1
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 MARCH 31, 1996
[ ] 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 April
30, 1996:
Common Stock, $5 par value - 102,123,834
(excl. 42,990 treasury shares)
2
UNION ELECTRIC COMPANY
INDEX
Page No.
Part I Financial Information (Unaudited)
Balance Sheet --
March 31, 1996 and December 31, 1995 2
Statement of Income --
Three Months and Twelve Months Ended
March 31, 1996 and 1995 3
Statement of Cash Flows --
Three Months Ended March 31, 1996 and 1995 4
Notes to Financial Statements 5
Management's Discussion and Analysis 6 thru 9
Part II Other Information
3
UNION ELECTRIC COMPANY Page 2
BALANCE SHEET
UNAUDITED
(Thousands of Dollars)
March 31, December 31,
1996 1995
------------ ------------
ASSETS
- ------
Property and plant, at original cost
Electric $8,558,166 $8,473,501
Gas 176,784 174,231
Other 35,097 35,033
---------- ----------
8,770,047 8,682,765
Less accumulated depreciation and amortization 3,559,955 3,494,722
---------- ----------
5,210,092 5,188,043
Construction work in progress:
Nuclear fuel in process 142,325 121,460
Other 115,464 125,934
---------- ----------
Total property and plant, net 5,467,881 5,435,437
Regulatory asset - deferred income taxes 706,371 732,580
Deferred charges:
Unamortized debt expense 43,260 44,496
Nuclear decommissioning trust fund 78,032 73,838
Other 25,912 20,101
---------- ----------
Total deferred charges 147,204 138,435
Current assets:
Cash 12,217 1,025
Accounts receivable - trade (less allowance for doubtful
accounts of $6,275 and $6,925 at respective dates) 173,762 191,520
Unbilled revenue 69,307 82,098
Other accounts and notes receivable 24,277 21,602
Materials and supplies, at average cost -
Fossil fuel 36,468 46,381
Construction and maintenance 95,537 92,921
Other 11,957 12,470
---------- ----------
Total current assets 423,525 448,017
---------- ----------
Total Assets
$6,744,981 $6,754,469
========== ==========
CAPITAL AND LIABILITIES:
- ------------------------
Capitalization:
Common stock, $5 par value, authorized 150,000,000 shares-
outstanding 102,123,834 shares (excluding 42,990 shares
at par value in treasury) $ 510,619 $ 510,619
Other paid-in capital 717,669 717,669
Retained earnings 1,063,909 1,090,909
---------- ----------
Total common stockholders' equity 2,292,197 2,319,197
Preferred stock not subject to mandatory redemption 218,497 218,497
Preferred stock subject to mandatory redemption 650 650
Capital lease obligation 69,994 62,607
Long-term debt 1,710,585 1,710,585
Unamortized discount and premium on debt (9,440) (9,579)
---------- ----------
Long-term debt, net 1,701,145 1,701,006
---------- ----------
Total capitalization 4,282,483 4,301,957
Accumulated deferred income taxes 1,327,759 1,357,689
Accumulated deferred investment tax credits 164,977 166,524
Regulatory liability 213,331 216,502
Accumulated provision for nuclear decommissioning 79,705 75,511
Other deferred credits and liabilities 151,730 150,600
Current and accrued liabilities:
Current maturity of capital lease obligation 32,289 34,462
Current maturity of long-term debt 70,000 35,000
Accounts payable 85,314 169,012
Wages payable 32,000 36,605
Bank loans 36,500 19,600
Accumulated deferred income taxes 39,153 27,429
Income taxes accrued 54,090 29,986
Other taxes accrued 39,010 17,727
Interest accrued 54,459 46,244
Dividends accrued 3,312 3,312
Other 78,869 66,309
---------- ----------
Total current and accrued liabilities 524,996 485,686
---------- ----------
Total Capital and Liabilities $6,744,981 $6,754,469
========== ==========
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UNION ELECTRIC COMPANY
STATEMENT OF INCOME
(UNAUDITED)
(Thousands of Dollars Except Shares and Per Share Amounts)
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
Operating revenues:
Electric $414,686 $408,748 $2,020,391 $1,976,314
Gas 44,548 38,212 94,149 87,570
Steam 157 155 443 447
-------- -------- ---------- ----------
Total operating revenue 459,391 447,115 2,114,983 2,064,331
Operating expenses:
Operations
Fuel and purchased power 88,085 88,899 364,345 336,865
Other 114,129 109,385 423,865 423,832
-------- -------- ---------- ----------
202,214 198,284 788,210 760,697
Maintenance 48,634 50,168 220,075 205,543
Depreciation and decommissioning 59,585 57,600 235,221 228,464
Income taxes 28,221 23,860 213,902 205,655
Other taxes 50,983 49,897 213,231 211,631
-------- -------- ---------- ----------
