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Proc-Type: 2001,MIC-CLEAR
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Item 7. Financial Statements and Exhibits (c) Exhibits Exhibit Number Description 99.1 Press release of Kinder Morgan, Inc.
issued July 21, 2004. Item 12. Results of Operations and Financial Condition
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 21, 2004
KINDER MORGAN, INC.
(Exact name of registrant as specified in its charter)
Kansas
(State or other jurisdiction
of incorporation)
1-06446
(Commission
File Number)
48-0290000
(I.R.S. Employer
Identification No.)
500 Dallas Street, Suite 1000
Houston, Texas 77002
(Address of principal executive offices, including zip code)
713-369-9000
(Registrant's telephone number, including area code)
Each of the exhibits set forth below is being furnished pursuant to Item 12.
On July 21, 2004, Kinder Morgan, Inc. issued a press release regarding its financial results for the quarter and six months ended June 30, 2004 and will hold a webcast conference call on July 21, 2004 discussing those results. The press release is furnished as Exhibit 99.1 to this report.
-2-
S I G N A T U R E
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 hereunto duly authorized.
KINDER MORGAN, INC. | |||
|
|||
Dated: July 21, 2004 |
By: |
/s/ | JOSEPH LISTENGART |
Joseph Listengart Vice President and General Counsel |
-3-
EXHIBIT INDEX
Exhibit Number |
Description |
|
99.1 |
Press release of Kinder Morgan, Inc. issued July 21, 2004. |
-4-
Exhibit 99.1
[Kinder Morgan, Inc. Logo]
Larry Pierce Media Relations (713) 369-9407 |
Mindy Mills Investor Relations (713) 369-9490 www.kindermorgan.com |
KINDER MORGAN, INC. REPORTS RECORD
SECOND QUARTER NET INCOME; EPS UP 11 PERCENT
HOUSTON, July 21, 2004 - Kinder Morgan, Inc. (NYSE: KMI) today reported record second quarter net income of $104.4 million, or $0.84 diluted earnings per share, compared to $94.2 million, or $0.76 per share, for the comparable period in 2003. This represents an 11 percent increase in earnings per share. For the first six months of the year, net income was $231.4 million, or $1.85 diluted earnings per share, compared to $205.3 million, or $1.66 per share, through the second quarter of 2003.
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KMI-Q2 Earnings | Page 2 |
"Including this year's estimate, we expect to return over $2 billion to investors from 2000 through year end via dividends (approximately $500 million), stock repurchases (approximately $500 million) and debt reduction (approximately $1 billion)," Kinder explained. "Moving forward, we remain committed to returning cash to our shareholders in an economic and tax-efficient manner, while at the same time maintaining a strong balance sheet and investing in energy infrastructure."
Overview of Business Segments
KMI's interest in
KMP contributed $114.5 million of pre-tax earnings to KMI in the second quarter, up 17
percent over $97.8 million in the same period last year and on target to meet its
published annual budget of 16 percent growth. KMI will receive $122 million in total
distributions from its investment in KMP for the quarter, up from $103.9 million for the
second quarter of 2003. "KMP's cash flow continued to increase in the second quarter
primarily due to strong internal growth and modest contributions from acquisitions,"
Kinder said. As KMP's cash flow grows, KMI's general partner share of that cash flow grows
as well, up to 50 percent of incremental cash flow.
(more)
KMI-Q2 Earnings | Page 3 |
Natural Gas Pipeline Company of America (NGPL) reported second quarter segment earnings of $93.4 million, an 11 percent increase over $84.3 million for the same period last year and on target to meet its published annual budget of 3 percent growth. NGPL had a strong second quarter led by a 5 percent increase in transportation and storage revenues compared to the second quarter of 2003. "NGPL continues to benefit from successful contract negotiations, as 96 percent of the firm, long-haul transportation capacity is sold out through year end," Kinder said. Storage is fully contracted until April 2005. Throughput volumes were up slightly, led by volumes delivered on the Louisiana Line and injections into storage, offset by milder weather in the market area. Throughput has only modest impact on earnings, however, because the vast majority of firm transportation and storage revenues come from demand charges secured by contracts that customers pay regardless of the amount of natural gas they ship through the pipeline.
