11-K 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 11-K --------------- ANNUAL REPORT Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1999 Commission File Number 1-6446 --------------- K N Energy, Inc. Profit Sharing and Savings Plan Kinder Morgan, Inc. 500 Dallas Street, Suite 1000 Houston, Texas, 77002 K N Energy, Inc. Profit Sharing and Savings Plan Financial Statements and Additional Information December 31, 1999 and 1998 K N Energy, Inc. Profit Sharing and Savings Plan Index to Financial Statements and Additional Information ----------------------------------------------------------------- Pages Reports of Independent Accountants 1 - 2 Financial Statements: Statements of Net Assets Available for Benefits as of 3 December 31, 1999 and 1998 Statement of Changes in Net Assets Available for Benefits for the year ended December 31, 1999 4 Notes to Financial Statements 5 - 10 Additional Information*: Schedule of Assets Held for Investment Purposes - Schedule H, Item 4(i) as of December 31, 1999 11 Schedule of Reportable Transactions - Schedule H, Item 4(j) for the year ended December 31, 1999 12 * Other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. 1 Report of Independent Accountants To the Participants and Administrator of the K N Energy, Inc. Profit Sharing and Savings Plan: In our opinion, the accompanying statement of net assets available for benefits as of December 31, 1999 and the related statement of changes in net assets available for benefits for the year ended December 31, 1999 present fairly, in all material respects, the net assets available for benefits of the K N Energy, Inc. Profit Sharing and Savings Plan (the "Plan") at December 31, 1999, and the changes in net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, as amended. These supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP June 28, 2000 Denver, Colorado 2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Plan Administrator, K N Energy, Inc. Profit Sharing and Savings Plan: We have audited the accompanying statement of net assets available for plan benefits of the K N ENERGY, INC. PROFIT SHARING AND SAVINGS PLAN (the "Plan"), as of December 31, 1998. This financial statement is the responsibility of the Plan's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain a reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by nanagement, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above presents fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1998, in conformity with accounting principles generally accepted in the United States. /s/ARTHUR ANDERSEN LLP Denver, Colorado, April 23, 1999. 3 K N Energy, Inc. Profit Sharing and Savings Plan Statements of Net Assets Available for Benefits December 31, 1999 and 1998 -----------------------------------------------------------------
1999 1998 Assets Cash $ 75,625 $ -- -------------- ------------- Investments, at fair value (Note 3): Kinder Morgan, Inc. (formerly K N Energy, Inc.) 58,342,856 60,903,758 common stock Registered investment companies 265,235,398 178,518,517 Money market funds 75,041,768 51,487,203 Participant loans 4,509,229 4,769,204 -------------- ------------- Total investments 403,129,251 295,678,682 -------------- ------------- Net assets available for benefits $ 403,204,876 $ 295,678,682 ============== =============
The accompanying notes are an integral part of these financial statements. 4 K N Energy, Inc. Profit Sharing and Savings Plan Statement of Changes in Net Assets Available for Benefits for the year ended December 31, 1999 --------------------------------------------------------------- Additions To Net Assets Attributed To: Investment income: Net appreciation in fair value of investments (Note 3) $ 33,776,618 Interest income 4,746,956 Dividend income 24,436,739 ------------- 62,960,313 Participant contributions 8,609,067 Transfers from the MRA Plan (Note 1) 96,631,250 Other 270,710 ------------- Total additions 168,471,340 ------------- Deductions From Net Assets Attributed To: Benefits paid to participants (60,933,819) Administration fees (11,218) Refund of excess contributions (109) ------------- Total deductions (60,945,146) ------------- Net increase 107,526,194 Net assets available for benefits: Beginning of year 295,678,682 ------------- End of year $ 403,204,876 ============= The accompanying notes are an integral part of these financial statements. 