-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NQEMY3RDlNQSvOKF66SsKKtqBfCfLW2Ta+0UKFuR978wl0LyybOhUMj4oS6ce8N7 /IwfYD6xWZLvndKIWJMtvA== 0000054502-99-000014.txt : 19991119 0000054502-99-000014.hdr.sgml : 19991119 ACCESSION NUMBER: 0000054502-99-000014 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991007 ITEM INFORMATION: FILED AS OF DATE: 19991118 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KINDER MORGAN INC CENTRAL INDEX KEY: 0000054502 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 480290000 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-06446 FILM NUMBER: 99760655 BUSINESS ADDRESS: STREET 1: 370 VAN GORDON ST STREET 2: PO BOX 281304 CITY: LAKEWOOD STATE: CO ZIP: 80228-8304 BUSINESS PHONE: 3039891740 MAIL ADDRESS: STREET 1: 370 VAN GORDON STREET STREET 2: P O BOX 281304 CITY: LAKEWOOD STATE: CO ZIP: 80228-8304 FORMER COMPANY: FORMER CONFORMED NAME: K N ENERGY INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: KN ENERGY INC DATE OF NAME CHANGE: 19920430 FORMER COMPANY: FORMER CONFORMED NAME: KANSAS NEBRASKA NATURAL GAS CO INC DATE OF NAME CHANGE: 19830403 8-K 1 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 October 7, 1999 (Date of earliest event reported) KINDER MORGAN, INC. (Exact name of registrant as specified in its charter) Kansas 1-6446 48-0290000 (State or other juri (Commission (I.R.S. Employer sdiction File Number) Identification No.) of incorporation) 1301 McKinney, Suite 3400 Houston, Texas 77010 (Address of principal executive offices, including zip code) 713-844-9500 (Registrant's telephone number, including area code) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements. The financial statements of Kinder Morgan, Inc., a Delaware corporation ("Kinder Morgan - Delaware"), as of September 30, 1999, and for the nine months ended September 30, 1999, are included herein commencing on page F-1. (b) Pro Forma Financial Information. The pro forma financial statements of Kinder Morgan, Inc., a Kansas corporation ("Kinder Morgan"), giving effect to the acquisition by merger of Kinder Morgan - Delaware as of September 30, 1999, and for the nine months ended September 30, 1999, are included herein commencing on page PF-1. (c) Exhibits. The following materials are filed as exhibits to this Current Report on Form 8-K. Exhibit Number Description 2.1 Agreement and Plan of Merger dated July 8, 1999, by and Kinder Morgan, Rockies Merger Corp. and Kinder Morgan - Delaware (incorporated by reference to Annex A-1 of Kinder Morgan's Registration Statement on Form S-4 filed on August 23, 1999 (File No. 333- 85747)). 2.2 First Amendment to the Agreement and Plan of Merger dated August 20, 1999, by and among Kinder Morgan, Rockies Merger Corp. and Kinder Morgan - Delaware (incorporated by reference to Annex A-2 of the Kinder Morgan's Registration Statement on Form S- 4 filed on August 23, 1999 (File No. 333- 85747)). KINDER MORGAN, INC. (KINDER MORGAN - DELAWARE) CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts and number of shares)
December 31 September 30 ------------- ------------- 1998 1999 ---- ---- (unaudited) ASSETS Current Assets: Cash and Cash Equivalents $ 13,873 $ 435 Accounts Receivable - Related Party 13,645 8,680 Prepaid Expenses 1,126 3,399 ---------- ---------- Total Current Assets 28,644 12,514 Investment in Partnership 41,959 45,421 Deferred Charges and Other Assets 3,679 5,890 ---------- ---------- Total Assets $ 74,282 $ 63,825 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 1,387 $ 2,522 Notes Payable - 148,600 Accrued Liabilities 13,634 8,465 Accrued Taxes 1,556 - ---------- ---------- Total Current Liabilities 16,577 159,587 Long-term Debt 100,000 - ---------- ---------- Total Liabilities 116,577 159,587 ---------- ---------- Commitments and Contingencies (Note 3) Stockholders' Equity: Series A Common Stock, Par Value $.01, 25,000 Shares Authorized, 8,047 Issued and Outstanding * * Series B Common Stock, Par Value $.01, 25,000 Shares Authorized, 2,541 Issued and Outstanding * * Retained Earnings (Deficit) (42,295) (95,762) Total Stockholders' Equity (Deficit) (42,295) (95,762) ---------- ---------- Total Liabilities and Stockholders' Equity $ 74,282 $ 63,825 ========== ========== * Rounds to Zero
The accompanying notes are an integral part of these consolidated financial statements. F-1 KINDER MORGAN, INC. (KINDER MORGAN - DELAWARE) CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts and number of shares)