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KMI-Q2 Earnings | Page 4 |
Ouray, Colo., into service. Retail expects to add about 3,000
Western Slope customers via the pipeline over the next five years.
Power generated
second quarter segment earnings of $3.9 million, down from $10.8 million for the
comparable quarter last year in which the company booked about $6.8 million in power
development fees for the Jackson, Mich., power plant. The segment, which is expected to
produce only 1 percent of KMI's total segment earnings in 2004, is on target to meet its
published annual budget of $13.5 million.
Outlook
In January, KMI
published its annual budget for earnings per diluted share of $3.71 for 2004, and the
company expects to meet or exceed that target. The expectations are based on contributions
from assets currently owned by Kinder Morgan and do not include any benefits from
unidentified acquisitions. KMI's annual budget is posted on the company's web site at
www.kindermorgan.com.
Kinder Morgan, Inc. is one
of the largest energy transportation and storage companies in America, operating more than
35,000 miles of natural gas and products pipelines and almost 100 terminals. Kinder
Morgan, Inc. owns the general partner interest of Kinder Morgan Energy Partners, L.P., the
largest publicly traded pipeline limited partnership in the U.S. in terms of market
capitalization. Combined, the two companies have an enterprise value of approximately $23
billion. (Enterprise value is market value of the equity securities plus net debt,
excluding interest rate swaps.)
Please join us at 4:30 p.m. Eastern Time on Wednesday, July 21, at www.kindermorgan.com for a LIVE webcast conference call on the company's second quarter earnings.
In this release and as discussed following, we present a measure of earnings that differs from earnings measures prepared under Generally Accepted Accounting Principles (GAAP). We believe that this measure, which we have described as "diluted earnings per share before discontinued operations and certain other gains and losses", is most closely comparable to the GAAP measure "Diluted Earnings per Share from Continuing Operations." For 1999, we arrived at this earnings measure by beginning
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KMI-Q2 Earnings | Page 5 |
with a net loss of $259.9 million ($3.24 per diluted share) and removing the impact of a loss from discontinued operations of $395.3 million and income tax expense of $79.2 million to arrive at "Income from Continuing Operations Before Income Taxes" of $214.6 million as prepared and presented in accordance with GAAP. We then made adjustments to remove the impact of the following significant items: (1) a pre-tax gain of $127.0 million from sales of assets to Kinder Morgan Energy Partners, L.P., (2) pre-tax gains of $31.1 million from other asset sales, principally offshore natural gas pipeline and gathering assets and (3) a pre-tax loss of $37.4 million from merger-related and severance costs associated with the KN Energy/Kinder Morgan, Inc. merger. This adjusted pre-tax income from continuing operations of $93.9 million is reduced for income taxes of $34.6 million (utilizing the consolidated effective tax rate) to arrive at adjusted earnings of $59.3 million, or $0.74 per share (after division by the weighted average shares outstanding during 1999). We believe that, because of the significant impact of these items and the resulting distortion of the trend in earnings, this revised measure is more useful in comparing our current level of earnings to earnings at the time the current management team assumed responsibility for the combined KN Energy/Kinder Morgan, Inc. assets and operations.
In this release, we also present a measure of cash flow that differs from cash flow measures prepared under GAAP. In this release, we have defined cash flow to be pre-tax income before depletion, depreciation and amortization (DD&A), less cash paid for income taxes and less sustaining capital expenditures. In each case, the amounts included in the calculation of these measures are computed in accordance with GAAP, with the exception of sustaining capital expenditures, which is not a defined term under GAAP. Sustaining capital expenditures are defined as capital expenditures (determined in accordance with GAAP) which do not increase the capacity of the asset. We routinely calculate and communicate this measure to investors. We believe that continuing to provide this information results in consistency in our financial reporting. In addition, we believe that this measure is useful to investors because it provides investors with a quick, simple and reasonable estimate of our cash flow available for expansion projects, debt repayment, dividends and share repurchases.
