================================================================================ 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, 1994 [ ] 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. X Yes________. No ________. Shares outstanding of each of registrant's classes of common stock as of April 30, 1994: 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 -- March 31, 1994 and December 31, 1993 2 Statement of Income -- Three Months and Twelve Months Ended March 31, 1994 and 1993 3 Statement of Cash Flows -- Three Months Ended March 31, 1994 and 1993 4 Notes to Financial Statements 5 Management's Discussion and Analysis 6 thru 8 Part II Other Information Page 2 UNION ELECTRIC COMPANY ---------------------- BALANCE SHEET ------------- (UNAUDITED) ----------- (Thousands of Dollars) ASSETS March 31, December 31, 1994 1993 ---------- ------------ Property and plant, at original cost: Electric $7,988,661 $7,916,493 Gas 152,494 149,167 Other 35,127 34,884 --------- --------- 8,176,282 8,100,544 Less accumulated depreciation and amortization 3,136,987 3,079,509 --------- --------- 5,039,295 5,021,035 Construction work in progress: Nuclear fuel in process 106,613 101,265 Other 145,118 142,656 --------- --------- Total property and plant, net 5,291,026 5,264,956 Regulatory asset - deferred income taxes 742,028 762,331 Deferred charges and other assets: Unamortized debt expense 53,144 53,451 Nuclear decommissioning trust fund 46,195 44,420 Other 27,187 28,552 ---------- ---------- Total deferred charges and other assets 126,526 126,423 Current assets: Cash 2,804 1,297 Accounts receivable - trade (less allowance for doubtful accounts of $6,324 and $5,858, at respective dates) 171,698 178,559 Unbilled revenue 53,288 79,957 Other accounts and notes receivable 18,973 18,319 Materials and supplies, at average cost - Fossil fuel 54,578 53,123 Construction and maintenance 93,055 87,450 Environmental bond fund 13,685 17,026 Other 8,757 6,129 ---------- ---------- Total current assets 416,838 441,860 ---------- ---------- Total Assets $6,576,418 $6,595,570 ========== ========== 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 951,997 977,880 ---------- ---------- Total common stockholders' equity 2,180,285 2,206,168 Preferred stock not subject to mandatory redemption 218,497 218,497 Preferred stock subject to mandatory redemption 702 702 Long-term debt 1,865,259 1,777,153 Unamortized discount and premium on debt (10,549) (10,498) ---------- ---------- Total capitalization 4,254,194 4,192,022 Accumulated deferred income taxes 1,367,544 1,360,159 Accumulated deferred investment tax credits 177,340 178,887 Regulatory liability 238,074 266,399 Accumulated provision for nuclear decommissioning 47,868 46,093 Other deferred credits and liabilities 104,316 92,227 Current and accrued liabilities: Current maturity of long-term debt 35,854 30,539 Accounts payable 88,160 153,474 Wages payable 29,792 37,326 Bank loans - 59,600 Income taxes accrued 52,903 25,147 Accumulated deferred income taxes 28,978 28,871 Other taxes accrued 36,654 17,578 Interest accrued 54,425 41,252 Dividends declared 3,301 3,301 Other 57,015 62,695 ---------- ---------- Total current and accrued liabilities 387,082 459,783 ---------- ---------- Total Capital and Liabilities $6,576,418 $6,595,570 ========== ========== Page 3 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, ---------------------- ------------------------ 1994 1993 1994 1993 ----------- --------- ----------- ----------- Operating revenues (*): Electric $401,967 $403,465 $1,964,482 $1,937,196 Gas 36,751 49,340 86,963 99,062 Other 182 161 494 899 -------- -------- ---------- ---------- Total operating revenues 438,900 452,966 2,051,939 2,037,157 Operating expenses: Operations Fuel and purchased power 81,595 95,840 398,810 406,297 Other 121,219 119,903 446,850 401,557 -------- -------- ---------- ---------- 202,814 215,743 845,660 807,854 Maintenance 42,385 37,983 194,500 183,877 Depreciation and nuclear decommissioning 55,182 54,205 220,610 216,319 Amortization of phase-in plans deferred costs - - - 24,198 Income taxes 24,626 22,466 181,635 178,877 Other taxes (*) 48,742 47,520 208,135 203,155 -------- -------- ---------- ---------- Total operating expenses 373,749 377,917 1,650,540 1,614,280 -------- -------- ---------- ---------- Operating income 65,151 75,049 401,399 422,877 Other income and deductions: Allowance for equity funds used during construction 1,653 1,399 6,672 3,783 Miscellaneous, net 2,637 256 6,300 16,678 -------- -------- ---------- ---------- Total other income and deductions, net 4,290 1,655 12,972 20,461 -------- -------- ---------- ---------- Income before interest charges 69,441 76,704 414,371 443,338 Interest charges: Interest 32,384 33,803 128,182 133,268 Allowance for borrowed funds used