The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from Business Wire

Kinder Morgan, Inc. Declares Dividend of $0.30 Per Share

Wednesday, October 19, 2011

Kinder Morgan, Inc. Declares Dividend of $0.30 Per Share16:05 EDT Wednesday, October 19, 2011 HOUSTON (Business Wire) -- Kinder Morgan, Inc. (NYSE: KMI) today reported third quarter cash available to pay dividends of $186.9 million. Through the first three quarters of the year, the company reported cash available to pay dividends of $592.2 million. The board of directors declared a dividend of $0.30 per share ($1.20 annualized), payable on Nov. 15, 2011, to shareholders of record as of Oct. 31, 2011. This represents an increase of 3 percent from the declared dividend of $0.29 per share ($1.16 annualized) that was announced when KMI was taken public in February of this year. Chairman and CEO Richard D. Kinder said, “KMI had a good third quarter and is on target to exceed its previously disclosed annual budget of $820 million in cash available to pay dividends, as we are outperforming our initial budget projections for the year. KMI continues to benefit from strong performance at Kinder Morgan Energy Partners.” As previously announced, KMI and El Paso Corporation (NYSE: EP) have entered into a definitive agreement whereby KMI will acquire all of the outstanding shares of EP in a transaction that will create the largest midstream and the fourth largest energy company in North America with an enterprise value of approximately $94 billion and 80,000 miles of pipelines. The total purchase price, including the assumption of debt outstanding at El Paso Corporation and at El Paso Pipeline Partners, L.P. (NYSE: EPB), is approximately $38 billion. Prior to closing, the transaction will require approval of both KMI and EP shareholders. The transaction is expected to close in the second quarter of 2012 and is subject to customary regulatory approvals. KMI owns the general partner of Kinder Morgan Energy Partners, L.P. (NYSE: KMP), one of the largest publicly traded pipeline limited partnerships in America, and has limited partner interests in KMP and Kinder Morgan Management, LLC (NYSE: KMR). Approximately 98 percent of the distributions KMI receives are attributable to KMP. KMI also owns a 20 percent interest in Natural Gas Pipeline Company of America. Please refer to KMP's third quarter earnings news release (also distributed today) for more detailed information on KMP and KMR. Kinder Morgan, Inc. (NYSE: KMI) is a leading pipeline transportation and energy storage company in North America. It owns an interest in or operates more than 37,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel. KMI owns the general partner interest of Kinder Morgan Energy Partners, L.P. (NYSE: KMP), one of the largest publicly traded pipeline limited partnerships in America. Combined, KMP and KMI constitute the largest midstream energy entity in the United States with an enterprise value of over $55 billion. For more information please visit www.kindermorgan.com. Please join Kinder Morgan at 4:30 p.m. Eastern Time on Wednesday, Oct. 19, at www.kindermorgan.com for a LIVE webcast conference call on the company's third quarter earnings.The non-generally accepted accounting principles, or non-GAAP, financial measure ofcash available to pay dividends is presented in this news release.This non-GAAP financial measure should not be considered as analternative to a GAAP measure such as net income or any other GAAP measure of liquidity or financial performance.Cash available to pay dividends is a significant metric used by us and by external users of our financial statements, such as investors, research analysts, commercial banks and others, to compare basic cash flows generated by us to the cash dividends we expect to pay our shareholders on an ongoing basis.Management uses this metric to evaluate our overall performance.Cash available to pay dividends is also an important non-GAAP financial measure for our shareholders because it serves as an indicator of our success in providing a cash return on investment.This financial measure indicates to investors whether or not we typically are generating cash flow at a level that can