<PAGE>
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, 1998
[ ] 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, 1998:
Common Stock, $5 par value - 102,123,834
<PAGE>
Union Electric Company
Index
Page No.
Part I Financial Information (Unaudited)
Management's Discussion and Analysis 2
Balance Sheet
- June 30, 1998 and December 31, 1997 6
Statement of Income
- Three months, six months and 12 months ended
June 30, 1998 and 1997 7
Statement of Cash Flows
- Six months ended June 30, 1998 and 1997 8
Notes to Financial Statements 9
Part II Other Information
<PAGE>
PART I. FINANCIAL INFORMATION (UNAUDITED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Union Electric Company (AmerenUE or the Registrant) is a subsidiary of Ameren
Corporation (Ameren), a newly created holding company which is registered under
the Public Utility Holding Company Act of 1935 (PUHCA). In December 1997,
AmerenUE and CIPSCO Incorporated (CIPSCO) combined to form Ameren, with AmerenUE
and CIPSCO's subsidiaries, Central Illinois Public Service Company (AmerenCIPS)
and CIPSCO Investment Company (CIC), becoming wholly-owned subsidiaries of
Ameren (the Merger).
The following discussion and analysis should be read in conjunction with the
Notes to Financial Statements beginning on page 9, and the Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A),
the Audited Financial Statements and the Notes to Financial Statements appearing
in the Registrant's 1997 Annual Report included in its 1997 Form 10-K.
RESULTS OF OPERATIONS
Earnings
Second quarter 1998 earnings of $64 million declined $3 million compared to 1997
second quarter earnings. Earnings for the six months ended June 30, 1998
decreased $5 million from the year-ago period to $92 million. Earnings for the
12 months ended June 30, 1998, were $288 million, a $3 million decrease from the
preceding 12-month period. Excluding the extraordinary charge recorded in the
fourth quarter of 1997 to write off the generation-related regulatory assets and
liabilities of the Registrant's Illinois retail electric business, earnings for
the 12-month period ended June 30, 1998, were $324 million.
Earnings fluctuated due to many conditions, the primary ones being: weather
variations, credits to electric customers, sales growth, fluctuating operating
costs, the write-off of certain generation-related regulatory assets and
liabilities, and merger-related costs. The significant items affecting revenues,
costs and earnings during the three-month, six-month and 12-month periods ended
June 30, 1998, and 1997 are detailed below.
Electric Operations
<TABLE>
<CAPTION>
Electric Operating Revenues Variations for periods ended June 30, 1998
from comparable prior-year periods
- ------------------------------ ---------------- --------------- ----------------
(Millions of Dollars) Three Months Six Months Twelve Months
- ------------------------------ ---------------- --------------- ----------------
<S> <C> <C> <C>
Credit to customers $ (26) $ (24) $ (22)
Effect of abnormal weather 33 22 53
Growth and other 31 47 63
Interchange sales - (12) (29)
- ------------------------------ ---------------- --------------- ----------------
$ 38 $ 33 $ 65
- ------------------------------ ---------------- --------------- ----------------
</TABLE>
The $38 million increase in second quarter electric revenues compared to the
year-ago quarter was primarily due to warm weather, a strong regional economy
and benefits realized from elimination of the retail electric fuel adjustment
clause in the Registrant's Illinois jurisdiction effective May 1998, partially
offset by increased credits to Missouri electric customers (see Note 5 under
Notes to Financial Statements for further information). Weather-sensitive
residential kilowatthour sales increased 18 percent, commercial sales increased
7 percent and industrial sales increased 1 percent.
Electric revenues for the first six months of 1998 increased $33 million over
the same period in 1997 primarily due to warm weather and benefits realized from
elimination of the retail electric fuel adjustment clause in the Registrant's
Illinois jurisdiction in the second quarter of 1998, partially offset by
increased credits to customers (see Note 5 under Notes to Financial Statements
for further information) and a decrease in interchange sales. Residential,
commercial, and industrial sales increased 7 percent, 3 percent, and 2 percent,
respectively, due to the strong regional economy. Interchange sales decreased 37
percent due to decreased sales opportunities.