during construction (1,169) (1,303) (4,993) (5,042) -------- -------- ---------- ---------- Net interest charges 31,215 32,500 123,189 128,226 -------- -------- ---------- ---------- Net income 38,226 44,204 291,182 315,112 Preferred stock dividends 3,313 3,681 13,719 14,225 -------- -------- ---------- ---------- Earnings on common stock $ 34,913 $ 40,523 $ 277,463 $ 300,887 ======== ======== ========== ========== Earnings per share of common stock (based on average shares outstanding) $0.34 $0.40 $2.72 $2.95 ======== ======== ========== ========== Dividends per share of common stock $0.595 $0.58 $2.35 $2.28 ======== ======== ========== ========== Average number of common shares outstanding (in thousands) 102,124 102,124 102,124 102,124 ======== ======== ========== ========== (*) Includes license and franchise taxes of $20,496,000 and $20,563,000, respectively, for the three-month periods and $97,724,000 and $94,213,000, respectively, for the twelve-month periods ended March 31, 1994 and 1993. Page 4 UNION ELECTRIC COMPANY ---------------------- STATEMENT OF CASH FLOWS ----------------------- (UNAUDITED) (Thousands of Dollars) Three Months Ended March 31, -------------------- 1994 1993 -------- --------- Cash Flows From Operating: Net income $ 38,226 $ 44,204 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 52,853 51,883 Amortization of nuclear fuel 10,821 15,108 Allowance for funds used during construction (2,822) (2,702) Postretirement benefit accrual 7,154 8,124 Deferred income taxes, net (530) 15,170 Deferred investment tax credits, net (1,547) (2,394) Changes in assets and liabilities: Receivables, net 32,876 7,927 Materials and supplies (7,060) 15,268 Accounts and wages payable (72,848) (84,418) Taxes accrued 46,833 28,519 Interest and dividends accrued or declared 13,173 8,041 Other, net (863) (21,271) -------- --------- Net cash provided by operating activities 116,266 83,459 Cash Flows From Investing: Construction expenditures (85,392) (67,007) Allowance for funds used during construction 2,822 2,702 Nuclear fuel expenditures (5,274) (4,855) -------- --------- Net cash used in investing activities (87,844) (69,160) Cash Flows From Financing: Dividends on preferred and common stock (64,077) (62,913) Environmental bond funds 3,341 47,500 Redemptions - Nuclear fuel lease (4,100) (13,930) Short-term debt (59,600) - Long-term debt (25,000) (387,500) Preferred stock - (32,287) Issuances - Nuclear fuel lease 22,521 274 Short-term debt - 58,500 Long-term debt 100,000 342,000 Preferred stock - 33,000 -------- --------- Net cash used in financing activities (26,915) (15,356) -------- --------- Net change in cash and cash equivalents 1,507 (1,057) Cash and cash equivalents at beginning of period 1,297 2,257 -------- --------- Cash and cash equivalents at end of period $ 2,804 $ 1,200 ======== ========= 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) $ 15,850 $ 21,977 Income taxes 145 0 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 1993 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. 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, 1994 and 1993 are not necessarily indicative of trends for any twelve-month period. Note 4 - Electric rates charged to customers provide for recovery of Callaway Plant decommissioning costs over the life of the plant, based on an assumed 40-year life, ending with expiration of the plant's operating license in 2024. The Callaway site is assumed to be decommissioned using the DECON (immediate dismantlement) alternative. Decommissioning costs, including decontamination, dismantling and site restoration, are estimated to be $372 million in current year dollars and are expected to escalate 4.5% per year through the end of decommissioning activity in 2033. Decommissioning costs are charged to depreciation expense over Callaway's service life and amounted to $6.7 million in 1993 and $1.7 million in the first quarter 1994. Every three years, the Missouri Public Service Commission (MoPSC) requires the registrant to file updated cost studies for decommissioning Callaway and rates may be adjusted at such times to reflect changes in assumptions. The MoPSC has approved the costs currently being collected from customers and deposited in an external trust fund established to provide for Callaway's decommissioning. Fund earnings are expected to average 10.4% thru 2017 and 8.4% thereafter until 2033. If the assumed return on trust assets is not earned, the registrant believes it is probable that such earnings deficiency will be recovered in rates. Trust fund earnings, net of expenses were $3.5 million in 1993 and $.1 million in the first quarter 1994, and appear on the balance sheet as increases in Nuclear decommissioning trust fund and in the Accumulated provision for nuclear decommissioning. Page 