Total operating expenses 389,637 379,809 1,670,639 1,611,990
Operating income 69,754 67,306 444,344 452,341
Other income and deductions:
Allowance for equity funds used
during construction 1,702 1,892 6,637 6,006
Miscellaneous, net 895 646 (5,733) (1,588)
-------- -------- ---------- ----------
Total other income/deductions, net 2,597 2,538 904 4,418
Income before interest charges 72,351 69,844 445,248 456,759
Interest charges:
Interest 33,858 33,435 135,163 142,163
Allowance for borrowed funds
used during construction (1,647) (1,815) (5,938) (6,159)
-------- -------- ---------- ----------
Net interest charges 32,211 31,620 129,225 136,004
Net income 40,140 38,224 316,023 320,755
Preferred stock dividends 3,312 3,313 13,249 13,251
-------- -------- ---------- ----------
Earnings on common stock $ 36,828 $ 34,911 $ 302,774 $ 307,504
======== ======== ========== ==========
Earnings per share of common stock $0.36 $0.34 $2.96 $3.01
===== ===== ===== =====
(based on average shares outstanding)
Dividends per share of common stock $0.625 $0.61 $2.47 $2.41
====== ===== ===== =====
Average number of common shares
outstanding (in thousands) 102,124 102,124 102,124 102,124
======= ======= ======= =======
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UNION ELECTRIC COMPANY Page 4
STATEMENT OF CASH FLOWS
UNAUDITED
(Thousands of Dollars)
Three Months Ended
March 31,
------------------
1996 1995
---- ----
Cash Flows From Operating:
Net income $ 40,140 $ 38,224
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 57,173 55,272
Amortization of nuclear fuel 10,723 9,375
Allowance for funds used during construction (3,349) (3,707)
Postretirement benefit accrual - 8,086
Deferred income taxes, net 4,832 (2,705)
Deferred investment tax credits, net (1,547) (1,546)
Changes in assets and liabilities:
Receivables, net 27,874 28,518
Materials and supplies 7,297 (3,429)
Accounts and wages payable (88,303) 24,846
Taxes accrued 45,387 47,748
Interest and dividends accrued or declared 8,215 9,328
Other, net 11,086 (10,091)
-------- --------
Net cash provided by operating activities 119,528 199,919
Cash Flows From Investing:
Construction expenditures (83,605) (88,384)
Allowance for funds used during construction 3,349 3,707
Nuclear fuel expenditures (18,054) (8,845)
-------- --------
Net cash used in investing activities (98,310) (93,522)
Cash Flows From Financing:
Dividends on preferred stock (3,312) (3,313)
Dividends on common stock (63,828) (62,295)
Environmental bond funds - 1,620
Redemptions -
Nuclear fuel lease (7,959) (48,911)
Long-term debt (5,000) -
Issuances -
Nuclear fuel lease 13,173 12,704
Short-term debt 16,900 -
Long-term debt 40,000 -
-------- --------
Net cash used in financing activities (10,026) (100,195)
-------- --------
Net change in cash and cash equivalents 11,192 6,202
Cash and cash equivalents at beginning of period 1,025 1,510
-------- --------
Cash and cash equivalents at end of period $ 12,217 $ 7,712
======== =========
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) $ 22,422 $ 20,696
Income taxes 170 1,076
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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 1995
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 to 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 March 31, 1996 and 1995 are not necessarily
indicative of trends for any 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 provided for a 1.8 percent rate decrease for all
classes of Missouri retail electric customers, effective August 1,
1995, reducing annual revenues by $30 million. In addition, a
one-time $30 million credit was provided to Missouri electric
customers in 1995 under the agreement. Also included is a three-year
plan which provides that earnings in any future years in excess of a
12.61% return on equity (determined on a regulatory basis) will be
shared equally between customers and stockholders and earnings above
a 14% return on equity will be credited to customers. The formula
for computing the credit uses twelve month results ending June 30,
rather than calendar year earnings. At March 31, 1996, the
registrant estimated that it will pay a credit of at least $13.5
million to its Missouri electric customers later in 1996. This
credit was reflected as a reduction in electric revenues. The final
amount of the credit will depend on several factors, including the
registrant's earnings for the 12 months ending June 30, 1996.