We believe the most directly comparable cash flow measure computed under GAAP is "cash flow provided by operating activities." This GAAP measure differs from the cash flow measure used in this release in that (1) it is not reduced for sustaining capital expenditures, and (2) it is affected by a number of items that are not taken into account in the cash flow measure used in this release, including (i) adjustments for equity in earnings, (ii) distributions from equity investments, (iii) minority interests in income of consolidated subsidiaries, (iv) deferred purchased gas costs, (v) changes in gas in underground storage, (vi) changes in other working capital items, (vii) net gains or losses on sales of facilities, (viii) proceeds from termination of interest rate swaps, and (ix) other, net. We have attached a reconciliation of cash flow to preliminary cash provided from operations for actual reported results. Cash flow should be considered in
(more)
KMI-Q2 Earnings | Page 6 |
conjunction with cash provided from operations, as defined by GAAP.
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 are enumerated in Kinder Morgan's Forms 10-K and 10-Q as filed with the Securities and Exchange Commission.
# # #
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended |
Six Months Ended |
||||||
2004 |
2003 |
2004 |
2003 |
||||
Operating Revenues: | |||||||
Natural Gas Transportation and Storage | $ 171,946 |
$ 162,974 |
$ 370,739 |
$ 345,827 |
|||
Natural Gas Sales | 42,941 |
70,490 |
180,043 |
193,489 |
|||
Other | 21,980 |
18,401 |
38,671 |
31,417 |
|||
Total Operating Revenues | 236,867 |
251,865 |
589,453 |
570,733 |
|||
Operating Costs and Expenses: | |||||||
Gas Purchases and Other Costs of Sales | 52,210 |
79,852 |
185,681 |
192,807 |
|||
Operations and Maintenance | 37,934 |
31,549 |
74,128 |
61,450 |
|||
General and Administrative | 19,879 |
18,786 |
42,167 |
35,194 |
|||
Depreciation and Amortization | 29,707 |
29,047 |
59,188 |
58,672 |
|||
Taxes, Other Than Income Taxes | 8,451 |
7,383 |
16,832 |
14,557 |
|||
Total Operating Costs and Expenses | 148,181 |
166,617 |
377,996 |
362,680 |
|||
Operating Income | 88,686 |
85,248 |
211,457 |
208,053 |
|||
Other Income and (Expenses): | |||||||
Equity in Earnings of Kinder Morgan Energy Partners | 132,802 |
113,732 |
261,569 |
225,227 |
|||
Equity in Earnings of Other Equity Investments | 2,695 |
2,719 |
5,502 |
5,202 |
|||
Interest Expense, Net | (32,361) |
(31,314) |
(64,795) |
(71,288) |
|||
Interest Expense - Deferrable Interest Debentures1 | (5,478) |
- |
(10,956) |
- |
|||
Minority Interests1 | (15,089) |
(15,476) |
(24,397) |
(31,397) |
|||
Other, Net | 762 |
(874) |
1,521 |
122 |
|||
Total Other Income and (Expenses) | 83,331 |
68,787 |
168,444 |
127,866 |
|||
Income Before Income Taxes | 172,017 |
154,035 |
379,901 |
335,919 |
|||
Income Taxes | 67,627 |
59,841 |
148,469 |
130,655 |
|||
Net Income | $ 104,390 |
$ 94,194 |
$ 231,432 |
$ 205,264 |
|||
========= |
========= |
========= |
========= |
||||
Basic Earnings Per Common Share | $ 0.84 |
$ 0.77 |
$ 1.87 |
$ 1.68 |
|||
========= |
========= |
========= |
========= |
||||
Number of Shares Used in Computing Basic | |||||||
Earnings Per Common Share | 123,882 |
122,218 |
123,799 |
122,048 |
|||
========= |
========= |
========= |
========= |
||||
Diluted Earnings Per Common Share | $ 0.84 |
$ 0.76 |
$ 1.85 |
$ 1.66 |
|||
========= |
========= |
========= |
========= |
||||
