehensive income. FAS 131 establishes standards for reporting
information about operating segments in annual financial statements and
interim reports to shareholders. FAS 129 is effective for financial statements
issued for periods ending after December 15, 1997. FAS 130 and FAS 131 are
effective for fiscal years beginning after December 15, 1997. FAS 129, FAS
130 and FAS 131 are not expected to have a material effect on the
registrant's financial position or results of operations upon adoption.
Safe Harbor Statement
Statements made in this report which are not based on historical
facts are forward-looking and, accordingly, involve risks and uncertainties
that could cause actual results to differ materially from those discussed.
Although such forward-looking statements have been made in good faith and are
based on reasonable assumptions, there is no assurance that the expected
results will be achieved. These statements include (without limitation)
statements as to future expectations, beliefs, plans, strategies, objectives,
events, conditions and financial performance. In connection with the "Safe
Harbor" provisions of the Private Securities Litigation Reform Act of 1995,
the Company is providing the following cautionary statement to identify
important factors that could cause actual results to differ materially from
those anticipated. Factors include, but are not limited to, the effects of:
regulatory actions; changes in laws and other governmental actions;
competition; business and economic conditions; weather conditions; fuel
prices and availability; generation plant performance; monetary and fiscal
policies; and legal and administrative proceedings.
Page 10
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-----------------
UNAUDITED PRO FORMA FINANCIAL INFORMATION
AMEREN CORPORATION
On August 11, 1995, the registrant and CIPSCO Incorporated ("CIPSCO")
entered into an Agreement and Plan of Merger, which was subsequently approved
by the shareholders of both parties. The merger ("Merger") is further
conditioned on, among other things, receipt of regulatory and governmental
approvals, and will result in a newly formed holding company, Ameren
Corporation. The following unaudited pro forma financial information
combines the historical balance sheets and statements of income of the
registrant and CIPSCO, including their respective subsidiaries, after giving
effect to the Merger. The unaudited pro forma combined condensed balance
sheet at June 30,1997, gives effect to the Merger as if it had occurred at
June 30, 1997. The unaudited pro forma combined condensed statements of
income for the six-month periods ended June 30, 1997 and 1996, and the
twelve-month period ended June 30, 1997, give effect to the Merger as if it
had occurred at the beginning of the periods presented. These statements are
prepared on the basis of accounting for the Merger as a pooling of interests
and are based on the assumptions set forth in the notes thereto. In addition,
the pro forma financial information does not give effect to the expected
synergies of the transaction.
The following pro forma financial information has been prepared from,
and should be read in conjunction with, the historical financial statements
and related notes thereto of the registrant and CIPSCO. The following
information is not necessarily indicative of the financial position or
operating results that would have occurred had the Merger been consummated
on the date, or at the beginning of the periods, for which the Merger is
being given effect nor is it necessarily indicative of future operating
results or financial position. In addition, due to the effect of weather on
sales and other factors which are characteristic of public utility
operations, financial results for the six-month periods ended June 30, 1997
and 1996, are not necessarily indicative of trends for any twelve-month
period.
Also see Part I, Note 5, Notes to Financial Statements.
Page 11
AMEREN CORPORATION
------------------
UNAUDITED PRO FORMA COMBINED CONDENSED
--------------------------------------
BALANCE SHEET
-------------
AT JUNE 30, 1997
----------------
(Thousands of Dollars)
Pro Forma
ASSETS: As Reported (Note 1) Adjustments Pro Forma
- ------- --------------------
Property and plant UE CIPSCO (Notes 2,8) Combined
------ ------ ----------- ----------
Electric $8,746,956 $2,286,097 $ 377,544 $11,410,597
Gas 190,738 245,808 - 436,546
Other 35,975 - - 35,975
--------- --------- ------- ----------
8,973,669 2,531,905 377,544 11,883,118
Less accumulated depreciation and amortization 3,776,716 1,106,615 276,843 5,160,174
--------- --------- ------- ----------
5,196,953 1,425,290 100,701 6,722,944
Construction work in progress:
Nuclear fuel in process 106,651 - - 106,651
Other 100,022 43,692 2,536 146,250
--------- --------- ------- ---------
Total property and plant, net 5,403,626 1,468,982 103,237 6,975,845