Nine Months Ended September 30 ------------------------------ 1998 1999 ---- ---- (unaudited) Partnership Income $ 25,935 $ 44,396 ---------- ---------- Operating Expenses: Depreciation and Amortization 341 769 General and Administrative 420 1,706 ---------- ---------- Total Operating Expenses 761 2,475 ---------- ---------- Operating Income 25,174 41,921 ---------- ---------- Other Income (Expense): Interest Expense (2,578) (7,717) Interest Income 564 172 Other, Net (71) (62) ---------- ---------- Total Other Income (Expense) (2,085) (7,607) ---------- ---------- Income Before Income Taxes 23,089 34,314 Income Taxes 8,349 13,195 ---------- ---------- Net Income $ 14,740 $ 21,119 ========== ========== Earnings Per Common Share Basic and Diluted $ 1,392.14 $ 1,994.62 ========== ========== Number of Common Shares Used in Calculation 10,588 10,588 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-2 KINDER MORGAN, INC. (KINDER MORGAN - DELAWARE) CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine Months Ended September 30 ------------------------------ 1998 1999 ---- ---- (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 14,740 $ 21,119 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 341 769 Distributions from Investment in Partnership 19,667 41,084 Equity in Earnings of Partnership (25,935) (44,396) Changes in Components of Working Capital: Accounts Receivable (6,552) 4,965 Prepaid Expense (2,284) (1,761) Accounts Payable 1,707 1,134 Accrued Liabilities 6,678 (5,622) Accrued Taxes (1,228) 317 Other, Net 583 (3,516) ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 7,717 14,093 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital Contributions to Partnership Investments (12,488) (156) Property Additions * * ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (12,488) (156) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Borrowings 103,850 70,825 Payment of Long-term Debt (14,550) (22,225) Dividends Paid (74,294) (75,000) Debt Issuance Costs (1,794) (975) ---------- ---------- NET CASH PROVIDED BY (USED IN) FINANCING 13,212 (27,375) ACTIVITIES ---------- ---------- Increase (Decrease) in Cash and Cash Equivalents 8,441 (13,438) Cash and Cash Equivalents, Beginning of Period 165 13,873 ---------- ---------- Cash and Cash Equivalents, End of Period $ 8,606 $ 435 ========== ========== *Rounds to Zero
The accompanying notes are an integral part of these consolidated financial statements. F-3 KINDER MORGAN, INC. (KINDER MORGAN - DELAWARE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation Kinder Morgan, Inc. (Kinder Morgan - Delaware or the Company), formerly KC Liquids Holding Corporation, was formed in October 1996. From October 1996 to February 1997, the Company had no operations or activities. Effective February 14, 1997, the Company acquired all of the issued and outstanding stock of Enron Liquids Pipeline Company (ELPC or the Predecessor Company) and renamed it Kinder Morgan G.P., Inc. (KMGP). KMGP owns approximately 3.8% and 8.1% of Kinder Morgan Energy Partners, L.P. (the Partnership) as of September 30, 1999 and 1998, respectively. At September 30, 1999 and 1998, the ownership interest consists of 2% general partner interests and 862,000 common units of the Partnership. The Company's acquisition of KMGP was accounted for under the purchase method of accounting. The purchase price of KMGP was approximately $21,745,000. The unaudited consolidated financial statements as of September 30, 1999 and for the nine-month period then ended have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial results for the interim periods. Certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes, however, that the disclosures are adequate to make the information presented not misleading. 2. Debt On February 14, 1997, the Company entered into a borrowing agreement with First Union National Bank (First Union) in connection with the acquisition of the common stock of KMGP. Pursuant to this agreement, the Company issued two notes in the aggregate amount of $15,000,000, bearing interest, at the Company's option, at either First Union's Base Rate plus one-half of 1% or LIBOR plus 2.5%. The notes were payable August 31, 1999. Effective December 31, 1997, the borrowing agreement was amended to provide a $15,000,000 facility note in place of the two notes issued February 14, 1997. The borrowing agreement was amended again in 1998 and 1999 to provide a term loan commitment for an additional $85 million and $65 million, respectively, for