sustain or support an increase in the quarterly dividends we are paying.Our dividend policy provides that, subject to applicable law, we will pay quarterly cash dividends generally representing the cash we receive from our subsidiaries less any cash disbursements and reserves established by our board of directors.Cash available to pay dividends is also a quantitative measure used in the investment community because the value of a share of an entity like KMI that pays out all or a substantial proportion of its cash flow, is generally determined by the dividend yield (which in turn is based on the amount of cash dividends the corporation pays to its shareholders).The economic substance behind our use of cash available to pay dividends is to measure and estimate the ability of our assets to generate cash flows sufficient to pay dividends to our investors.We believe the GAAP measure most directly comparable to cash available to pay dividends is income from continuing operations.A reconciliation of cash available to pay dividends to income from continuing operations is provided in this release.Our non-GAAP measure described above should not be considered as an alternative to GAAP net income and has important limitations as an analytical tool. Our computation of cash available to pay dividends may differ from similarly titled measures used by others. You should not consider this non-GAAP measure in isolation or as a substitute for an analysis of our results as reported under GAAP.Management compensates for the limitations of this non-GAAP measure by reviewing our comparable GAAP measures, understanding the differences between the measures and taking this information into account in its analysis and its decision making processes.This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.Although Kinder Morgan believes that its expectations are based on reasonable assumptions, it can give no assurance that such assumptions will materialize.Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include those enumerated in Kinder Morgan's Forms 10-K and 10-Q as filed with the Securities and Exchange Commission and those set forth herein under the caption “Other News.”     Kinder Morgan, Inc. and SubsidiariesPreliminary Cash Available to Pay DividendsIncluding an Interim Capital Transaction(Non-GAAP, Unaudited)(In millions)             Three Months Ended September 30,Nine Months Ended September 30,2011201020112010 KMP distributions to us From ownership of general partner interest (1) (5) $ 303.5 $ 97.6 $ 878.5 $ 607.4 On KMP units owned by us (2) 25.0 23.5 74.2 69.5 On KMR shares owned by us (3)   15.6     13.8     45.6     39.9   Total KMP distributions to us 344.1 134.9 998.3 716.8 NGPL PipeCo LLC's distributions to us   9.8     18.2     19.7     34.7     Total distributions received 353.9 153.1 1,018.0 751.5 General and administrative expenses and sustaining capital expenditures (2.5 ) 0.9 (7.7 ) 1.7 Interest expense   (79.8 )   (74.6 )   (160.7 )   (153.0 )   Cash available to pay dividends before cash taxes 271.6 79.4 849.6 600.2 Cash taxes (4)   (84.7 )   (18.1 )   (257.4 )   (169.2 )   Cash available to pay dividends (5)$186.9   $61.3   $592.2   $431.0     Notes (1)   Based on (i) Kinder Morgan Energy Partners, L.P. (KMP) distributions of $1.15 and $3.42 per common unit paid in the three and nine months ended September 30, 2011, respectively, and distributions of $1.09 and $3.21 per common unit paid in the three and nine months ended September 30, 2010, respectively (versus the $1.16 and $3.45 per common unit declared for the three and nine months ended September 30, 2011, respectively, and distributions of $1.11 and $3.27 per common unit declared in the three and nine months ended September 30, 2010, respectively), (ii) 316.2 million and 298.2 million aggregate common units, Class B units and i-units outstanding as of January 31, 2011 and January 29, 2010, respectively, (iii) 318.9 million and 299.7 million aggregate common units, Class B units and i-units outstanding as of April 29, 2011 and April 30, 2010, respectively, (iv) 329.7 million and 309.3 million aggregate common units, Class B units and i-units outstanding as of July 29, 2011 and July 30, 