5 K N Energy, Inc. Profit Sharing and Savings Plan Notes to Financial Statements and Schedules --------------------------------------------------------------- 1. Description of the Plan General The Employees Retirement Fund Trust Profit Sharing Plan (the "Profit Sharing Plan") of K N Energy, Inc. was established in 1945 for the benefit of eligible employees (as defined in the Profit Sharing Plan indenture). Effective with K N Energy, Inc.'s acquisition of Kinder Morgan (Delaware), Inc., formerly Kinder Morgan, Inc., a Delaware corporation, K N Energy, Inc. changed its name to Kinder Morgan, Inc. (the "Company"). The Profit Sharing Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Profit Sharing Plan is the surviving plan of a merger, effective July 1, 1994, of the 401(k) Retirement Savings Plan and Trust (the "401(k) Plan") and the Profit Sharing Plan. The surviving Profit Sharing Plan was amended and restated, including the name change to the K N Energy, Inc. Energy, Inc. Profit Sharing and Savings Plan (the "Plan"). In connection with the acquisition of MidCon Corp. by the Company, the MidCon Corp. Savings Plan (the "MSA Plan") was merged into the Plan effective May 1, 1998. All assets in the MSA Plan, which totaled approximately $138 million, were liquidated and invested in the Plan pursuant to the participants' directions. All MidCon employees whose employment terminated as a result of the MidCon acquisition became 100 percent vested in their account balances due to a partial termination of the MSA Plan. In connection with the acquisition of MidCon Corp. by the Company, the MidCon Retirement Account Plan (the "MRA Plan") was merged into the Plan effective January 1, 1999. All assets in the MRA Plan, which totaled approximately $96 million, were liquidated and invested in the Plan pursuant to the participants' direction. All MidCon employees whose employment terminated as a result of the MidCon acquisition became 100 percent vested in their account balances due to a partial termination of the MRA Plan. Benefits under the Plan are not guaranteed by the Pension Benefit Guaranty Corporation. Reference should be made to the Plan agreement for a more complete description of the Plan's provisions. Contributions Participants may elect to make pretax contributions totaling from 1 percent to 15 percent of their annual compensation, limited by requirements of the Internal Revenue Code ("IRC"). Participants may discontinue their election to contribute at any time. For each Plan year, the Company contributes to the Plan a maximum of 10 percent of the total compensation (excluding bonuses) paid to eligible employees during that year, based on the Company's attainment of financial targets set by the Company's Board of Directors for that fiscal year. The 1999 and 1998 contributions were based on eligible net income. The total Company contribution was $0 in 1999 and 1998. Beginning with the Company contribution in 1990, 50 percent of each participant's portion of the annual Company contribution must be designated to the fund consisting of the Company's common stock, (the "Kinder Morgan, Inc. Common Stock Fund"). Participants are not allowed to transfer their employer contribution portion of their investments in Company common stock until age 55. The participants can invest the remaining 50 percent in other investment elections. Under IRS regulation, annual additions under the Plan and all other plans sponsored by the Company are limited to the lesser of 25 percent of eligible compensation or $30,000 for each employee. Annual additions are defined as employer contributions and employee contributions. Benefits/Vesting Obligations for distributions to participants who terminated from the Plan prior to December 31, 1999 and 6 1998 but were not paid until subsequent to year end were $0 and $99,192 at December 31, 1999 and 1998, respectively. Participants are fully and immediately vested in their elective deferral contributions and rollover contributions. Employees hired after January 1, 1995 are subject to a four- year vesting provision (25 percent per year of service) for Company contributions. Contributions may be withdrawn, with the approval of the Advisory Committee, in the event of unusual expenses connected with illness or disability, that the money is necessary for children's college expenses, or for the purchase of a primary residence, as defined in the Plan document. If not withdrawn earlier, a participant's account will be distributed in the event of termination of employment, death, or termination of the Plan. If a participant's account is less than $3,500, a lump-sum distribution will generally be made. If a participant's account is greater than $3,500, the participant's distribution options are: lump-sum distribution, monthly or yearly installments, or purchase of an annuity. Retirees may continue to leave their account in the Plan. Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts. Participants may borrow, from the vested portion of their fund accounts, a minimum of $500 up to a maximum equal to the lesser of $50,000 or 50 percent of their vested deferral account balance. The loans are subject to certain restrictions as defined in the Plan document and applicable restrictions under the IRC. Forfeitures Forfeitures of non-vested employer contributions remain in the plan and earn interest income. Forfeited balances of terminated participants' non-vested accounts are used to reduce future Company profit sharing contributions. During 1999, $102,702 of employer contributions was forfeited by terminating employees before those amounts became vested. At December 31, 1999, the remaining forfeiture balance was $443,360. 