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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 later approved by the shareholders of both
companies in December 1995. The merged entity is expected to realize
approximately $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 in early 1997.
RESULTS OF OPERATIONS
First quarter 1996 common stock earnings were $36.8 million or 36 cents
per share, an increase of $1.9 million from 1995's first quarter. Earnings per
share in the first quarter of 1996 were 2 cents higher than in the comparable
year-ago period despite a $13.5 million revenue reduction to provide for a
credit expected to be paid to Missouri electric customers later in 1996. This
reduced earnings by 8 cents per share. Additionally, the 1.8 percent rate
decrease for Missouri electric customers implemented in August, 1995 further
reduced electric revenues in this year's first quarter by $7 million and
earnings by about 4 cents per share when compared to the same 1995 period.
(See Note 4 to the Financial Statements of this report).
The increased earnings for the three months ended March 31, 1996 over
the comparable 1995 period primarily reflect increased electric and gas
operating revenues, largely offset by the revenue adjustments noted above. The
higher first quarter revenues were primarily from increased electricity and gas
sales this year due to colder winter weather and an additional day in the
quarter due to leap year.
Common stock earnings for the twelve months ended March 31, 1996 were
$302.8 million, a $4.7 million decrease from the preceding twelve-month period.
Earnings of $2.96 per share for the twelve months ended March 31, 1996
decreased 5 cents per share from the twelve months ended March 31, 1995.
The decreased earnings for the twelve months ended March 31, 1996
versus the prior twelve-month period reflects higher electric operating
revenues and lower interest charges offset by increased operating expenses and
merger-related expenses. Electric revenues were higher despite the revenue
adjustments noted above and the one-time $30 million credit for Missouri
electric customers recorded in the third quarter of 1995. (See Note 4 to the
Financial Statements of this report). In addition to greater fuel and
purchased power costs, operating expenses were up due to increased maintenance,
depreciation and taxes. The increased maintenance expenses for the twelve
months ended March 31, 1996 resulted from the Spring 1995 Callaway nuclear
refueling outage.
The significant items affecting revenues, costs and earnings during the
three-month and twelve-month periods ended March 31, 1996 and 1995 are detailed
below:
Electric Operating Revenues
(Millions of Dollars) Variations for periods ended March 31, 1996
from comparable prior periods
--------------------------------------------------
Three Months Twelve Months
------------- -------------
Rate variations $ (6.9) $ (20.6)
Credit to customers (13.5) (43.5)
Effect of abnormal weather 7.9 57.1
Growth and other 18.4 51.1
------ ------
$ 5.9 $ 44.1
====== ======
As discussed previously, rate variations and credits to customers for
the three months and twelve months ended March 31, 1996 are attributable to the
agreement reached with the Missouri Public Service Commission in July 1995, as
discussed previously.
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UNION ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS (Continued)
First quarter 1996 kilowatt-hour sales were up 7 percent from the same
quarter of 1995, primarily due to colder winter weather and an additional day
in the quarter due to leap year. Weather-sensitive residential and commercial
sales rose 10 percent and 7 percent, respectively, from the year-ago quarter
while industrial sales grew 3 percent.
Kilowatt-hour sales for the twelve months ended March 31, 1996
increased 6 percent over the prior twelve-month period. This increase reflects
hotter than normal and colder than normal temperatures in the 1995 third
quarter and the 1996 first quarter, respectively, and a strong local economy.
Residential sales increased 9 percent, while sales to commercial and industrial
customers rose 4 percent and 3 percent, respectively.