The increase in electric revenues for the 12 months ended June 30, 1998,
compared to the prior 12-month period was primarily due to favorable weather,
partially offset by a higher estimated Missouri customer credit recorded during
the period (see Note 5 under Notes to Financial Statements for further
information) and a 37 percent decline in interchange sales. Residential sales
2
<PAGE>
increased 6 percent, while commercial and industrial sales increased 3 percent
and 2 percent, respectively, due to the strong regional economy.
<TABLE>
<CAPTION>
Fuel and Purchased Power Variations for periods ended June 30, 1998
from comparable prior-year periods
- ------------------------------------ -------------- ------------ ---------------
(Millions of Dollars) Three Months Six Months Twelve Months
- ------------------------------------ -------------- ------------ ---------------
<S> <C> <C> <C>
Fuel:
Variation in generation $ (9) $ (6) $ (6)
Price 4 6 (2)
Generation efficiencies and other 2 2 2
Purchased power variation 25 15 29
- ------------------------------------ -------------- ------------ ---------------
$ 22 $ 17 $ 23
- ------------------------------------ -------------- ------------ ---------------
</TABLE>
The increase in fuel and purchased power costs for the three, six, and twelve
months ended June 30, 1998, versus the comparable prior year periods was
primarily due to increased sales volumes and higher purchased power prices.
While unprecedented prices for power purchases occurred in the marketplace
during the last week of June 1998, the Registrant was able to effectively manage
its power costs in the face of soaring wholesale electricity prices. Overall,
the abnormally high prices for power purchases in June had little impact on the
Registrant's financial results for the periods presented.
Gas Operations
Gas revenues for the six and twelve month periods ended June 30, 1998, decreased
$3 million and $4 million, respectively, compared to the same year-ago periods
due to an overall decrease in dekatherm sales due to milder winter weather,
partially offset by the annual $11.5 million Missouri gas rate increase
effective February 1998.
Gas costs for the six and twelve months ended June 30, 1998, decreased $9
million and $12 million, respectively, compared to the same year-ago periods
primarily due to lower gas prices and a decline in dekatherm sales.
Other Operating Expenses
Other operating expense variations reflected recurring factors such as growth,
inflation, labor and benefit increases.
Other operations expenses for the three, six, and twelve months ended June 30,
1998, increased $21 million, $26 million, and $43 million, respectively,
compared to the same year-ago periods primarily due to an increase in injuries
and damages expense and increased information system-related costs and
professional services expenses.
Maintenance expenses for the three and six months ended June 30, 1998, increased
$5 million and $4 million, respectively, compared to the year-ago periods
primarily due to the costs of refueling the Callaway Nuclear Plant, partially
offset by a reduction in scheduled fossil plant maintenance. The spring 1998
scheduled refueling was completed in 31 days. The $3 million decrease in
maintenance expenses for the 12-month period ended June 30, 1998, compared to
the prior 12-month period was due to decreased scheduled fossil plant
maintenance.
Depreciation and amortization expense for the three, six, and twelve-month
periods ended June 30, 1998, increased $3 million, $6 million, and $9 million,
respectively, versus the comparable 1997 periods, primarily due to increased
depreciable property and amortization of the Missouri portion of merger-related
costs which were recorded as a regulatory asset upon Merger close under the
conditions of the Missouri Public Service Commission (MoPSC) order approving the
Merger.
In March 1998, Ameren announced plans to reduce its other operating expenses,
including plans to eliminate approximately 400 employee positions by mid-1999
through a hiring freeze and a targeted voluntary separation plan (the Plan). In
July 1998, Ameren offered separation packages to employees whose positions are
to be eliminated through the Plan. The Registrant expects that the Plan will
result in a charge to earnings in the third quarter of 1998 once the number of
employees that will accept the terms of the Plan is known. At this time, the
Registrant is unable to estimate the expected charge to earnings resulting from
the Plan.