2. Significant Accounting Policies Basis of Accounting The financial statements of the Plan are prepared on the accrual basis of accounting. The preparation of the financial statements in conformity with generally accepted accounting principles requires the Plan's management to use estimates and assumptions that affect the accompanying financial statements and disclosures. Actual results could differ from these estimates. Investment Valuation and Income Recognition Investments are accounted for at fair market values. Participant loans are valued at cost, which approximates fair market value. Unrealized appreciation (depreciation) is the difference between the fair value at the end of the current year and the cost of the investment, if acquired during the Plan year, or the fair value at the beginning of the Plan year. The accompanying supplemental schedule of assets held for investment purposes reflects cost basis determined utilizing an original cost approach as required by ERISA. Purchases and sales of the funds are reflected on a trade date basis. Gain or loss on sale of units is based on average cost. The Plan presents in the statement of changes in net assets the net appreciation (depreciation) in the fair value of investments which consists of realized gains and losses, and the net change in unrealized appreciation (depreciation) on those investments. 7 Other The Company's annual contribution is determined when annual net income and payroll amounts are known. The contribution is allocated to participants subsequent to year end. The Company provides certain administrative and accounting services to the Plan at no cost and also pays the cost of certain outside services provided to the Plan. Such outside services paid by the Company were approximately $29,000 and $94,000 for 1999 and 1998, respectively. Payment of Benefits Benefits are recorded when paid. 3. Investments Participants may designate their allocated portion of the contribution, in percentage increments divisible by five, to one or more of the eligible investment programs. New Plan participants may elect to transfer investments from other qualified plans into the Plan. The investment programs of the Plan and the number of participants in each program at December 31, 1999 and 1998 are briefly described as follows: Kinder Morgan, Inc. Common Stock Fund - This program consists of shares of the Company's common stock. At December 31, 1999, 2,441 participants held 2,890,049 shares with a cost of $51,877,351 and a market value of $58,342,856. At December 31, 1998, 2,493 participants held 2,511,495 shares with a cost of $27,698,020 and a market value of $60,903,758. Putnam Voyager Fund - This program consists of investments in common stocks of small companies and is managed by Putnam Investment Management, Inc. At December 31, 1999, 2,403 participants held 3,128,151 shares with a cost of $78,345,422 and a market value of $98,849,582. At December 31, 1998, 2,576 participants held 3,010,130 shares with a cost of $53,122,542 and a market value of $65,982,049. Putnam New Opportunities Fund - This program consists of investments in a portfolio of stocks in certain emerging industry groups that Putnam believes offer above-average long-term growth. At December 31, 1999, 792 participants held 221,541 shares with a cost of $15,872,604 and a market value of $20,472,631. At December 31, 1998, 583 participants held 85,079 shares with a cost of $4,242,746 and a market value of $4,971,186. Putnam Asset Allocation Growth Portfolio - This program uses a strategic allocation percentage between equity securities and fixes income securities. At December 31, 1999, 1,101 participants held 2,089,795 shares with a cost of $29,980,553 and a market value of $31,952,964. At December 31, 1998, 667 participants held 622,634 shares with a cost of $8,227,554 and a market value of $8,486,500. Putnam Asset Allocation Balanced Portfolio - This program uses a strategic allocation percentage between equity securities and fixed income securities. At December 31, 1999, 885 participants held 1,884,309 shares with a cost of $23,040,260 and a market value of $24,439,486. At December 31, 1998, 646 participants held 893,166 shares with a cost of $10,598,121 and a market value of $10,726,925. Putnam Asset Allocation Conservative Portfolio - This program uses a strategic allocation percentage between equity securities and fixed income securities. At December 31, 1999, 8 414 participants held 569,002 shares with a cost of $5,924,888 and a market value of $6,008,662. At December 31, 1998, 69 participants held 77,229 shares with a cost of $784,271 and a market value of $801,637. Putnam Fund for Growth and Income - This program seeks capital growth and current income by investing primarily in a portfolio of common stocks that offer the potential for