Regulatory assets:
Deferred income taxes (Note 5) 665,397 39,994 - 705,391
Other 171,387 129,844 - 301,231
------- ------- ----------
Total regulatory assets 836,784 169,838 - 1,006,622
Other assets:
Nuclear decommissioning trust fund 112,578 - - 112,578
Unamortized debt expense 10,256 3,469 558 14,283
Investments in nonregulated activities - 117,798 - 117,798
Other 25,930 25,477 (4,333) 47,074
------- ------- ------- -------
Total other assets 148,764 146,744 (3,775) 291,733
Current assets:
Cash and temporary investments 12,960 8,011 21,078 42,049
Accounts receivable, net 181,070 67,810 22,144 271,024
Unbilled revenue 102,894 28,860 - 131,754
Materials and supplies, at average cost -
Fossil fuel 51,737 36,150 6,213 94,100
Other 94,584 38,402 4,409 137,395
Other 44,113 20,401 3,468 67,982
------- ------- ------- -------
Total current assets 487,358 199,634 57,312 744,304
--------- --------- ------- ---------
Total Assets $6,876,532 $1,985,198 $ 156,774 $9,018,504
========= ========= ======= =========
CAPITAL AND LIABILITIES:
- ------------------------
Capitalization:
Common stock (Note 2) $ 510,619 $ 356,812 $ (866,059) $ 1,372
Other stockholders' equity (Note 2) 1,810,557 296,923 866,059 2,973,539
--------- ------- -------- ---------
Total common stockholders' equity 2,321,176 653,735 - 2,974,911
Preferred stock of subsidiary 155,197 80,000 - 235,197
Long-term debt, net 1,943,186 570,379 115,556 2,629,121
--------- --------- ------- ---------
Total capitalization 4,419,559 1,304,114 115,556 5,839,229
Minority interest in consolidated subsidiary - - 3,534 3,534
Accumulated deferred income taxes 1,310,922 340,609 (6,565) 1,644,966
Accumulated deferred investment tax credits 157,257 47,218 - 204,475
Regulatory liability 193,227 98,685 - 291,912
Accumulated provision for nuclear decommissioning 115,924 - - 115,924
Other deferred credits and liabilities 159,759 - 3,681 163,440
Current liabilities:
Current maturity of long-term debt 32,734 - 14,444 47,178
Short-term debt 68,000 55,481 - 123,481
Accounts payable 79,237 44,493 22,794 146,524
Wages payable 34,494 11,177 - 45,671
Taxes accrued 160,418 14,735 - 175,153
Interest accrued 44,808 9,587 399 54,794
Other 100,193 59,099 2,931 162,223
------- ------- ------ -------
Total current liabilities 519,884 194,572 40,568 755,024
--------- --------- ------- ---------
Total Capital and Liabilities $6,876,532 $1,985,198 $ 156,774 $9,018,504
========= ========= ======= =========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
Page 12
AMEREN CORPORATION
------------------
UNAUDITED PRO FORMA COMBINED CONDENSED
--------------------------------------
STATEMENTS OF INCOME
--------------------
SIX MONTHS ENDED JUNE 30, 1997
------------------------------
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO Pro Forma
-- ------
(As Reported) (As Reported) Adjustments Pro Forma
(Notes 1,3,9) (Notes 1,3) (Notes 2,8) Combined
------------- ----------- ----------- --------
OPERATING REVENUES:
Electric $ 978,461 $ 329,015 $ 96,361 $ 1,403,837
Gas 58,469 85,425 - 143,894
Other 282 5,821 481 6,584
--------- ------- ------ ---------
Total operating revenues 1,037,212 420,261 96,842 1,554,315
OPERATING EXPENSES:
Operations
Fuel and purchased power 230,520 116,445 55,432 402,397
Gas costs 36,962 54,994 - 91,956
Other 194,443 78,082 9,323 281,848
------- ------- ------ -------
461,925 249,521 64,755 776,201
Maintenance 110,920 32,262 8,725 151,907
Depreciation and amortization 122,664 45,710 7,419 175,793
Income taxes (Note 6) 69,628 16,165 4,136 89,929
Other taxes 102,404 29,168 960 132,532
------- ------- ------ ---------
Total operating expenses 867,541 372,826 85,995 1,326,362
OPERATING INCOME 169,671 47,435 10,847 227,953
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 1,830 144 - 1,974
Minority interest in consolidated subsidiary - - (2,553) (2,553)
Miscellaneous, net (2,841) (253) (3,372) (6,466)
------- ----- ------- -------
Total other income and deductions, net (1,011) (109) (5,925) (7,045)
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 168,660 47,326 4,922 220,908
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 70,633 17,866 4,922 93,421
Allowance for borrowed funds used during
construction (3,245) (182) - (3,427)
Preferred dividends of subsidiaries (Note 7) 4,409 1,842 - 6,251
------ ------ ----- ------
Net interest charges and preferred dividends 71,797 19,526 4,922 96,245
NET INCOME $ 96,863 $ 27,800 $ - $ 124,663
========== ========== =========== ===========
EARNINGS PER SHARE OF COMMON STOCK
(BASED ON AVERAGE SHARES OUTSTANDING) $0.95 $0.82 $0.91
===== ===== =====
AVERAGE COMMON SHARES OUTSTANDING (Note 2) 102,123,834 34,069,542 1,022,086 137,215,462
=========== ========== ========= ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
Page 13
AMEREN CORPORATION
------------------
UNAUDITED PRO FORMA COMBINED CONDENSED
--------------------------------------