Other Income and Deductions
Miscellaneous, net for the three months and six months ended June 30, 1998,
increased $3 million and $4 million, respectively, versus the comparable 1997
periods, primarily due to reduced merger-related costs. Miscellaneous, net
increased $17 million for the 12-month period ended June 30, 1998, compared to
the year-ago period primarily due to the reversal of the Missouri
3
<PAGE>
portion of merger-related costs which were recorded as a regulatory asset upon
Merger close under conditions of the MoPSC order approving the Merger.
Balance Sheet
The $82 million increase in trade accounts receivable and unbilled revenues was
due primarily to higher revenues in May and June 1998 compared to November and
December 1997.
Changes in accounts and wages payable and other taxes accrued result from the
timing of various payments to taxing authorities and suppliers.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $158 million for the six months
ended June 30, 1998, compared to $198 million during the same 1997 period.
Cash flows used in investing activities totaled $104 million and $151 million
for the six months ended June 30, 1998 and 1997, respectively. Construction
expenditures for the six months ended June 30, 1998 for constructing new or
improving existing facilities, and complying with the Clean Air Act were $101
million. In addition, the Registrant expended $9 million for the acquisition of
nuclear fuel. Capital requirements for the remainder of 1998 are expected to be
principally for construction expenditures and the acquisition of nuclear fuel.
Cash flows used in financing activities were $44 million for the six months
ended June 30, 1998, compared to $38 million during the same 1997 period. The
Registrant's principal financing activities for the six months ended June 30,
1998, included the issuance of long-term debt of $149 million, the redemption of
short-term debt and the nuclear fuel lease of $21 million and $51 million,
respectively, and the payment of dividends.
The Registrant plans to continue utilizing short-term debt to support normal
operations and other temporary requirements. The Registrant is authorized by the
Securities and Exchange Commission under PUHCA to have up to $1.1 billion of
short-term unsecured debt instruments outstanding at any one time. Short-term
borrowings consist of bank loans (maturities generally on an overnight basis)
and commercial paper (maturities generally within 10 to 45 days). At June 30,
1998, the Registrant had committed bank lines of credit aggregating $154 million
(all of which were 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. The lines of credit are renewable annually at various
dates throughout the year. At June 30, 1998, the Registrant had no outstanding
short-term borrowings.
The Registrant also has a bank credit agreement due 2000 which permits the
borrowing of up to $300 million on a long-term basis, all of which was unused
and $116 million was available at June 30, 1998.
Additionally, the Registrant has a lease agreement which provides for the
financing of nuclear fuel. At June 30, 1998, the maximum amount which could be
financed under the agreement was $120 million. Cash provided from financing for
the first six months of 1998 included redemptions under the lease for nuclear
fuel of $51 million, offset in part by $8 million of issuances. At June 30,
1998, $75 million was financed under the lease.
RATE MATTERS
As a result of the Electric Service Customer Choice and Rate Relief Law of 1997
(the Law) providing for electric utility restructuring in Illinois, AmerenUE
filed a proposal with the Illinois Commerce Commission to eliminate the electric
fuel adjustment clause for Illinois retail customers, thereby including a
historical level of fuel costs in base rates. The ICC approved AmerenUE's filing
on April 28, 1998.
In June 1998, the Registrant filed a residential rate reduction tariff with the
ICC to comply with the requirements of the Law. Under provisions of the Law, a
rate decrease of 5 percent will become effective for Illinois residential
electric customers beginning August 1, 1998.
See Note 5 under Notes to Financial Statements for further discussion of Rate
Matters.
4
<PAGE>
ACCOUNTING MATTERS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and
requires recognition of all derivatives in the balance sheet measured at fair
value. SFAS 133 is effective for fiscal years beginning after June 15, 1999.
Earlier application is encouraged, but permitted only as of the beginning of any
fiscal quarter that begins after issuance of the standard. At this time, the
Registrant is unable to determine the impact of SFAS 133 on its financial
position or results of operations upon adoption.