capital growth, current income or both. At December 31, 1999, 2,053 participants held 2,558,815 shares with a cost of $50,693,160 and a market value of $48,028,955. At December 31, 1998, 2,419 participants held 3,056,327 shares with a cost of $59,348,919 and a market value of $62,624,146. Putnam Income Fund - This program invests primarily in corporate bonds from credit-worthy companies. At December 31, 1999, 670 participants held 997,985 shares with a cost of $6,503,528 and a market value of $6,367,143. At December 31, 1998, 726 participants held 1,129,527 shares with a cost of $7,746,353 and a market value of $7,816,328. Putnam International Growth Fund - This program seeks capital appreciation by investing in a diversified portfolio of stocks of companies located outside the United States. At December 31, 1999, 1,296 participants held 997,374 shares with a cost of $22,374,675 and a market value of $29,115,976. At December 31, 1998, 1,309 participants held 889,742 shares with a cost of $14,517,963 and a market value of $17,109,746. Putnam Money Market Fund - This program invests primarily in money market investments. At December 31, 1999, 2,352 participants held 75,041,768 shares with a cost of $75,041,767 and a market value of $75,041,768. At December 31, 1998, 2,283 participants held 51,487,203 shares with a cost and a market value of $51,487,203. Prior to January 1, 1987, participants had the option of purchasing life insurance through the Plan. Thereafter, the segment of the Plan allowing for the purchase of a life insurance policy on the life of the participant was frozen so that no new policies could be written. Participants with policies at December 31, 1986, had the following options: 1) allow the policy to remain in force with a frozen face value and fixed premium payments, 2) elect to use the cash surrender value ("CSV") of the policy to purchase paid-up life insurance or 3) reinvest the CSV of the policy in another fund. The value of life insurance in force is not recorded in these financial statements. The following presents the fair value of investments that represent 5 percent or more of the Plan's net assets:
December 31, ------------------------------ 1999 1998 Kinder Morgan, Inc. Common Stock Fund $ 58,342,856 $ 60,903,758 Putnam Asset Allocation Growth Portfolio 31,952,964 -- Putnam Asset Allocation Balanced Portfolio 24,439,486 -- Putnam International Growth Fund 29,115,976 17,109,746 Putnam Fund for Growth and Income 48,028,955 62,624,146 Putnam New Opportunities Fund 20,472,631 -- Putnam Voyager Fund 98,849,582 65,982,049 Putnam Money Market Fund 75,041,768 51,487,203
9 During 1999, the Plan's investments appreciated (depreciated) in value (including gains and losses on investments bought and sold, as well as held during the year) as follows: Kinder Morgan, Inc. Common Stock Fund $ (9,201,027) Putnam Asset Allocation Growth Portfolio 3,258,555 Putnam Asset Allocation Balanced Portfolio 1,702,155 Putnam Asset Allocation Conservation Portfolio 43,041 Putnam International Growth Fund 9,535,409 Putnam Fund for Growth and Income (4,003,632) Putnam Income Fund (603,868) Putnam New Opportunities Fund 5,696,759 Putnam Voyager Fund 27,349,226 ------------- $ 33,776,618 ============= 4. Nonparticipant - Directed Investments Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant-directed investments in Kinder Morgan, Inc. common stock of $58,342,856 and $60,903,758 at December 31, 1999 and 1998 respectively, is as follows: Year ended December 31, 1999 ----------------- Changes in Net Assets: Dividends $ 1,745,007 Net depreciation (9,201,027) Contributions 1,191,591 Benefits paid (4,254,912) Interfund transfers 7,862,006 Other, net 96,433 ------------- $ (2,560,902) ============= 5. Tax Status The Plan is qualified under the IRC as exempt from federal income taxes, and the Plan received a favorable determination letter from the Internal Revenue Services on August 23, 1996. The Plan has been amended since receiving this determination; however, the Plan administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, the administrator believes that the Plan was tax exempt as of the financial statement dates. Employer contributions to the Plan and all earnings from Plan investments are not taxable to participants until a partial or complete distribution of such contributions or earnings is made. 6. Party-in-Interest Transactions Certain Plan investments are shares of Kinder Morgan, Inc. common stock. Certain Plan investments are 10 shares of mutual funds and money market funds managed by Putnam Investments, Inc. Putnam Fiduciary Trust Company (the Trustee of the Plan) is a subsidiary of Putnam Investments, Inc. and, therefore, these transactions qualify as party-in-interest. 7. Risks and Uncertainties The Plan provides for various investment options in mutual funds, money market funds and Company common stock. Investments, in general, are exposed to various risks, such as interest rate, credit and overall market volatility risk. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of investments will occur in the near term and that such changes could materially affect participants' account balances and the amounts shown in the Statements of Net Assets Available for Benefits. 8. New Accounting Pronouncement In September 1999, the American Institute of Certified Public Accountants issued Statement of Position 99-3 ("SOP 99-3"), Accounting for and Reporting of Certain Defined Contribution Plan Investments and Other Disclosure Matters. SOP 99-3 eliminates certain disclosure requirements for defined contribution investments. SOP 99-3 is effective for plan years ending after December 15, 1999. Accordingly, the Company has adopted SOP 99-3 and these financial statements reflect changes herein. Certain prior period amounts have been reclassified to conform with the current year presentation. 11 K N Energy, Inc. Profit Sharing and Savings Plan Schedule of Assets Held for Investment Purposes - Schedule H, Item 4i as of December 31, 1999 -------------------------------------------------------------
Number of Shares or Issue, Borrower, Lessor or Similar Party Description of Investment Units Cost* Current Value **Kinder Morgan, Inc. Common Stock Fund Company Common Stock 2,890,049 $ 51,877,851 $ 58,342,856 **Putnam Investments: Putnam Voyager Fund Registered Investment Company 3,128,151 78,345,422 98,849,582 Putnam New Opportunities Fund Registered Investment Company 221,541 15,872,604 20,472,631 Putnam Asset Allocation Growth Portfolio Registered Investment Company 2,089,795 29,980,553 31,952,964 Putnam Asset Allocation Balanced Portfolio Registered Investment Company 1,884,309 23,040,260 24,439,486 Putnam Asset Allocation Conservative Portfolio Registered Investment Company 569,002 5,924,888 6,008,662 Putnam Fund for Growth and Income Registered Investment Company 2,558,815 50,693,160 48,028,955 Putnam Income Fund Registered Investment Company 997,985 6,503,528 6,367,142 Putnam International Growth Fund Registered Investment Company 997,374 22,374,675 29,115,976 Putnam Money Market Fund Money Market Fund 75,041,768 5,041,767 75,041,768 Participant Loans Loans, ranging 0 - 5 years maturity with interest rates ranging from 5.0% to 10.36% 4,509,229 4,509,229 ------------ ------------ Total investments $364,163,937 $403,129,251 ============ ============
* Determined using original historical cost ** Party-in-Interest (Note 6) 12 K N Energy, Inc. Profit Sharing and Savings Plan Schedule of Reportable Transactions - Schedule H, Item 4j for the year ended December 31, 1999 -----------------------------------------------------------------
Identity Current of Party * Purchase * Selling Cost of Value of Net Gain Involved Description of Transaction Price Price Asset Asset (Loss) ** Putnam Asset Allocation Growth Portfolio $36,277,096 -- $36,277,096 $36,277,096 -- ** Putnam Asset Allocation Growth Portfolio -- $47,385,362 45,840,277 47,385,362 $1,545,085 ** Putnam Asset Allocation Balanced Portfolio 27,272,038 -- 27,272,038 27,272,038 -- ** Putnam Asset Allocation Balanced Portfolio -- 35,199,128 34,767,398 35,199,128 431,730 ** Putnam International Growth Fund 26,987,822 -- 26,987,822 26,987,822 -- ** Putnam International Growth Fund -- 24,516,977 19,131,091 24,516,977 5,385,885 ** Putnam Fund for Growth and Income 65,098,224 -- 65,098,224 65,098,224 -- ** Putnam Fund for Growth and Income -- 75,689,722 73,753,932 75,689,722 1,935,791 ** Putnam Income Fund 8,571,895 -- 8,571,895 8,571,895 -- ** Putnam Income Fund -- 16,488,639 16,886,148 16,488,639 (397,509) ** Putnam New Opportunities Fund 28,269,865 -- 28,269,865 28,269,865 -- ** Putnam New Opportunities Fund -- 18,465,118 16,639,964 18,465,118 1,825,154 ** Putnam Voyager Fund 93,200,426 -- 93,200,426 93,200,426 -- ** Putnam Voyager Fund -- 87,682,059 67,977,501 87,682,059 19,704,558 ** Kinder Morgan, Inc. Common Stock Fund 17,804,123 -- 17,804,123 17,804,123 -- ** Kinder Morgan, Inc. Common Stock Fund -- 11,172,821 10,240,325 11,172,821 932,496 ** Putnam Money Market Fund 30,024,251 -- 30,024,251 30,024,251 -- ** Putnam Money Market Fund -- 45,053,478 45,053,478 45,053,478 --
*Represents a transaction or a series of transactions in securities of the same issue in excess of 5 percent of the plan's market value as of December 31, 1998. **Putnam Investments, Inc. - Party-in-Interest (Note 6) 13 Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees have duly caused this annual report to be signed by the undersigned hereunto duly authorized. K N ENERGY, INC. PROFIT SHARING AND SAVINGS PLAN By: /s/JOSEPH LISTENGART ---------------------------------- Name: Joseph Listengart ---------------------------------- Title: Vice President and General Counsel ---------------------------------- Date: June 28, 2000 ---------------------------------- 14 EXHIBIT INDEX Exhibit Number Description -------------- ----------- 23.1 Consent dated June 28, 2000 23.2 Consent dated June 27, 2000