2010, respectively and (v) with respect to the 7.9 million common units issued during 2010 that were deemed by us to be issued in connection with financing a portion of the acquisition of KMP's initial 50% interest in the KinderHawk joint venture, we as general partner waived receipt of its related incentive distributions from the second quarter 2010 through 2011. (2) Based on 21.7 million KMP units owned by us multiplied by the KMP per unit distribution paid, as outlined in footnote (1) above. (3) Assumes that we sold approximately 243,000 and 699,000 Kinder Morgan Management, LLC (KMR) shares that we received as distributions in the three and nine months ended September 30, 2011, respectively, and approximately 232,000 and 679,000 KMR shares that we received as distributions in the three and nine months ended September 30, 2010, respectively, at the price used to calculate the number of KMR shares received in the quarterly distributions. We did not sell any KMR shares in 2011 or 2010. We intend periodically to sell the KMR shares we receive as distributions to generate cash. (4) 2010 amounts include approximately $61 million of tax benefits related to an interim capital transaction. (5) Includes $170 million pre-tax (approximately $109 million after-tax) negative impact in the third quarter of 2010 of a KMP distribution of cash from an interim capital transaction. As a result of the distribution of cash from an interim capital transaction, the amount actually distributed to the general partner in the third quarter of 2010 was $170 million lower than it otherwise would have been had all distributions been cash from operations. Excluding the effect of the distribution of cash from an interim capital transaction, 2010 projected cash available to pay dividends would have been approximately $170 million and $540 million, respectively, for the three and nine months ended September 30.                 Kinder Morgan, Inc. and SubsidiariesPreliminary Cash Available to Pay DividendsExcluding an Interim Capital Transaction(Non-GAAP, Unaudited)(In millions)   Three Months Ended September 30,Nine Months Ended September 30,2011201020112010 KMP distributions to us From ownership of general partner interest (1) (5) $ 303.5 $ 267.6 $ 878.5 $ 777.4 On KMP units owned by us (2) 25.0 23.5 74.2 69.5 On KMR shares owned by us (3)   15.6     13.8     45.6     39.9   Total KMP distributions to us 344.1 304.9 998.3 886.8 NGPL PipeCo LLC's distributions to us   9.8     18.2     19.7     34.7     Total distributions received 353.9 323.1 1,018.0 921.5 General and administrative expenses and sustaining capital expenditures (2.5 ) 0.9 (7.7 ) 1.7 Interest expense   (79.8 )   (74.6 )   (160.7 )   (153.0 )   Cash available to pay dividends before cash taxes 271.6 249.4 849.6 770.2 Cash taxes (4)   (84.7 )   (79.3 )   (257.4 )   (230.4 )   Cash available to pay dividends (5)$186.9   $170.1   $592.2   $539.8     Notes (1)   Based on (i) Kinder Morgan Energy Partners, L.P. (KMP) distributions of $1.15 and $3.42 per common unit paid in the three and nine months ended September 30, 2011, respectively, and distributions of $1.09 and $3.21 per common unit paid in the three and nine months ended September 30, 2010, respectively (versus the $1.16 and $3.45 per common unit declared for the three and nine months ended September 30, 2011, respectively, and distributions of $1.11 and $3.27 per common unit declared in the three and nine months ended September 30, 2010, respectively), (ii) 316.2 million and 298.2 million aggregate common units, Class B units and i-units outstanding as of January 31, 2011 and January 29, 2010, respectively, (iii) 318.9 million and 299.7 million aggregate common units, Class B units and i-units outstanding as of April 29, 2011 and April 30, 2010, respectively, (iv) 329.7 million and 309.3 million aggregate common units, Class B units and i-units outstanding as of July 29, 2011 and July 30, 2010, respectively and (v) with respect to the 7.9 million common units issued during 2010 that were deemed by us to be issued in connection with financing a portion of the acquisition of KMP's initial 50% interest in the KinderHawk joint venture, we as general partner waived receipt of