STATEMENTS OF INCOME
--------------------
SIX MONTHS ENDED JUNE 30, 1996
------------------------------
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO Pro Forma
-- ------
(As Reported) (As Reported) Adjustments Pro Forma
(Notes 1,3,9) (Notes 1,3) (Notes 2,8) Combined
------------- ----------- ----------- --------
OPERATING REVENUES:
Electric $ 982,277 $ 341,210 $ 91,574 $ 1,415,061
Gas 58,478 85,359 - 143,837
Other 259 5,082 789 6,130
--------- ------- ------ ---------
Total operating revenues 1,041,014 431,651 92,363 1,565,028
OPERATING EXPENSES:
Operations
Fuel and purchased power 249,021 131,646 49,735 430,402
Gas costs 34,571 52,681 - 87,252
Other 186,203 69,207 9,396 264,806
------- ------- ------ -------
469,795 253,534 59,131 782,460
Maintenance 110,462 30,971 9,232 150,665
Depreciation and amortization 119,285 43,130 7,601 170,016
Income taxes (Note 6) 72,865 21,294 4,048 98,207
Other taxes 103,207 29,384 1,028 133,619
------- ------- ------ ---------
Total operating expenses 875,614 378,313 81,040 1,334,967
OPERATING INCOME 165,400 53,338 11,323 230,061
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 3,823 77 - 3,900
Minority interest in consolidated subsidiary - - (2,482) (2,482)
Miscellaneous, net (1,586) (1,062) (3,719) (6,367)
------- ------- ------- -------
Total other income and deductions, net 2,237 (985) (6,201) (4,949)
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 167,637 52,353 5,122 225,112
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 67,528 17,487 5,122 90,137
Allowance for borrowed funds used during
construction (3,978) (98) - (4,076)
Preferred dividends of subsidiaries (Note 7) 6,625 1,864 - 8,489
------ ------ ----- ------
Net interest charges and preferred dividends 70,175 19,253 5,122 94,550
NET INCOME $ 97,462 $ 33,100 $ - $ 130,562
========== ========== =========== ===========
EARNINGS PER SHARE OF COMMON STOCK
(BASED ON AVERAGE SHARES OUTSTANDING) $0.95 $0.97 $0.95
===== ===== =====
AVERAGE COMMON SHARES OUTSTANDING (Note 2) 102,123,834 34,069,542 1,022,086 137,215,462
=========== ========== ========= ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
Page 14
AMEREN CORPORATION
------------------
UNAUDITED PRO FORMA COMBINED CONDENSED
--------------------------------------
STATEMENTS OF INCOME
--------------------
TWELVE MONTHS ENDED JUNE 30, 1997
---------------------------------
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO Pro Forma
-- ------
(As Reported) (As Reported) Adjustments Pro Forma
(Notes 1,3,9) (Notes 1,3) (Notes 2,8) Combined
------------- ----------- ----------- --------
OPERATING REVENUES:
Electric $2,157,000 $ 718,617 $ 180,312 $3,055,929
Gas 99,055 155,414 - 254,469
Other 508 11,294 797 12,599
--------- ------- ------- ---------
Total operating revenues 2,256,563 885,325 181,109 3,322,997
OPERATING EXPENSES:
Operations
Fuel and purchased power 494,331 259,014 98,943 852,288
Gas costs 66,938 98,541 - 165,479
Other 387,346 155,463 18,230 561,039
------- ------- ------- ---------
948,615 513,018 117,173 1,578,806
Maintenance 224,090 62,752 16,603 303,445
Depreciation and amortization 244,677 89,977 15,482 350,136
Income taxes (Note 6) 194,132 44,428 8,322 246,882
Other taxes 212,463 57,601 1,711 271,775
--------- ------- ------- ---------
Total operating expenses 1,823,977 767,776 159,291 2,751,044
OPERATING INCOME 432,586 117,549 21,818 571,953
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 4,499 445 - 4,944
Minority interest in consolidated subsidiary - - (4,946) (4,946)
Miscellaneous, net (5,549) (1,974) (7,065) (14,588)
------- ------- -------- --------
Total other income and deductions, net (1,050) (1,529) (12,011) (14,590)
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 431,536 116,020 9,807 557,363
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 135,749 38,131 9,807 183,687
Allowance for borrowed funds used during
construction (6,274) (567) - (6,841)
Preferred dividends of subsidiaries (Note 7) 11,033 3,699 - 14,732
------- ------ ----- -------
Net interest charges and preferred dividends 140,508 41,263 9,807 191,578
NET INCOME $ 291,028 $ 74,757 $ - $ 365,785
========== ========== ========= ==========
EARNINGS PER SHARE OF COMMON STOCK
(BASED ON AVERAGE SHARES OUTSTANDING) $2.85 $2.19 $2.67
===== ===== =====
AVERAGE COMMON SHARES OUTSTANDING (Note 2) 102,123,834 34,069,542 1,022,086 137,215,462
=========== ========== ========= ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
Page 15
AMEREN CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. Reclassifications were made to certain "as reported" account balances
reflected in the registrant's and CIPSCO's financial statements to
conform to this reporting presentation (See Notes 5, 6 and 7). All
other financial statement presentation and accounting policy
differences were immaterial and were not adjusted in the pro forma
combined condensed financial statements.