Number of Shares Used in Computing Diluted | |||||||
Earnings Per Common Share | 124,955 |
123,474 |
124,942 |
123,285 |
|||
========= |
========= |
========= |
========= |
||||
Dividends Per Common Share | $ 0.5625 |
$ 0.1500 |
$ 1.1250 |
$ 0.3000 |
|||
========= |
========= |
========= |
========= |
________________ |
|
1 | Due to our adoption of a recently issued accounting standard, the expense associated with our Deferrable Interest Debentures is recorded as interest expense for the three months and six months ended June 30, 2004. For the three months and six months ended June 30, 2003, the corresponding expense of $5,478 and $10,956, respectively, was included in "Minority Interests." |
KINDER MORGAN, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended |
Six Months Ended |
||||||
2004 |
2003 |
2004 |
2003 |
||||
Equity in Earnings of Kinder Morgan Energy Partners | $ 132,802 |
$ 113,732 |
$ 261,569 |
$ 225,227 |
|||
Segment Earnings:1 | |||||||
NGPL | 93,427 |
84,335 |
200,173 |
184,411 |
|||
TransColorado | 5,384 |
5,297 |
11,011 |
12,557 |
|||
Retail | 4,971 |
6,331 |
38,652 |
37,790 |
|||
Power | 3,908 |
10,778 |
7,631 |
13,698 |
|||
240,492 |
220,473 |
519,036 |
473,683 |
||||
General and Administrative Expenses | (19,879) |
(18,786) |
(42,167) |
(35,194) |
|||
Interest Expense, Net | (32,361) |
(31,314) |
(64,795) |
(71,288) |
|||
Interest Expense - Deferrable Interest Debentures2 | (5,478) |
- |
(10,956) |
- |
|||
Other2 | (10,757) |
(16,338) |
(21,217) |
(31,282) |
|||
Income Before Income Taxes | 172,017 |
154,035 |
379,901 |
335,919 |
|||
Income Taxes | 67,627 |
59,841 |
148,469 |
130,655 |
|||
Net Income | $ 104,390 |
$ 94,194 |
$ 231,432 |
$ 205,264 |
|||
========= |
========= |
========= |
========= |
Earnings Attributable to Investments in KMP
Three Months Ended |
Six Months Ended |
||||||
2004 |
2003 |
2004 |
2003 |
||||
General Partner Interest, Including | |||||||
Minority Interest in the OLPs | $ 97,912 |
$ 82,243 |
$ 191,427 |
$ 160,412 |
|||
Limited Partner Units (KMP) | 9,228 |
8,803 |
18,827 |
18,312 |
|||
Limited Partner i-units (KMR) | 25,662 |
22,686 |
51,315 |
46,503 |
|||
132,802 |
113,732 |
261,569 |
225,227 |
||||
Pre-tax Minority Interest in KMR3 | (18,312) |
(15,960) |
(36,567) |
(32,715) |
|||
Pre-tax KMI Earnings from Investments in KMP | $ 114,490 |
$ 97,772 |
$ 225,002 |
$ 192,512 |
|||
========= |
========= |
========= |
========= |
Additional Information
Three Months Ended |
Six Months Ended |
||||||
2004 |
2003 |
2004 |
2003 |
||||
(Units and Shares in Millions) |
|||||||
Average KMP Units Owned by KMI | 18.3 |
18.3 |
18.3 |
18.3 |
|||
KMP Earnings per Unit | $ 0.51 |
$ 0.48 |
$ 1.03 |
$ 1.00 |
|||
Average KMR Shares Owned by KMI | 14.4 |
14.0 |
14.3 |
13.8 |
|||
Average Total KMR Shares Outstanding | 50.6 |
47.0 |
50.0 |
46.5 |
Volume Highlights
Three Months Ended |
Six Months Ended |
||||||
2004 |
2003 |
2004 |
2003 |
||||
Systems Throughput (Trillion Btus): | |||||||
NGPL4 | 343.0 |
340.8 |
787.4 |
786.7 |
|||
TransColorado | 46.1 |
42.2 |
88.4 |
88.7 |
|||
Retail5 | 6.2 |
5.9 |
24.6 |
23.3 |
Btus = British thermal units | |
________________ |
|
1 | Operating income before corporate costs plus gains and losses on incidental sales of assets plus earnings from equity method investments. |
2 | Beginning with the third quarter of 2003, payments associated with our capital trust securities are included with interest expense. Prior to the third quarter of 2003, such payments are included as minority interest within the "Other" caption. |