6 UNION ELECTRIC COMPANY ---------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS First quarter 1994 common stock earnings were $34.9 million, a decrease of $5.6 million from first quarter 1993. First quarter 1994 earnings of 34 cents per share were 6 cents lower than the corresponding period of 1993. Common stock earnings for the twelve months ended March 31, 1994 were $277.5 million, a $23.4 million decrease from the preceding twelve-month period. Earnings of $2.72 per share during the twelve months ended March 31, 1994 were 23 cents per share below results for the twelve months ended March 31, 1993. The lower first quarter 1994 earnings resulted from mild weather which decreased electric and gas revenues. Earnings were also adversely affected by higher federal and Missouri income tax rates and increased non-fuel operating expenses. The lower earnings for the twelve months ended March 31, 1994 versus the prior twelve-month period reflects registrant's $18 million net gain on the sale of its Iowa and northern Illinois electric properties in December, 1992, higher income taxes from increased federal and state rates and greater operating expenses, partially offset by higher operating revenues, lower fuel prices and reduced interest expenses. The higher operating expenses are the result of the expenses associated with the 1993 summer floods and of accruing postretirement benefit costs beginning in January, 1993. The impact of significant items affecting revenues, costs and earnings during the three-month and twelve-month periods ended March 31, 1994 and 1993 is detailed below: Electric Operating Revenues - - ----------------------------- (Millions of Dollars) Variations for periods ended March 31, 1994 from comparable prior periods -------------------------------------------- Three Months Twelve Months ------------ ------------- Rate variations.................. $ - $(34.1) Effect of abnormal weather....... (14.0) 37.1 Growth and other................. 12.5 24.3 ------ ------ $ (1.5) $ 27.3 ------ ------ First quarter 1994 kilowatt-hour sales increased 1 percent from the same quarter of 1993. Growth in industrial and commercial sales which rose 2 percent and 3 percent, respectively, was partially offset by a 1 percent decline in sales to the weather sensitive residential class. The weather this year was milder than the colder than normal weather that occurred in the first quarter of 1993. Kilowatt-hour sales during the twelve months ended March 31, 1994 increased 1 percent over the prior twelve-month period, reflecting warmer 1993 spring and summer weather as compared to 1992. Residential sales increased 7 percent and commercial sales were up 3 percent, while sales to industrial customers decreased 9 percent, primarily reflecting the December, 1992 sale of the registrant's Iowa and northern Illinois service territory. Electric operating revenues for the current twelve-month period reflect the 2.5% electric rate reduction in Missouri effective January 1, 1993. Page 7 UNION ELECTRIC COMPANY ---------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS (Continued) Operating Expenses - - ------------------ (Millions of Dollars) Variations for periods ended March 31, 1994 from comparable prior periods ------------------------------------------- Three Months Twelve Months ------------ ------------- Fuel: Variation in generation............................. $ (.5) $(28.1) Price............................................... (15.4) (17.9) Amortization of uranium litigation settlement....... - (.1) Generation efficiencies............................. .8 9.4 Department of Energy assessment..................... .3 .7 Net interchange sales and purchased power variation.. .6 28.5 ------ ------ $(14.2) $ (7.5) ------ ------ The decrease in fuel and purchased power costs during the three months ended March 31, 1994, versus the three months ended March 31, 1993, is primarily due to lower fuel prices, partially offset by decreased generating efficiencies and higher net purchased power costs. The decreased fuel costs for the twelve months ended March 31, 1994, versus the twelve months ended March 31, 1993, reflects reduced fossil-fueled generation caused by the 1993 flood-interrupted coal deliveries and lower fuel prices. These reductions were partially offset by increased power purchases made to conserve coal and reduced generating efficiencies. Other operating expense variations reflect recurring conditions such as growth, inflation and wage increases. During the three months ended March 31, 1994, versus the comparable prior year period, operations expenses other than fuel and purchased power, were $1 million higher primarily due to increased employee labor, pension and medical insurance costs, offset in part by reduced purchased gas costs. Maintenance