2. The pro forma combined condensed financial statements reflect the
conversion of each share of the registrant's Common Stock ($5 par
value) outstanding into one share of Ameren Common Stock ($.01 par
value) and the conversion of each share of CIPSCO Common Stock (no par
value) outstanding into 1.03 shares of Ameren Common Stock, as provided
in the Merger Agreement. The pro forma combined condensed financial
statements are presented as if the companies were combined during all
periods included therein.
3. The allocation between the registrant and CIPSCO and their customers of
the estimated cost savings resulting from the merger, net of the costs
incurred to achieve such savings, will be subject to regulatory review
and approval. Merger-related costs (which include transaction costs
and costs to achieve such savings) are currently estimated to be
approximately $73 million (including costs for financial advisors,
attorneys, accountants, consultants, filings, printing, system
integration, relocation, etc.). None of these estimated cost savings
have been reflected in the pro forma combined condensed financial
statements. However, net income for the six months and twelve months
ended June 30, 1997, included merger-related costs of $5 million and
$9 million, net of income taxes, for the registrant, and $1 million and
$3 million, net of income taxes, for CIPSCO, respectively. Net income
for the six months ended June 30, 1996, included merger-related costs
of $4 million, net of income taxes, for the registrant, and $2 million,
net of income taxes, for CIPSCO.
4. Intercompany transactions (including purchased and exchanged power
transactions) between the registrant and CIPSCO during the periods
presented were not material and, accordingly, no pro forma adjustments
were made to eliminate such transactions.
5. CIPSCO's regulatory asset related to deferred income taxes was
reclassified from the regulatory liability account balance to conform
to this reporting presentation.
6. CIPSCO's income taxes were reflected as operating expenses to conform
to this reporting presentation.
7. Currently, the registrant's Preferred Stock is not issued by a
subsidiary; subsequent to the merger, the registrant's Preferred Stock
will be issued by a subsidiary of Ameren. As a result, the
registrant's preferred dividend requirements were reclassified to conform
to this reporting presentation.
8. Pro forma adjustments were made to consolidate the financial results of
Electric Energy, Inc. (EEI), which will, in substance, be a 60 percent
owned subsidiary of Ameren subsequent to the merger. The registrant
and CIPSCO hold 40 percent and 20 percent ownership interests,
respectively, in EEI and account for these investments under the equity
method of accounting. All intercompany transactions between the
registrant, CIPSCO and EEI were eliminated.
9. Net income for the six and twelve months ended June 30, 1997, included
credits for Missouri electric customers which reduced revenues and
pretax income of the registrant by $20 million and $21 million,
respectively. Net income for the six months ended June 30, 1996,
included a credit to Missouri electric customers which reduced revenues
and pretax income of the registrant by $46 million.
Page 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
Exhibit 12(a) - Computation of Ratio of Earnings to
Fixed Charges, 12 Months Ended
June 30, 1997.
Exhibit 12(b) - Computation of Ratio of Earnings to
Fixed Charges and Preferred Stock
Dividend Requirements, 12 Months
Ended June 30, 1997.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
UNION ELECTRIC COMPANY
(Registrant)
August 13, 1997 By /s/ Donald E. Brandt
----------------------------
Donald E. Brandt
Senior Vice President
Finance and Corporate Services