Operating Expenses
(Millions of Dollars)
Variations for periods ended March 31, 1996
from comparable prior periods
--------------------------------------------------
Three Months Twelve Months
------------ -------------
Fuel:
Variation in generation $ 6.6 $ 11.4
Price (6.4) (2.3)
Generation efficiencies 2.3 4.7
Department of Energy assessment (0.3) (0.7)
Net Interchange sales and purchased power
variation (3.0) 14.4
----- -----
$(0.8) $27.5
===== =====
The decrease in fuel and purchased power costs for the three months
ended March 31, 1996, versus the three months ended March 31, 1995, is
primarily due to lower fuel prices and reduced net purchased power costs offset
by increased generation and reduced generating efficiencies.
The increased fuel and purchased power costs for the twelve months
ended March 31, 1996, versus the twelve months ended March 31, 1995, is
primarily due to greater net purchased power costs and increased generation.
These increases resulted from the need for replacement power during the
Callaway plant refueling outage during the Spring of 1995 and greater
electricity sales during the hot 1995 summer and colder first quarter of 1996.
Other operating expense variations reflect recurring conditions such as
growth, inflation and wage increases. During the three months ended March 31,
1996, versus the comparable 1995 period, operations expenses other than fuel
and purchased power were up $5 million due primarily to increased gas purchased
for resale. Maintenance expenses during the current three-month period were
$1.5 million lower primarily due to reduced labor expense.
For the twelve months ended March 31, 1996, versus the prior
twelve-month period, operations expenses other than fuel and purchased power,
were unchanged with a $5 million increase in natural gas purchased for resale
and a $6 million increase in labor being offset by a $11 million reduction in
other expenses. The $11 million reduction in other expenses resulted primarily
from a $5 million decrease in employee benefits expense, a $8 million decrease
in injuries, damages and insurance premiums offset by a $2 million increase in
materials and supplies expense. Maintenance expenses for the current
twelve-month period increased $15 million due to a $21 million increase in
power plant maintenance (due largely to the Spring 1995 Callaway nuclear
refueling outage), partially offset by reduced distribution system maintenance.
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UNION ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS (Continued)
Operating Expenses (Continued)
Depreciation expense for the three-month and twelve-month periods ended
March 31, 1996, versus the comparable 1995 periods, increased $2 million and $7
million, respectively, primarily due to increases in depreciable property.
Other taxes charged to operating expenses increased $1 million and $2
million, respectively, during the three and twelve months ended March 31, 1996,
versus the comparable 1995 periods, resulting primarily from increased gross
receipts taxes due to greater sales.
Income taxes charged to operating expenses increased $4 million and $8
million, respectively, during the three and twelve months ended March 31, 1996,
versus the comparable 1995 periods, primarily due to higher pretax income and a
higher effective tax rate.
Other Income and Deductions
Miscellaneous other net income and deductions decreased $4 million for
the twelve months ended March 31, 1996, versus the comparable 1995 period,
primarily reflecting $10 million of merger-related expenses partially offset by
reduced charitable contributions during the current twelve-month period.
Interest
During the twelve months ended March 31, 1996 versus the comparable
prior year period, interest decreased $7 million, primarily due to reductions
in other interest expense, partially offset by interest from higher rates on
variable rate long-term debt.
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 March 31, 1996 and 1995, AFC rates averaged 9.2 percent and 9.3 percent,
respectively.
Balance Sheet
The $30.5 million decrease in accounts receivable and unbilled revenues
is due primarily to increased budget billing accounts receivable balances in
November and December 1995 resulting from the hot summer weather in 1995, as
well as variations in revenue receipts for the months of February and March
1996, compared to the months of November and December 1995.
Changes in the accounts payable, income taxes accrued and other tax
accruals result from the timing of various payments to taxing authorities and
suppliers.
Rate Matters
See Note 4 under Notes to Financial Statements of this report.
On April 24, 1996 the FERC issued Orders 888 and 889 which are intended
to promote competition in the wholesale energy market. FERC will require
transmission owning public utilities, such as the registrant, to provide
transmission access and service to others in a manner similar and comparable to
that which the utility has by virtue of ownership. In Order 888, FERC requires
that a single tariff be used by the utility in providing transmission service.
Order 888 also provides for the recovery of stranded costs.
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UNION ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS (Continued)
Rate Matters (Continued)
Order 889 established the Standards of Conduct and information
requirements that transmission owners must adhere to in doing business under
the open access rule. Under Order 889, utilities must obtain transmission
service for their own use in the same manner its customers will obtain service,
thus mitigating market power through control of transmission facilities.