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits." SFAS
132 revises employers' disclosures about pension and other postretirement
benefit plans. SFAS 132 is effective for fiscal years beginning after December
15, 1998, although earlier application is encouraged. SFAS 132 is not expected
to have a material impact on the Registrant's financial position or results of
operations upon adoption.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance on accounting for the costs of
computer software developed or obtained for internal use. Under SOP 98-1,
certain costs which are currently expensed by the Registrant may be capitalized
and amortized over some future period. SOP 98-1 is effective for fiscal years
beginning after December 15, 1998, although earlier application is encouraged.
At this time, the Registrant is unable to determine the impact of SOP 98-1 on
its financial position or results of operations upon adoption.
SAFE HARBOR STATEMENT
Statements made in this Form 10-Q 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 Registrant is providing
this 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; future market prices for electricity; average
rates for electricity in the Midwest; business and economic conditions; weather
conditions; fuel prices and availability; generation plant performance; monetary
and fiscal policies; and legal and administrative proceedings.
5
<PAGE>
UNION ELECTRIC COMPANY
----------------------
BALANCE SHEET
-------------
UNAUDITED
---------
(Thousands of Dollars, Except Shares)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
- ------ ----------- -----------
<S> <C> <C>
Property and plant, at original cost:
Electric $8,919,032 $8,832,039
Gas 202,808 197,959
Other 36,023 36,023
---------- ----------
9,157,863 9,066,021
Less accumulated depreciation and amortization 3,983,466 3,866,925
---------- ----------
5,174,397 5,199,096
Construction work in progress:
Nuclear fuel in process 97,088 134,804
Other 86,015 68,074
---------- ----------
Total property and plant, net 5,357,500 5,401,974
---------- ----------
Investments and other assets:
Nuclear decommissioning trust fund 148,699 122,438
Other 40,667 33,315
---------- ----------
Total investments and other assets 189,366 155,753
---------- ----------
Current assets:
Cash and cash equivalents 12,925 3,232
Accounts receivable - trade (less allowance for doubtful
accounts of $5,336 and $3,645, respectively) 229,433 179,708
Unbilled revenue 103,703 71,156
Other accounts and notes receivable 53,552 41,028
Materials and supplies, at average cost -
Fossil fuel 53,605 49,574
Other 95,779 97,375
Other 15,130 11,040
---------- ----------
Total current assets 564,127 453,113
---------- ----------
Regulatory assets:
Deferred income taxes 610,047 611,740
Other 170,589 179,705
---------- ----------
Total regulatory assets 780,636 791,445
---------- ----------
Total Assets $6,891,629 $6,802,285
========== ==========
CAPITAL AND LIABILITIES
Capitalization:
Common stock, $5 par value, authorized 150,000,000 shares -
outstanding 102,123,834 shares $ 510,619 $ 510,619
Other paid-in capital, principally premium on
common stock 701,896 716,879
Retained earnings 1,128,939 1,159,956
---------- ----------
Total common stockholders' equity 2,341,454 2,387,454
Preferred stock not subject to mandatory redemption 155,197 155,197
Long-term debt 1,967,807 1,846,482
---------- ----------
Total capitalization 4,464,458 4,389,133
---------- ----------
Current liabilities:
Current maturity of long-term debt 12,740 28,797
Short-term debt -- 21,300
Accounts and wages payable 146,036 188,014
Accumulated deferred income taxes 43,517 35,809
Taxes accrued 151,758 94,167
Other 158,858 142,859
---------- ----------
Total current liabilities 512,909 510,946
---------- ----------
Accumulated deferred income taxes 1,259,467 1,264,800
Accumulated deferred investment tax credits 147,034 149,891
Regulatory liability 166,111 175,638
Other deferred credits and liabilities 341,650 311,877
---------- ----------
Total Capital and Liabilities $6,891,629 $6,802,285
========== ==========
</TABLE>
6
<PAGE>
UNION ELECTRIC COMPANY
----------------------
STATEMENT OF INCOME
-------------------
UNAUDITED
---------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $ 574,962 $ 537,494 $ 1,011,279 $ 978,461 $ 2,221,389 $ 2,157,000
Gas 13,621 12,359 55,715 58,469 95,505 99,055
Other 93 101 267 282 488 508