expenses during the current three month period were $4 million higher due to increased power plant maintenance. For the twelve months ended March 31, 1994, versus the prior twelve-month period, operations expenses other than fuel and purchased power, increased $45 million, primarily due to a $23 million increase in accrued employee postretirement benefits expense, a $4 million increase in purchased gas costs, a $7 million increase in labor costs, and higher pension, computer services and tree trimming costs. Maintenance expenses during the same period increased $11 million primarily due to flood-related expenses and increased power plant maintenance. Depreciation expense for the three-month and twelve-month periods ended March 31, 1994, versus the comparable periods in 1993 increased $1 million and $4 million, respectively, primarily due to increases in depreciable property. Elimination of the amortization of phase-in credits associated with the registrant's nuclear plant phase-in plan reduced operating expenses by $24 million for the twelve months ended March 31, 1994. Other taxes charged to operating expenses during the three and twelve months ended March 31, 1994, versus the comparable prior year periods, increased $1 million and $5 million. Real estate taxes increased in the three-month period and gross receipts, real estate and payroll taxes were all higher for the twelve-month period. Page 8 UNION ELECTRIC COMPANY ---------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS (Continued) Operating Expenses (Continued) - - ------------------ Income taxes charged to operating expenses during the three and twelve months ended March 31, 1994, versus the comparable periods ended March 31, 1993, increased $2 million and $3 million, respectively, primarily due to increased federal and Missouri income tax rates. Other Income and Deductions - - --------------------------- Miscellaneous other net income and deductions decreased $10 million for the twelve months ended March 31, 1994, versus the twelve months ended March 31, 1993, reflecting the gain on the sale of the registrant's Iowa and northern Illinois electric distribution properties in December 1992, partially offset by lower miscellaneous income deductions. Interest - - -------- During the three-month and twelve-month periods ended March 31, 1994 versus the comparable prior year periods, interest decreased $1 million and $5 million, respectively, reflecting the refinancing of higher-cost debt with lower-cost issues and lower interest rates on variable rate debt. Allowance for Funds Used During Construction (AFC) - - -------------------------------------------------- Variations in AFC track variations in construction work in progress and were not significant for the reporting periods. During the twelve-month periods ended March 31, 1994 and 1993, AFC rates averaged 8.1 percent and 6.2 percent, respectively. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Liquidity and Capital Resources - - ------------------------------- On January 24, 1994, the registrant issued $100,000,000 of 7% Series First Mortgage Bonds due 2024. 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 26, 1994, the following matters, which are more fully described in Exhibit 23 hereto, 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..... 84,806,198 1,092,574 8,853,082 Thomas A. Hays........... 84,873,388 1,031,950 8,853,082 Thomas H. Jacobsen....... 84,840,806 1,047,276 8,853,082 Richard A. Liddy......... 84,669,152 1,182,082 8,853,082 John Peters MacCarthy.... 84,852,709 1,042,043 8,853,082 Paul L. Miller, Jr....... 84,687,357 1,171,641 8,853,082 Charles W. Mueller....... 84,902,001 1,039,717 8,853,082 Robert H. Quenon......... 84,769,250 1,107,070 8,853,082 Harvey Saligman.......... 84,649,248 1,219,874 8,853,082 Janet McAfee Weakley..... 84,815,599 1,132,048 8,853,082 Item (2) Stockholder Proposal re report on Callaway Plant emissions. Non-Voted For Against Abstain Brokers/2/ --- ------- ------- ---------- 10,038,590 63,808,255 3,368,291 17,313,804 - - ------------- /1/ Reflects effect of cumulative voting. /2/ Ascertained by deduction. 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, 1994. Exhibit 12(b) - Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements, 12 Months Ended March 31, 1994. Exhibit 23* - Proxy Statement dated March 17, 1994 containing a description of the matters referred to under Item 4. *This exhibit heretofore has been filed with the Securities and Exchange Commission pursuant to requirements of the Acts administered by the Commission and is hereby incorporated herein by reference. (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 12, 1994 By /s/ Donald E. Brandt ---------------------------------- Donald E. Brandt Senior Vice President Finance and Corporate Services