The registrant is currently evaluating Orders 888 and 889. Based on
its preliminary analysis, the registrant believes that these Orders, as they
relate to its wholesale business, will not have a material adverse effect on
its financial condition, results of operations or liquidity.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by the registrant's operations was $120 million for the
three months ended March 31, 1996 compared to $200 million during the same
period in 1995.
Cash flows used in investing activities totaled $98 million and $94
million for the three months ended March 31, 1996 and 1995, respectively.
Construction expenditures for the three months ended March 31, 1996 were for
constructing new or improving existing facilities, purchasing railroad coal
cars and expenditures for complying with the Clean Air Act. In addition, the
registrant expended $18 million for the acquisition of nuclear fuel. Capital
requirements for the remainder of 1996 are expected to be principally for
construction expenditures and the acquisition of nuclear fuel.
Cash flows used in financing activities were $10 million for the three
months ended March 31, 1996 compared to $100 million during the same period in
1995. The registrant's principal financing activities for the three months
ended March 31, 1996 were the redemption of $5 million of First Mortgage Bonds,
the issuance of $40 million of long-term debt under a revolving credit
agreement and the payment of dividends. On February 9, 1996, the Board of
Directors of the registrant declared a quarterly dividend of 62.5 cents per
common share. Common stock dividends paid for the twelve months ended March
31, 1996, resulted in a pay out rate of 83% of registrant's earnings to common
stockholders. Dividends paid to registrant's common stockholders relative to
net cash provided by operating activities for the same period were 45%.
The registrant plans to utilize short-term debt as support for normal
operations and other temporary requirements. The registrant is authorized by
the Federal Energy Regulatory Commission (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 March 31, 1996, the registrant had committed banks lines of credit
aggregating $184 million (of which $147.5 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, and in support
of which the registrant pays to its lending banks annual fees up to 0.10%.
These lines of credit are renewable annually at various dates throughout the
year. The registrant also has bank credit agreements due 1998 and 1999 which
permit the registrant to borrow up to $300 million and $200 million,
respectively, on a long-term basis. At March 31, 1996, $40 million of such
borrowings were outstanding.
Additionally, the registrant has a lease agreement which provides for
the financing of nuclear fuel. At March 31, 1996, the maximum amount which may
be financed under the agreement is $120 million. Cash provided from financing
for the three months ended March 31, 1996 included issuances for nuclear fuel
of $13 million offset by $8 million of redemptions. At March 31, 1996, $102
million was financed under the lease.
On May 1, 1996, the registrant redeemed $30,000,000 of 5-1/2% Series
First Mortgage Bonds, due on that date, at a price of 100% of the principal
amount.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders of the registrant held on
April 23, 1996, the following matters were presented to the meeting for a
vote and the results of such voting are as follows:
Item (1) Election of Directors.
Non-Voted
Name For(1) Withheld(1) Brokers(2)
---- ----- ---------- ---------
William E. Cornelius . . . . . . . . . . . 84,266,108 1,367,496 11,481,942
Thomas A. Hays . . . . . . . . . . . . . . 84,298,877 1,332,498 11,481,942
Thomas H. Jacobsen . . . . . . . . . . . . 84,297,310 1,327,823 11,481,942
Richard A. Liddy . . . . . . . . . . . . . 84,231,037 1,371,417 11,481,942
John Peters MacCarthy . . . . . . . . . . . 84,265,028 1,352,300 11,481,942
Paul L. Miller, Jr. . . . . . . . . . . . . 84,231,780 1,378,044 11,481,942
Charles W. Mueller . . . . . . . . . . . . 84,310,700 1,333,355 11,481,942
Robert H. Quenon . . . . . . . . . . . . . 83,484,538 1,521,438 11,481,942
Harvey Saligman . . . . . . . . . . . . . . 84,104,781 1,481,408 11,481,942
Janet McAfee Weakley . . . . . . . . . . . 84,078,702 1,502,536 11,481,942
Item (2) Stockholder Proposal re Report on Callaway Plant
Decommissioning Cost.
Non-Voted
For Against Abstain Brokers(2)
--- ------- ------- --------
7,244,625 62,750,602 4,237,244 20,510,181
____________________
(1) Reflects effect of cumulative voting.