an aggregate commitment of $165 million. Along with the increased borrowing, the interest rate was changed to First Union's Base Rate plus one-half of one percent or LIBOR plus three percent and the maturity date was changed to May 31, 2000. Kinder Morgan - Delaware has pledged the stock of KMGP and KMGP's assets as collateral for this term loan commitment. At December 31, 1998 and September 30, 1999, Kinder Morgan - Delaware had principal amounts outstanding of $100 million and $148.6 million, respectively. The carrying amounts of the long-term debt based upon prevailing interest rates available to Kinder Morgan - Delaware at September 30, 1999, approximated fair value. Subsequent to September 30, 1999, all borrowings under this credit agreement were repaid. F-4 3. Litigation, Commitments and Contingencies Through its investment in KMGP, in the ordinary course of business, the Company is a defendant in various lawsuits relating to the Partnership's assets. Although no assurance can be given, the Company believes, based on its experience to date, that the ultimate resolution of such items will not have a material, adverse impact on the Company's financial position or its results of operations. Environmental KMGP is a defendant in two proceedings (one by the State of Illinois and one by the Department of Transportation) relating to alleged environmental violations for events relating to a fire that occurred at the Morris storage field in September 1994. Although no assurance can be given, the Company believes the ultimate resolution of these matters will not have a material, adverse effect on the Partnership's financial position, results of operations, or its ability to pay cash distributions to KMGP. The Partnership is subject to environmental cleanup and enforcement actions from time to time. In particular, the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund law) generally imposes joint and several liability for cleanup and enforcement costs, without regard to fault or the legality of the original conduct, on current or predecessor owners and operators of a site. The operations of the Partnership are also subject to federal, state and local laws and regulations relating to protection of the environment. Although the Partnership believes its operations are in general compliance with applicable environmental regulations, risks of additional costs and liabilities are inherent in pipeline and terminal operations, and there can be no assurance significant costs and liabilities will not be incurred by the Partnership. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations of the Partnership, could result in substantial costs and liabilities to the Partnership which could affect future cash distributions to KMGP. The Partnership, along with several other respondents, is involved in a cleanup in connection with an acquisition made in 1998. This cleanup, ordered by the United States Environmental Protection Agency (EPA), related to ground water contamination in the vicinity of the Partnership's storage facilities and truck loading terminal at Sparks, Nevada. The EPA approved the respondents' remediation plan in September 1992 and the remediation system began operation in 1995. In addition, the Partnership is presently involved in 18 ground water hydrocarbon remediation efforts under administrative orders issued by the California Regional Water Quality Control Board and two other state agencies. Although no assurance can be given, KMGP believes the ultimate resolutions of these matters will not have a material, adverse effect on the Partnership's financial position, result of operations, or its ability to pay cash distributions to KMGP. FERC The Partnership and certain of its subsidiaries are defendants in several actions in which the plaintiffs protest pipeline transportation rates with the Federal Energy Regulatory Commission (FERC). These actions are currently pending. The Plaintiffs seek to recover transportation overpayments and interests. F-5 The Company is not able to predict with certainty whether settlement agreements will be completed with some or all of the complainants, the final terms of any such settlement agreements that may be consummated, or the final outcome of the FERC proceedings should they be carried through to their conclusion, and it is possible that current or future proceedings could be resolved in a manner adverse to the Partnership which could affect future cash distributions to