----------- ----------- ----------- ----------- ----------- -----------
Total operating revenues 588,676 549,954 1,067,261 1,037,212 2,317,382 2,256,563
OPERATING EXPENSES:
Operations
Fuel and purchased power 135,847 114,329 247,624 230,520 517,099 494,331
Gas 8,456 9,453 28,435 36,962 54,926 66,938
Other 120,188 98,966 220,297 194,443 430,810 387,346
----------- ----------- ----------- ----------- ----------- -----------
264,491 222,748 496,356 461,925 1,002,835 948,615
Maintenance 66,830 61,722 114,875 110,920 221,381 224,090
Depreciation and amortization 64,254 61,220 128,775 122,664 254,072 244,677
Income taxes 45,831 48,293 70,263 69,628 193,401 194,132
Other taxes 54,443 51,887 102,045 102,404 211,590 212,463
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses 495,849 445,870 912,314 867,541 1,883,279 1,823,977
OPERATING INCOME 92,827 104,084 154,947 169,671 434,103 432,586
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 1,201 953 2,218 1,830 4,849 4,499
Miscellaneous, net 1,409 (1,760) 890 (2,841) 11,065 (5,549)
----------- ----------- ----------- ----------- ----------- -----------
Total other income and deductions 2,610 (807) 3,108 (1,011) 15,914
(1,050)
INCOME BEFORE
INTEREST CHARGES 95,437 103,277 158,055 168,660 450,017 431,536
INTEREST CHARGES:
Interest 30,660 35,453 64,820 70,633 132,863 135,749
Allowance for borrowed funds
used during construction (1,474) (1,818) (3,318) (3,245) (6,749) (6,274)
----------- ----------- ----------- ----------- ----------- -----------
Net interest charges 29,186 33,635 61,502 67,388 126,114 129,475
INCOME BEFORE
EXTRAORDINARY CHARGE 66,251 69,642 96,553 101,272 323,903 302,061
----------- ----------- ----------- ----------- ----------- -----------
EXTRAORDINARY CHARGE
(NET OF INCOME TAXES) -- -- -- -- (26,967) --
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME 66,251 69,642 96,553 101,272 296,936 302,061
----------- ----------- ----------- ----------- ----------- -----------
PREFERRED STOCK DIVIDENDS 2,205 2,205 4,409 4,409 8,817 11,033
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME AFTER PREFERRED
STOCK DIVIDENDS $ 64,046 $ 67,437 $ 92,144 $ 96,863 $ 288,119 $ 291,028
=========== =========== =========== =========== =========== ===========
</TABLE>
7
<PAGE>
UNION ELECTRIC COMPANY
----------------------
STATEMENT OF CASH FLOWS
-----------------------
UNAUDITED
---------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1998 1997
---- ----
<S> <C> <C>
Cash Flows From Operating:
Net income $ 96,553 $ 101,272
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 123,981 118,107
Amortization of nuclear fuel 16,182 19,901
Allowance for funds used during construction (5,536) (5,075)
Deferred income taxes, net (5,511) (728)
Deferred investment tax credits, net (2,857) (3,085)
Changes in assets and liabilities:
Receivables, net (94,796) (13,623)
Materials and supplies (2,435) 11,847
Accounts and wages payable (41,978) (96,619)
Taxes accrued 57,591 74,364
Other, net 16,742 (8,549)
--------- ---------
Net cash provided by operating activities 157,936 197,812
Cash Flows From Investing:
Construction expenditures (100,525) (146,079)
Allowance for funds used during construction 5,536 5,075
Nuclear fuel expenditures (9,352) (10,401)
--------- ---------
Net cash used in investing activities (104,341) (151,405)
Cash Flows From Financing:
Dividends on common stock (123,161) (129,697)
Dividends on preferred stock (4,409) (4,409)
Redemptions -
Nuclear fuel lease (51,152) (12,717)
Short-term debt (21,300) --
Long-term debt -- (45,000)
Preferred stock -- (63,924)
Issuances -
Nuclear fuel lease 7,620 20,703
Short-term debt -- 56,700
Long-term debt 148,500 140,000
--------- ---------
Net cash used in financing activities (43,902) (38,344)
Net increase in cash and cash equivalents 9,693 8,063
Cash and cash equivalents at beginning of year 3,232 4,897
--------- ---------
Cash and cash equivalents at end of period $ 12,925 $ 12,960
========= =========
Cash paid during the periods:
Interest (net of amount capitalized) $ 63,904 $ 62,799
Income taxes, net $ 62,138 $ 45,536
</TABLE>
8
<PAGE>
UNION ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
Note 1 - Effective December 31, 1997, following the receipt of all required
state and federal regulatory approvals, Union Electric Company (AmerenUE or the
Registrant) and CIPSCO Incorporated (CIPSCO) combined to form Ameren Corporation
(Ameren)(the Merger).