(2) Ascertained by deduction.
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; is expected to be consummated in early 1997; 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 form a
combined condensed balance sheet at March 31, 1996 gives effect to the Merger
as if it had occurred at March 31, 1996. The unaudited pro forma combined
condensed statements of income for the three-month periods ended March 31,
1996, 1995 and the twelve-month period ended March 31, 1996, give effect to the
Merger as if it had occurred at the beginning of the periods presented. These
statements
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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 three-month periods ended March 31, 1996 and 1995, are not
necessarily indicative of trends for any twelve-month period.
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AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
AT MARCH 31, 1996
(THOUSANDS OF DOLLARS)
ASSETS As Reported (Note 1) Pro Forma
- ------ ---------------------- Adjustments Pro Forma
Property and plant UE CIPSCO (Notes 2,9) Combined
----- ------ ----------- ---------
Electric $8,558,166 $2,332,505 $ 374,762 $11,265,433
Gas 176,784 231,879 - 408,663
Other 35,097 - - 35,097
---------- ---------- --------- -----------
8,770,047 2,564,384 374,762 11,709,193
Less accumulated depreciation and amortization 3,559,955 1,146,735 255,439 4,962,129
---------- ---------- --------- -----------
5,210,092 1,417,649 119,323 6,747,064
Construction work in progress:
Nuclear fuel in process 142,325 - - 142,325
Other 115,464 41,937 1,633 159,034
---------- ---------- --------- -----------
Total property and plant, net 5,467,881 1,459,586 120,956 7,048,423
Regulatory asset - deferred income taxes (Note 6) 706,371 44,236 - 750,607
Other assets:
Unamortized debt expense 43,260 16,123 640 60,023
Nuclear decommissioning trust fund 78,032 - - 78,032
Investments in nonregulated activities - 107,213 - 107,213
Other 25,912 29,096 (1,528) 53,480
---------- ---------- --------- -----------
Total other assets 147,204 152,432 (888) 298,748
Current assets:
Cash and temporary investments 12,217 7,903 133 20,253
Accounts receivable, net 173,762 73,579 22,015 269,356
Unbilled revenue 69,307 27,225 - 96,532
Materials and supplies, at average cost -
Fossil fuel 36,468 33,255 7,637 77,360
Other 95,537 41,477 4,993 142,007
Other 36,234 17,300 3,700 57,234
---------- ---------- --------- -----------
Total current assets 423,525 200,739 38,478 662,742
---------- ---------- --------- -----------
Total Assets $6,744,981 $1,856,993 $ 158,546 $ 8,760,520
========== ========== ========= ===========
CAPITAL AND LIABILITIES:
- ------------------------
Capitalization:
Common stock (Note 2) $ 510,619 $ 356,812 $(866,059) $ 1,372
Other stockholders' equity (Note 2) 1,781,578 298,894 866,059 2,946,531
---------- ---------- --------- ----------
Total common stockholders' equity 2,292,197 655,706 - 2,947,903
Preferred stock of subsidiary 219,147 80,000 - 299,147
Long-term debt 1,771,139 479,002 130,000 2,380,141
---------- ---------- --------- ----------
Total capitalization 4,282,483 1,214,708 130,000 5,627,191
Minority interest in consolidated subsidiary - - 3,534 3,534
Accumulated deferred income taxes 1,327,759 326,372 (7,059) 1,647,072
Accumulated deferred investment tax credits 164,977 51,397 - 216,374
Regulatory liability 213,331 114,219 - 327,550
Accumulated provision for nuclear decommissioning 79,705 - - 79,705
Other deferred credits and liabilities 151,730 - 6,506 158,236
Current liabilities:
Current maturity of long-term debt 102,289 - - 102,289
Short-term debt 36,500 10,995 2,000 49,495
Accounts payable 85,314 50,233 18,029 153,576
Wages payable 32,000 10,691 - 42,691
Taxes accrued 132,253 25,955 - 158,208
Interest accrued 54,459 8,654 2,886 65,999
Other 82,181 43,769 2,650 128,600
---------- ---------- --------- ----------
Total current liabilities 524,996 150,297 25,565 700,858
---------- ---------- --------- ----------