KMGP. 4. Subsequent Event On October 7, 1999, Kinder Morgan completed its acquisition by merger of Kinder Morgan - Delaware. The combined company has been renamed Kinder Morgan, Inc. and trades under the New York Stock Exchange symbol "KMI." Kinder Morgan - Delaware is the sole stockholder of Kinder Morgan G.P., Inc., the Partnership's general partner. In the combination, Kinder Morgan issued an aggregate of approximately 41.5 million shares of Kinder Morgan stock to the stockholders of Kinder Morgan - Delaware in exchange for all of the outstanding shares of Kinder Morgan - Delaware. The combined entity (including the Partnership) has an enterprise value of approximately $10.0 billion. F-6 UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The following unaudited pro forma combined financial statements have been prepared from the historical financial statements of Kinder Morgan, Inc. ("Kinder Morgan", a Kansas Corporation, formerly K N Energy, Inc.) and Kinder Morgan, Inc. ("Kinder Morgan - Delaware", a Delaware Corporation) to give effect to the combination of these entities by merger. The unaudited pro forma combined balance sheet reflects adjustments as if the merger had occurred on September 30, 1999. The unaudited pro forma combined statement of income for the nine months ended September 30, 1999, reflects adjustments as if the merger had occurred on January 1, 1998. The pro forma adjustments reflected in the accompanying unaudited pro forma combined financial statements were prepared using the purchase method of accounting. The pro forma adjustments are based on preliminary estimates and certain assumptions that Kinder Morgan believes are reasonable under the circumstances. The preliminary allocation of the purchase price to assets acquired and liabilities assumed reflects the assumption that assets and liabilities, other than the investment in Kinder Morgan Energy Partners, are carried at historical amounts which approximate fair market value. The excess of the purchase price over Kinder Morgan - Delaware's share of the underlying equity in the net assets of Kinder Morgan Energy Partners, calculated as of September 30, 1999, has been fully allocated to the Kinder Morgan - Delaware investment in Kinder Morgan Energy Partners. This allocation reflects the estimated fair market value of this investment. The actual allocation of the consideration paid by Kinder Morgan for Kinder Morgan - Delaware may differ from that reflected in the unaudited pro forma combined financial statements after a more extensive review of the fair market values of the assets acquired and liabilities assumed has been completed. The unaudited pro forma combined financial statements do not purport to present the financial position or results of operations of Kinder Morgan had the transactions and events assumed therein occurred on the dates specified, nor are they necessarily indicative of the results of operations that may be achieved in the future. The unaudited pro forma combined statements of income do not give effect to any operating efficiencies or cost savings that may be realized as a result of the merger, primarily related to reduction of duplicative operating, general and administrative expenses. The unaudited pro forma combined financial statements should be read in conjunction with the historical financial statements, including the related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Kinder Morgan, which are included in its Annual Report on Form 10- K for the year ended December 31, 1998, from Kinder Morgan's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and of Kinder Morgan - Delaware and Kinder Morgan Energy Partners, which are included elsewhere in this Form 8-K or have been previously filed. The historical results of operations of Kinder Morgan reflect the acquisition of MidCon Corp. by Kinder Morgan on January 30, 1998, and include the results of operations of MidCon Corp. beginning with January 30, 1998. PF-1 KINDER MORGAN, INC. UNAUDITED PRO FORMA COMBINED BALANCE SHEET SEPTEMBER 30, 1999 (In thousands)