its related incentive distributions from the second quarter 2010 through 2011. (2) Based on 21.7 million KMP units owned by us multiplied by the KMP per unit distribution paid, as outlined in footnote (1) above. (3) Assumes that we sold approximately 243,000 and 699,000 Kinder Morgan Management, LLC (KMR) shares that we received as distributions in the three and nine months ended September 30, 2011, respectively, and approximately 232,000 and 679,000 KMR shares that we received as distributions in the three and nine months ended September 30, 2010, respectively, at the price used to calculate the number of KMR shares received in the quarterly distributions. We did not sell any KMR shares in 2011 or 2010. We intend periodically to sell the KMR shares we receive as distributions to generate cash. (4) 2010 amounts exclude approximately $61 million of tax benefits related to an interim capital transaction. (5) Excludes $170 million pre-tax (approximately $109 million after-tax) negative impact in the third quarter of 2010 of a KMP distribution of cash from an interim capital transaction. As a result of the distribution of cash from an interim capital transaction, the amount actually distributed to the general partner in the third quarter of 2010 was $170 million lower than it otherwise would have been had all distributions been cash from operations. Including the effect of the distribution of cash from an interim capital transaction, 2010 projected cash available to pay dividends was approximately $61 million and $431 million, respectively, for the three and nine months ended September 30.             Kinder Morgan, Inc. and SubsidiariesPreliminary Consolidated Statement of Income(Unaudited)(In millions, except per share amounts)       Three Months Ended September 30,Nine Months Ended September 30,2011201020112010   Revenues $ 2,206.0   $ 2,088.2   $ 6,247.6   $ 6,236.7     Costs, expenses and other Operating expenses 1,354.4 1,294.9 3,842.6 3,933.1 Depreciation, depletion and amortization 287.8 261.7 807.6 813.7 General and administrative 109.1 308.2 399.2 528.7 Taxes, other than income taxes 39.0 41.9 141.4 128.1 Other expense (income)   0.2     0.4     (12.3 )   2.2     1,790.5     1,907.1     5,178.5     5,405.8     Operating income 415.5 181.1 1,069.1 830.9   Other income (expense) Earnings (loss) from equity investments 71.0 57.2 214.7 (256.1 ) Amortization of excess cost of equity investments (1.8 ) (1.4 ) (4.9 ) (4.3 ) Interest, net (169.4 ) (168.9 ) (505.1 ) (475.9 ) Other, net   (164.2 )   5.4     (156.2 )   9.7     Income before income taxes 151.1 73.4 617.6 104.3   Income tax (expense) benefit   (66.5 )   (20.6 )   (250.2 )   29.1     Net income from continuing operations 84.6 52.8 367.4 133.4   Loss from discontinued operations   (0.4 )   (0.2 )   (0.5 )   (0.4 )   Net income 84.2 52.6 366.9 133.0   Net (income) loss attributable to noncontrolling interests   67.3     (42.0 )   71.7     (237.3 )   Net income (loss) attributable to KMI$151.5   $10.6   $438.6   $(104.3)   Basic Earnings per Common Share (1) (2) Class P Shares $0.21   $0.52   Class A Shares $0.19   $0.48     Basic Weighted average common shares outstanding Class P Shares   110.9     110.8   Class A Shares   596.1     596.2     Diluted Earnings per Common Share Class P Shares $0.21   $0.52   Class A Shares $0.19   $0.48     Diluted Weighted average common shares outstanding Class P Shares   707.9     707.4   Class A Shares   596.1     596.2     Declared dividend per share (3)$0.30   $0.74     Notes (1)   Earnings per share not applicable to the three and nine months ended September 30, 2010. (2) The Class A shares earnings per share as compared to the Class P shares earnings per share has been reduced by the dividend paid to the Class B shareholders on May 16, 2011 and August 15, 2011. (3) Nine months 2011 dividend per share has been prorated for the portion of the first quarter Kinder Morgan, Inc. (KMI) was a public company ($0.14 per share). If KMI had been a public company for the entire nine months, the year to date declared dividend would have been $0.89 per share ($0.29, $0.30 and $0.30 per share for the first quarter, second quarter and third quarter of 2011, respectively).                 