Total Capital and Liabilities $6,744,981 $1,856,993 $ 158,546 $8,760,520
========== ========== ========= ==========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
14
Page 13
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO
-- ------ Pro Forma
(As Reported) (As Reported) Adjustments Pro Forma
(Notes 1,4,10) (Notes 1,4) (Notes 2,9) Combined
-------------- ----------- ---------- ---------
OPERATING REVENUES:
Electric $414,686 $171,288 $48,136 $634,110
Gas 44,548 64,418 - 108,966
Other 157 2,173 104 2,434
-------- -------- ------- --------
Total operating revenues 459,391 237,879 48,240 745,510
OPERATING EXPENSES:
Operations
Fuel and purchased power 88,085 69,269 28,037 185,391
Gas costs 24,325 41,197 - 65,522
Other 89,804 34,635 4,431 128,870
-------- -------- ------- --------
202,214 145,101 32,468 379,783
Maintenance 48,634 11,436 3,815 63,885
Depreciation and amortization 59,585 20,913 3,776 84,274
Income taxes (Note 7) 28,221 13,460 1,946 43,627
Other taxes 50,983 16,013 552 67,548
-------- -------- ------- --------
Total operating expenses 389,637 206,923 42,557 639,117
OPERATING INCOME 69,754 30,956 5,683 106,393
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 1,702 11 - 1,713
Minority interest in consolidated subsidiary - - (1,192) (1,192)
Miscellaneous, net 895 (203) (1,851) (1,159)
-------- -------- ------- --------
Total other income and deductions, net 2,597 (192) (3,043) (638)
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 72,351 30,764 2,640 105,755
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 33,858 8,722 2,640 45,220
Allowance for borrowed funds used during
construction (1,647) (15) - (1,662)
Preferred dividends of subsidiaries (Note 8) 3,312 939 - 4,251
-------- -------- ------- --------
Net interest charges and preferred dividends 35,523 9,646 2,640 47,809
NET INCOME $ 36,828 $ 21,118 $ - $ 57,946
======== ======== ======= ========
EARNINGS PER SHARE OF COMMON STOCK
(BASED ON AVERAGE SHARES OUTSTANDING) $0.36 $0.62 $0.42
===== ===== =====
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.
15
Page 14
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1995
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO
-- ------ Pro Forma
(As Reported) (As Reported) Adjustments Pro Forma
(Note 1) (Notes 1,3) (Notes 2,9) Combined
-------- ----------- ---------- ---------
OPERATING REVENUES:
Electric $408,748 $153,188 $46,053 $607,989
Gas 38,212 55,687 - 93,899
Other 155 1,587 53 1,795
-------- -------- ------- --------
Total operating revenues 447,115 210,462 46,106 703,683
OPERATING EXPENSES:
Operations
Fuel and purchased power 88,899 57,984 25,975 172,858
Gas costs 19,286 34,131 - 53,417
Other 90,099 41,526 4,561 136,186
-------- -------- ------- --------
198,284 133,641 30,536 362,461
Maintenance 50,168 12,205 4,023 66,396
Depreciation and amortization 57,600 20,601 3,792 81,993
Income taxes (Note 7) 23,860 6,680 1,828 32,368
Other taxes 49,897 15,763 547 66,207
-------- -------- ------- --------
Total operating expenses 379,809 188,890 40,726 609,425
OPERATING INCOME 67,306 21,572 5,380 94,258
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 1,892 171 - 2,063
Minority interest in consolidated subsidiary - - (1,128) (1,128)
Miscellaneous, net 646 315 (1,682) (721)
-------- -------- ------- --------
Total other income and deductions, net 2,538 486 (2,810) 214
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 69,844 22,058 2,570 94,472
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 33,435 8,537 2,570 44,542
Allowance for borrowed funds used during
construction (1,815) (15) - (1,830)
Preferred dividends of subsidiaries (Note 8) 3,313 968 - 4,281
-------- -------- ------- --------
Net interest charges and preferred dividends 34,933 9,490 2,570 46,993
NET INCOME $ 34,911 $ 12,568 $ - $ 47,479
======== ========= ======= ========
EARNINGS PER SHARE OF COMMON STOCK
(BASED ON AVERAGE SHARES OUTSTANDING) $0.34 $0.37 $ - $0.35
===== ===== ======= =====
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.