Note 2 - 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 1997
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 3 - 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 4 - 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, 1998 and 1997, are not necessarily indicative of trends for any
three-month, six-month, or twelve-month period.
Note 5 - On July 21, 1995, the Missouri Public Service Commission (MoPSC)
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 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, 1998, the Registrant recorded an
estimated $43 million credit for the third year of the plan compared to a $20
million credit recorded for 1997. This credit, which the Registrant expects to
pay to Missouri customers later this year, was reflected as a reduction in
electric revenues.
A new three-year experimental alternative regulation plan was included in the
joint agreement approved by the MoPSC in its February 1997 order approving the
Merger. Like the current plan, the new plan requires that earnings over a 12.61
percent ROE up to a 14 percent ROE will be shared equally between customers and
stockholders. The new three-year plan will also return to customers 90 percent
of all earnings above a 14 percent ROE up to a 16 percent ROE. Earnings above 16
percent ROE will be credited entirely to customers. The joint agreement also
provides for a Missouri electric rate decrease, effective September 1, 1998,
based on the weather-adjusted average annual credits to customers under the
current experimental alternative regulation plan.
Note 6 - Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" became effective on January 1, 1998. SFAS 130 requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in the financial statements with
the same prominence as other financial statement components. Adoption of SFAS
130 did not have a material effect on the financial position, results of
operations, liquidity or presentation of financial information of the
Registrant.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Any stockholder proposal intended for inclusion in the proxy material
for the Registrant's 1999 annual meeting of stockholders must be received by
December 1, 1998.
In addition, under the Registrant's By-Laws, shareholders who intend to
submit a proposal in person at an Annual Meeting, or who intend to nominate a
director at a Meeting, must provide advance written notice along with other
prescribed information. In general, said notice must be received by the
Secretary of the Registrant not later than 60 nor earlier than 90 days prior to
the Meeting. For the Registrant's 1999 annual meeting of stockholders, such a
proposal should be received not later than February 27, 1999 nor earlier than
January 28, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 12 - Computation of Ratio of Earnings to
Fixed Charges and Preferred Stock
Dividend Requirements, 12 Months
Ended June 30, 1998.