Kinder Morgan, Inc. and SubsidiariesPreliminary Reconciliation of Cash Available to Pay Dividends to Income from Continuing OperationsIncluding an Interim Capital Transaction(Unaudited)(In millions)   Three Months Ended September 30,Nine Months Ended September 30,2011201020112010   Income from continuing operations (1) $ 84.6 $ 52.8 $ 367.4 $ 133.4 Depreciation, depletion and amortization (1) 287.8 261.7 807.6 813.7 Amortization of excess cost of investments (1) 1.8 1.4 4.9 4.3 Loss (income) from equity investments (1) (71.0 ) (57.2 ) (214.7 ) 256.1 Distributions from equity investments 65.2 53.0 200.9 154.9 Distributions from equity investments in excess of cumulative earnings 53.9 78.0 185.0 187.9 KMP certain items (2) 231.8 18.8 479.5 176.3 KMI purchase accounting (3) (2.0 ) (12.4 ) (8.0 ) (29.5 ) Going Private Transaction litigation settlement (4) - 200.0 - 200.0 Interim capital transaction (5) - (166.6 ) - (166.6 ) Difference between cash and book taxes (21.3 ) 7.7 (29.2 ) (204.7 ) Difference between cash and book interest expense for KMI (38.7 ) (35.2 ) (36.5 ) (36.2 ) Sustaining capital expenditures (6) (55.0 ) (40.7 ) (140.8 ) (121.8 ) KMP declared distribution on its limited partner units owned by the public (7) (345.1 ) (308.9 ) (1,007.4 ) (892.8 ) Other (8)   (5.1 )   8.9     (16.5 )   (44.0 )   Cash available to pay dividends$186.9   $61.3   $592.2   $431.0     Notes (1)   Consists of the corresponding line items in the preceding Preliminary Unaudited Consolidated Statement of Income. (2) Consists of items such as hedge ineffectiveness, legal and environmental reserves, gain/loss on sale, insurance proceeds from casualty losses, and asset disposition expenses. Three months 2011 includes $167 million non-cash loss on remeasurement of KMP's previously held equity interest in KinderHawk to fair value and $69 million related to rate case and other litigation matters in KMP's products pipelines on the West Coast. Nine months 2011 includes (i) $167 million non-cash loss on KMP's previously held equity interest in KinderHawk discussed above, (ii) $234 million increase to KMP's legal reserve attributable to rate case and other litigation involving KMP's products pipelines on the West Coast and (iii) KMP's portion ($87 million) of a $100 million special bonus expense for non-senior employees, which KMP is required to recognize in accordance with U.S. generally accepted accounting principles. However, KMP has no obligation, nor did it pay any amounts in respect to such bonuses. The cost of the $100 million special bonus to non-senior employees was not borne by our Class P shareholders. In May of 2011 we paid for the $100 million of special bonuses, which included the amounts allocated to KMP, using $64 million (after-tax) in available earnings and profits reserved for this purpose and not paid in dividends to our Class A shareholders. KMP adds back these certain items in its calculation of distributable cash flow used to determine its distribution. For more information, see KMP's 3rd Quarter 2011 Earnings Release furnished on Form 8-K with the SEC on October 19, 2011. (3) Consists of non-cash purchase accounting adjustments related to the Going Private Transaction primarily associated with non-cash income recognized from the revaluation of KMP's crude hedges. (4) Three months 2010 includes a $200 million (pre-tax) Going Private Transaction litigation settlement. (5) Includes an interim capital transaction wherein a portion of KMP's partnership distributions for the second quarter of 2010 (which it paid in the third quarter of 2010) was a distribution of cash from an interim capital transaction rather than a distribution of cash from operations. The difference between the $166.6 million pre-tax amount shown here and the $170 million pre-tax amount discussed elsewhere in this release is due to differences between the earnings impact and the cash impact of the interim capital transaction. The difference is reflected in this table in "Other". (6) We define sustaining capital expenditures as capital expenditures that do not expand the capacity of an asset. (7) Declared distribution multiplied by limited partner units outstanding on the