16
Page 15
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
TWELVE MONTHS ENDED MARCH 31, 1996
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO
-- ------ Pro Forma
(As Reported) (As Reported) Adjustments Pro Forma
(Notes 1,4,10) (Notes 1,3,4) (Notes 2,9) Combined
-------------- ------------- ---------- ---------
OPERATING REVENUES:
Electric $2,020,391 $721,583 $184,846 $2,926,820
Gas 94,149 138,337 - 232,486
Other 443 9,759 412 10,614
---------- -------- -------- ----------
Total operating revenues 2,114,983 869,679 185,258 3,169,920
OPERATING EXPENSES:
Operations
Fuel and purchased power 364,345 259,511 99,791 723,647
Gas costs 56,290 81,120 - 137,410
Other 367,575 148,477 19,018 535,070
---------- -------- -------- ----------
788,210 489,108 118,809 1,396,127
Maintenance 220,075 67,227 17,733 305,035
Depreciation and amortization 235,221 83,575 15,730 334,526
Income taxes (Note 7) 213,902 52,551 7,976 274,429
Other taxes 213,231 56,863 1,917 272,011
---------- -------- -------- ----------
Total operating expenses 1,670,639 749,324 162,165 2,582,128
OPERATING INCOME 444,344 120,355 23,093 587,792
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction 6,637 729 - 7,366
Minority interest in consolidated subsidiary - - (4,625) (4,625)
Miscellaneous, net (5,733) (2,816) (8,081) (16,630)
---------- --------- -------- ----------
Total other income and deductions, net 904 (2,087) (12,706) (13,889)
INCOME BEFORE INTEREST CHARGES
AND PREFERRED DIVIDENDS 445,248 118,268 10,387 573,903
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest 135,163 33,954 10,387 179,504
Allowance for borrowed funds used during
construction (5,938) (73) - (6,011)
Preferred dividends of subsidiaries (Note 8) 13,249 3,821 - 17,070
---------- -------- -------- ----------
Net interest charges and preferred dividends 142,474 37,702 10,387 190,563
NET INCOME $ 302,774 $ 80,566 $ - $ 383,340
========== ======== ======== ==========
EARNINGS PER SHARE OF COMMON STOCK
(BASED ON AVERAGE SHARES OUTSTANDING) $2.96 $2.36 $2.79
===== ===== =====
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.
17
Page 16
AMEREN CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. Reclassifications have been 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 6, 7
and 8). All other financial statement presentation and accounting
policy differences are immaterial and have not been 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. Net income for the three months ended March 31, 1995 includes CIPSCO's
pre-tax charges of $5.8 million for a voluntary separation program.
Net income for the twelve months ended March 31, 1996 includes $5.7
million of system development expenses.
4. 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. Transaction costs are currently estimated to be
approximately $22 million (including fees for financial advisors,
attorneys, accountants, consultants, filings and printing). None of
these estimated cost savings have been reflected in the pro forma
combined condensed financial statements. However, net income for the
three months and twelve months ended March 31, 1996 include merger
transaction costs and costs to achieve such savings of $0.9 million and
$9.9 million, net of income taxes, for the registrant and $0.7 million
and $5.4 million, net of income taxes, for CIPSCO, respectively.
5. 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.
6. CIPSCO's regulatory asset related to deferred income taxes was
reclassified from the regulatory liability account balance to conform
to this reporting presentation.
7. CIPSCO's income taxes are reflected as operating expenses to conform to
this reporting presentation.
8. 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 have been reclassified to
conform to this reporting presentation.
9. Pro forma adjustments have been made to consolidate the financial
results of Electric Energy, Inc. (EEI), which will, in substance, be a
60% owned subsidiary of Ameren subsequent to the merger. The
registrant and CIPSCO hold 40% and 20% 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 have been eliminated.
10. Net income for the three and twelve months ended March 31, 1996
includes credits for Missouri electric customers which reduced revenues
and pre-tax income of the registrant by $13.5 million and $43.5
million, respectively.
18
Page 17
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 March 31, 1996.
Exhibit 12(b) - Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividend
Requirements, 12 Months Ended March 31,
1996.
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)
May 13, 1996 By /s/ Donald E. Brandt
----------------------------
Donald E. Brandt
Senior Vice President
Finance and Corporate Services