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, 1998 By /s/ Donald E. Brandt
-----------------------
Donald E. Brandt
Senior Vice President
Finance and Corporate Services
10
UNION ELECTRIC COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Year Ended December 31, 12 Months
-------------------------------------------------------------- Ended
June 30,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Thousands of Dollars Except Ratios
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 297,160 $ 320,757 $ 314,107 $ 304,876 $ 301,655 $ 296,936
Add- Extraordinary items net of tax -- -- -- -- 26,967 26,967
--------- --------- --------- --------- --------- ---------
Net Income from continuing operations $ 297,160 $ 320,757 $ 314,107 $ 304,876 $ 328,622 $ 323,903
Add- Federal and state income taxes:
Current 146,900 232,497 222,072 198,405 234,846 238,308
Deferred (net) 40,039 (20,208) (6,770) 4,160 (33,926) (38,635)
Deferred investment tax credits, net (7,626) (6,182) (6,181) (6,182) (10,451) (10,116)
Income tax applicable to nonoperating income 3,403 (2,280) (1,387) (173) 9,294 6,210
--------- --------- --------- --------- --------- ---------
182,716 203,827 207,734 196,210 199,763 195,767
--------- --------- --------- --------- --------- ---------
Net income before income taxes 479,876 524,584 521,841 501,086 528,385 519,670
--------- --------- --------- --------- --------- ---------
Add- fixed charges:
Interest on long term debt 124,430 135,608 129,239 128,375 135,004 129,268
Rentals 1,314 1,299 3,330 3,458 3,727 3,495
Amortization of net debt premium, discount,
expenses and losses 5,170 5,504 5,502 4,269 3,672 3,595
--------- --------- --------- --------- --------- ---------
130,914 142,411 138,071 136,102 142,403 136,358
--------- --------- --------- --------- --------- ---------
Earnings as defined 610,790 666,995 659,912 637,188 670,788 656,028
========= ========= ========= ========= ========= =========
Ratio of earnings to fixed charges 4.66 4.68 4.78 4.68 4.71 4.81
Earnings required for preferred dividends:
Preferred stock dividends 14,087 13,252 13,250 13,249 8,817 8,817
Adjustment to pre-tax basis 7,450 7,262 7,558 7,363 4,509 4,229
--------- --------- --------- --------- --------- ---------
21,537 20,514 20,808 20,612 13,326 13,046
Fixed charges plus preferred stock dividend
requirements 152,451 162,925 158,879 156,714 155,729 149,404
========= ========= ========= ========= ========= =========
Ratio of earnings to fixed charges plus
preferred stock dividend requirements 4.00 4.09 4.15 4.06 4.30 4.39
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
Exhibit 27
UNION ELECTRIC COMPANY
10-Q JUNE 30, 1998
FINANCIAL DATA SCHEDULE UT
PUBLIC UTILITY COMPANIES AND PUBLIC UTILITY HOLDING COMPANIES
APPENDIX E TO ITEM 601 (C) OF REGULATION S-K
(Thousands of Dollars)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 5,357,500
<OTHER-PROPERTY-AND-INVEST> 148,699
<TOTAL-CURRENT-ASSETS> 564,127
<TOTAL-DEFERRED-CHARGES> 40,667
<OTHER-ASSETS> 780,636
<TOTAL-ASSETS> 6,891,629
<COMMON> 510,619
<CAPITAL-SURPLUS-PAID-IN> 701,896
<RETAINED-EARNINGS> 1,128,939
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,341,454
0
155,197
<LONG-TERM-DEBT-NET> 1,905,900
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 61,907
<LEASES-CURRENT> 12,740
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,414,431
<TOT-CAPITALIZATION-AND-LIAB> 6,891,629
<GROSS-OPERATING-REVENUE> 1,067,261
<INCOME-TAX-EXPENSE> 70,263
<OTHER-OPERATING-EXPENSES> 842,051
<TOTAL-OPERATING-EXPENSES> 912,314
<OPERATING-INCOME-LOSS> 154,947
<OTHER-INCOME-NET> 3,108
<INCOME-BEFORE-INTEREST-EXPEN> 158,055
<TOTAL-INTEREST-EXPENSE> 61,502
<NET-INCOME> 96,553
4,409
<EARNINGS-AVAILABLE-FOR-COMM> 92,144
<COMMON-STOCK-DIVIDENDS> 123,161
<TOTAL-INTEREST-ON-BONDS> 0<F1>
<CASH-FLOW-OPERATIONS> 157,936
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1> Required on fiscal year-end only
<F2> Information not normally disclosed in financial statements and notes
</FN>
</TABLE>