applicable record date less units owned by us. Includes distributions on KMR shares. KMP must generate the cash to cover the distributions on the KMR shares, but those distributions are paid in additional shares and KMP retains the cash. We do not have access to that cash. (8) Consists of items such as timing and other differences between earnings and cash (for example, a lag between when earnings are recognized and distributions are paid, including distributions to us by KMP), the elimination of any earnings from our formerly owned Power segment, KMI certain items, including, for the nine months 2011, KMI's portion ($13 million) of the special bonus described in footnote (2) above, and KMP's cash flow in excess of its distributions.         Kinder Morgan, Inc. and SubsidiariesPreliminary Consolidated Balance Sheet(Unaudited)(In millions)     September 30,December 31,20112010ASSETS   Cash and cash equivalents - KMI (1) $ 3 $ 373 Cash and cash equivalents - KMP (1) 271 129 Other current assets 1,204 1,285 Property, plant and equipment, net - KMI (1) 2,372 2,468 Property, plant and equipment, net - KMP (1) 15,344 14,603 Investments - KMI (1) 396 405 Investments - KMP (1) 3,272 3,886 Goodwill - KMI (1) 3,637 3,597 Goodwill - KMP (1) 1,304 1,234 Deferred charges and other assets   2,354     928   TOTAL ASSETS$30,157   $28,908     LIABILITIES AND SHAREHOLDERS' EQUITY   Liabilities Short-term debt: KMI (1) (2) (3) $ 1,217 $ 751 KMP (1) 1,844 1,262 Other current liabilities 1,334 1,630 Long-term debt: KMI (1) (4) 1,943 2,780 KMP (1) 10,662 10,277 Preferred interest in general partner of KMP 100 100 Value of interest rate swaps 1,147 656 Deferred income taxes 2,226 2,093 Other long-term liabilities   936     820   Total liabilities   21,409     20,369     Shareholders' Equity Accumulated other comprehensive loss (32 ) (137 ) Other shareholders' equity (5) 3,488 - Other members' equity (5)   -     3,576   Total KMI equity 3,456 3,439 Noncontrolling interests   5,292     5,100   Total shareholders' equity   8,748     8,539   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$30,157   $28,908     KMI's debt, net of its cash and cash equivalents (6) $ 3,192 $ 3,196   Distributions received from KMP and other equity investees (7) $ 1,326 $ 1,239   Debt to Distributions Received2.42.6   Notes (1)   KMI amounts include its consolidated subsidiaries, excluding KMP. KMP amounts do not include allocations of purchase accounting adjustments associated with our 2007 Going Private Transaction. These allocations have been applied to KMI's amounts so that KMP's amounts agree to its 3rd Quarter 2011 Earnings Release furnished on Form 8-K with the SEC on October 19, 2011. (2) 2011 amount includes $839.3 million of 6.5% senior notes that are due on September 1, 2012. 2010 amount includes $750.0 million of 5.35% senior notes paid on January 5, 2011 with cash on hand and KMI's bank facility. (3) Amounts include $1 million as of September 30, 2011 and December 31, 2010 for allocations of purchase accounting adjustments related to KMP as described in footnote (1) above. (4) Amounts include ($40) million and ($44) million as of September 30, 2011 and December 31, 2010, respectively, for allocations of purchase accounting adjustment. Amounts also include $4 million and $5 million as of September 30, 2011 and December 31, 2010, respectively, for allocations of purchase accounting adjustments related to KMP as described in footnote (1) above. (5) On February 10, 2011, we converted from a Delaware limited liability company to a Delaware corporation. (6) Amounts include only KMI's short-term and long-term debt, net of its cash and its cash equivalents and exclude allocation of purchase accounting adjustments described in footnotes (3) and (4) above and the preferred interest in general partner of KMP. (7) Distributions received from equity investees is shown net of KMI's G&A and sustaining capital expenditures over last 12 months. Twelve months ended December 31, 2010 amount excludes the approximately $170 million impact of an interim capital transaction.   Kinder Morgan, Inc.Emily Mir, 713-369-8060Media RelationsorMindy Mills Thornock, 713-369-9490Investor Relationswww.kindermorgan.com