3 | Minority interest, net of tax (as reported in the Consolidated Statements of Income), was $11,353 and $9,895 for the three months ended June 30, 2004 and 2003, respectively, and $22,671 and $20,283 for the six months ended June 30, 2004 and 2003, respectively. |
4 | Excludes transport for Kinder Morgan Texas and Kinder Morgan Tejas intrastate pipelines. |
5 | Excludes transport volumes of intrastate pipelines. |
KINDER MORGAN, INC. AND SUBSIDIARIES
PRELIMINARY SUMMARIZED BALANCE SHEET INFORMATION (UNAUDITED)
(DOLLARS IN MILLIONS)
June 30, |
December 31, |
||
2004 |
2003 |
||
Assets: | |||
Cash and Cash Equivalents | $ 7 |
$ 11 |
|
Other Current Assets | 275 |
265 |
|
Investments | 3,291 |
3,288 |
|
Property, Plant and Equipment, Net | 6,086 |
6,084 |
|
Other Assets | 326 |
389 |
|
Total Assets | $ 9,985 |
$ 10,037 |
|
========= |
========= |
||
Liabilities and Stockholders' Equity: | |||
Notes Payable and Current Maturities of Long-term Debt | $ 721 |
$ 133 |
|
Other Current Liabilities | 305 |
344 |
|
Other Liabilities and Deferred Credits | 2,675 |
2,675 |
|
Long-term Debt: | |||
Outstanding Notes and Debentures | 2,187 |
2,837 |
|
Deferrable Interest Debentures Issued to Subsidiary Trusts | 284 |
284 |
|
Value of Interest Rate Swaps | 31 |
88 |
|
2,502 |
3,209 |
||
Minority Interests in Equity of Subsidiaries | 1,040 |
1,010 |
|
Stockholders' Equity | 2,742 |
2,666 |
|
Total Liabilities and Stockholders' Equity | $ 9,985 |
$ 10,037 |
|
========= |
========= |
||
Total Debt 1 | $ 2,901 |
$ 2,959 |
|
========= |
========= |
||
Total Capital 2 | $ 6,967 |
$ 6,919 |
|
========= |
========= |
||
Ratio of Total Debt to Total Capital | 41.6% |
42.8% |
|
========= |
========= |
________________ |
|
1 | Notes payable and current maturities of long-term debt plus outstanding notes and debentures, less cash and cash equivalents. |
2 | Total debt plus deferrable interest debentures issued to subsidiary trusts plus minority interests in equity of subsidiaries plus stockholders' equity. |
KINDER MORGAN, INC. AND SUBSIDIARIES
RECONCILIATION OF PRELIMINARY CASH FLOW (UNAUDITED)
(DOLLARS IN MILLIONS)
Six Months Ended |
|||
2004 |
2003 |
||
Simplified Calculation of Cash Flow Per Press Release | |||
Income Before Income Taxes | $ 379.9 |
$ 335.9 |
|
Add: Depreciation and Amortization | 59.2 |
58.7 |
|
Less: Sustaining Capital Expenditures | (33.6) |
(32.7) |
|
Less: Cash Paid for Income Taxes | (117.1) |
(63.0) |
|
Simplified Calculation of Cash Flow Per Press Release | $ 288.4 |
$ 298.9 |
|
========= |
========= |
||
Reconciliation of Simplified Calculation to Preliminary Statement of Cash Flow | |||
Simplified Calculation of Cash Flow Per Press Release | $ 288.4 |
$ 298.9 |
|
Add Back: Sustaining Capital Expenditures | 33.6 |
32.7 |
|
Subtotal | 322.0 |
331.6 |
|
Other Adjustments1 | (76.0) |
(34.7) |
|
Net Cash Flows Provided by Continuing Operations | $ 246.02 |
$ 296.9 |
|
========= |
========= |
________________ |
|
1 | Adjustments for equity in earnings, distributions from equity investments, minority interests in income of consolidated subsidiaries, deferred purchased gas costs, net gain on sale of facilities, changes in gas in underground storage, changes in other working capital items, proceeds from termination of interest rate swap and other, net. |
2 | Preliminary estimate. Final statement of cash flows will be provided on Form 10-Q. |