Historical Pro Forma ------------------------------- ------------------------------ Kinder Morgan- Kinder Morgan Delaware Adjustments Combined ------------- -------------- ------------- ------------- ASSETS: Current Assets: Cash and Cash Equivalents $ 22,459 $ 435 $ $ 22,894 Restricted Deposits 7,461 7,461 Accounts Receivable 660,988 8,680 669,668 Inventories 134,209 134,209 Gas Imbalances 84,477 84,477 Other 51,265 3,399 54,664 ---------- ---------- ---------- ========== 960,859 12,514 - 973,373 ---------- ---------- ---------- ========== Investments: Investment in Kinder Morgan Energy Partners 45,421 1,241,248a 1,286,669 Other Investments 257,570 257,570 ---------- ---------- ---------- ========== 257,570 45,421 1,241,248 1,544,239 ---------- ---------- ---------- ========== Property, Plant and Equipment, at Cost 7,767,790 7,767,790 Less Accumulated Depreciation and Amortization 880,768 880,768 ---------- ---------- ---------- ========== 6,887,022 - - 6,887,022 ---------- ---------- ---------- ========== Deferred Charges and Other Assets 246,690 5,890 252,580 ---------- ---------- ---------- ========== Total Assets $8,352,141 $ 63,825 $1,241,248 $9,657,214 ========== ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Current Maturities of Long-term Debt $ 7,167 $ $ $ 7,167 Notes Payable 578,700 148,600 727,300 Accounts Payable 543,811 2,522 546,333 Accrued Taxes 28,474 28,474 Gas Imbalances 68,925 68,925 Payable for Purchase of Thermo Companies 43,762 43,762 Other 201,385 8,465 3,000a 212,850 ---------- ---------- ---------- ========== 1,472,224 159,587 3,000 1,634,811 ---------- ---------- ---------- ========== Deferred Liabilities, Credits and Reserves: Deferred Income Taxes 1,696,908 463,238b 2,160,146 Other 321,354 321,354 ---------- ---------- ---------- ========== 2,018,262 - 463,238 2,481,500 ---------- ---------- ---------- ========== Long-term Debt 3,298,484 - - 3,298,484 ---------- ---------- ---------- ========== KMI-Obligated Mandatorily Redeemable Preferred Capital Trust Securities of Subsidiary Trusts Holding Solely Debentures of KMI 275,000 - - 275,000 ---------- ---------- ---------- ========== Minority Interests in Equity of Subsidiaries 64,213 - - 64,213 ---------- ---------- ---------- ========== Stockholders' Equity: Common Stock 354,837 208,417a 563,254 Additional Paid-in Capital 731,199 470,831a 1,202,030 Retained Earnings 141,663 (95,762) 95,762a 141,663 Other (3,741) (3,741) ---------- ---------- ---------- ========== Total Common Stockholders' Equity 1,223,958 (95,762) 775,010 1,903,206 ---------- ---------- ---------- ========== Total Liabilities and Stockholders' Equity $8,352,141 $ 63,825 $1,241,248 $9,657,214 ========== ========== ========== ==========
PF-2 KINDER MORGAN, INC. UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (In thousands, except per share amounts)
Historical Pro Forma ------------------------------- ------------------------------- Kinder Morgan- Kinder Morgan Delaware Adjustments Combined -------------- -------------- -------------- -------------- Operating Revenues: $3,704,018 $ 44,396 $ - $3,748,414 ---------- ---------- --------- ---------- Operating Costs and Expenses: Gas Purchases and Other Costs of Sales 2,995,953 2,995,953 Operations and Maintenance 303,762 1,706 305,468 Depreciation and Amortization 147,993 769 22,275c 171,037 Taxes, Other Than Income Taxes 41,274 41,274 Merger-related and Severance Costs 10,962 10,962 ---------- ---------- --------- ---------- Total Operating Costs and Expenses 3,499,944 2,475 22,275 3,524,694 ---------- ---------- --------- ---------- Operating Income 204,074 41,921 (22,275) 223,720 ---------- ---------- --------- ---------- Other Income and (Deductions): Interest Expense (210,505) (7,717) (218,222) Minority Interests (16,789) (16,789) Other, Net 36,607 110 36,717 ---------- ---------- --------- ---------- Total Other Income and (Deductions) (190,687) (7,607) - (198,294) ---------- ---------- --------- ---------- Income from Continuing Operations Before Income Taxes 13,387 34,314 (22,275) 25,426 Income Taxes 5,221 13,195 (8,687)d 9,729 ---------- ---------- --------- ---------- Income from Continuing Operations 8,166 21,119 (13,588) 15,697 ---------- ---------- --------- ---------- Discontinued Operations, Net of Tax: Loss from Discontinued Operations (6,491) (6,491) Loss on Disposal of Discontinued Operations (11,479) (11,479) ---------- ---------- --------- ---------- Total Loss from Discontinued Operations (17,970) - - (17,970) ---------- ---------- --------- ---------- Net Income (Loss) (9,804) 21,119 (13,588) (2,273) Less - Preferred Stock Dividends 129 129 Less - Premium Paid on Preferred Stock Redemption 350 350 ---------- ---------- --------- ---------- Earnings (Loss) Available For Common Stock $ (10,283) $ 21,119 $ (13,588)a $ (2,752) ========== ========== ========= ========== Number of Shares Used in Computing Basic Earnings Per Common Share 70,363 41,683a 112,046 ========== ========== ========= ========== Basic Earnings (Loss) Per Common Share: Continuing Operations $ 0.11 $ 0.14 Discontinued Operations $ (0.09) $ (0.06) Disposal of Discontinued Operations $ (0.17) $ (0.10) ---------- ---------- --------- ---------- Total Basic Earnings (Loss) Per Common Share $ (0.15) $ (0.02) ========== ========== ========= ========== Number of Shares Used in Computing Diluted Earnings Per Common Share 70,441 41,683a 112,124 ========== ========== ========= ========== Diluted Earnings (Loss) Per Common Share: Continuing Operations $ 0.11 $ 0.14 Discontinued Operations $ (0.09) $ (0.06) Disposal of Discontinued Operations $ (0.17) $ (0.10) ---------- ---------- --------- ---------- Total Diluted Earnings (Loss) Per Common Share $ (0.15) $ (0.02) ========== ========== ========= ========== Dividends Per Common Share $ 0.60 $ 0.60 ========== ========== ========= ==========
PF-3 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS a) The adjustment to the investment in Kinder Morgan Energy Partners was derived as follows:
(Thousands) 41,483,328 shares of Kinder Morgan Common Stock issued in the merger at $16.2625 per share Common Stock - $5.00 Par Value $ 207,417 Additional Paid-in Capital 467,206 Estimated Fees and Expenses to Complete the Transaction: Fees and Expenses Paid in Cash 3,000 Fees Paid by Issuance of 200,000 Shares of Kinder Morgan Common Stock at $23.125 per Share Common Stock - $5.00 Par Value 1,000 Additional Paid-in Capital 3,625 Elimination of Retained Earnings Deficit of Kinder Morgan - Delaware as of September 30, 1999 95,762 Deferred Income Taxes (see Note b) 463,238 ----------- $ 1,241,248 ===========
The $16.2625 per share price used to value Kinder Morgan common stock issued in the merger was determined by calculating the average closing price for Kinder Morgan's common stock on the NYSE for the five business days before and after July 8, 1999, the date the terms of the merger were announced. The $23.125 per share price used to value Kinder Morgan common stock issued in payment of fees was determined as the average of the high and low prices for Kinder Morgan's stock on October 7, 1999, the date the merger was completed. Kinder Morgan's preliminary allocation of purchase price to assets acquired and liabilities assumed reflects the assumption that current assets and current liabilities, other than the investment in Kinder Morgan Energy Partners, are carried at historical amounts which approximate their fair market value. The excess of the purchase price over Kinder Morgan - Delaware's share of the underlying equity in the net assets of Kinder Morgan Energy Partners, calculated as of September 30, 1999, has been fully allocated to the Kinder Morgan - Delaware investment in Kinder Morgan Energy Partners. This allocation reflects the estimated fair market value of this investment. b) Represents deferred income taxes, using a 39% effective tax rate, calculated on the excess of Kinder Morgan's initial investment over Kinder Morgan - Delaware's share of the underlying equity in the net assets of Kinder Morgan Energy Partners. c) Represents amortization of the excess of Kinder Morgan's initial investment over Kinder Morgan - Delaware's share of the underlying equity in the net assets of Kinder Morgan Energy Partners, calculated using the straight-line method over 40 years (approximately the estimated remaining useful life of the assets of Kinder Morgan Energy Partners). d) Represents income tax expense calculated using a 39% effective tax rate on the pre-tax pro forma adjustments. PF-4 SIGNATURE 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: November 18, 1999 By: /s/JOSEPH LISTENGART --------------------------- Joseph Listengart Vice President and General Counsel EXHIBIT INDEX Exhibit Number Description ------ ----------- 2.1 Agreement and Plan of Merger dated July 8, 1999, by and among Kinder Morgan, Rockies Merger Corp. and Kinder Morgan - Delaware (incorporated by reference to Annex A-1 of the Company's Registration Statement on Form S-4 filed on August 23, 1999 (File No. 333-85747)). 2.2 First Amendment to the Agreement and Plan of Merger dated August 20, 1999, by and among Kinder Morgan, Rockies Merger Corp. and Kinder Morgan - Delaware (incorporated by reference to Annex A-2 of the Company's Registration Statement on Form S-4 filed on August 23, 1999 (File No. 333- 85747)). -----END PRIVACY-ENHANCED MESSAGE-----