KMI Cash Available to Pay Dividends up 21% over 2012 Dividend 11% Higher Than Fourth Quarter 2012 Business Wire HOUSTON -- January 15, 2014 Kinder Morgan, Inc. (NYSE: KMI) today reported fourth quarter cash available to pay dividends of $482 million, an increase of 10 percent from $439million for the comparable period in 2012. For the full year, KMI reported cash available to pay dividends of $1.713 billion, up 21 percent from $1.411 billion in 2012 and exceeding its published annual budget of $1.632 billion. The board of directors declared a quarterly dividend of $0.41 per share ($1.64 annualized), which is payable on Feb. 18, 2014, to shareholders of record as of Jan. 31, 2014. This represents an increase of 11 percent from the fourth quarter 2012 cash dividend per share of $0.37 ($1.48 annualized). Chairman and CEO Richard D. Kinder said, “KMI had an excellent fourth quarter and year. Growth was driven by continued outstanding performance at Kinder Morgan Energy Partners (KMP) highlighted by the strong results produced by the assets it acquired through the Copano and El Paso transactions, and a full year of contributions from El Paso Pipeline Partners (EPB). As a result, KMI met its revised target to declare a dividend of $1.60 per share for the full year and actually generated $1.65 per share in cash available per share outstanding. Looking ahead, we believe that our large footprint of diversified assets will continue to generate stable, attractive risk-adjusted returns to our investors. We are excited about 2014, and currently have identified approximately $14.8 billion in expansion and joint venture investments at KMP and EPB that we are confident will come to fruition and drive growth at KMI for years to come. We are also pursuing customer commitments for many more projects.” Outlook As previously announced, KMI expects to declare dividends of $1.72 per share for 2014, an 8 percent increase over its 2013 declared dividend of $1.60 per share. Growth in 2014 is expected to be driven by continued strong performance at KMP and contributions from EPB. The growth at KMI from KMP and EPB will be partially offset by the loss of income from the 2013 and expected 2014 sales (dropdowns) of certain assets to KMP and EPB. Subject to appropriate board approvals, KMI expects to drop down its 50 percent interest in Ruby Pipeline, its 50 percent interest in Gulf LNG and its 47.5 percent interest in Young Gas Storage to EPB during 2014. The boards of directors of the Kinder Morgan companies approved the 2014 budgets at the January board meeting, and the budgets will be discussed in detail during the company’s annual analyst conference on Jan. 29, 2014, in Houston. The conference starts at 8 a.m. CT and will be webcast live. Other News *KMI repurchased 5.2 million shares of its common stock during the fourth quarter for approximately $172 million. KMI has fully utilized the $350 million share and warrant repurchase program authorized by the board of directors in July of 2013 and has $94 million remaining on the $250 million authorized by the board in October of 2013 for share and warrant repurchase. Kinder Morgan is the largest midstream and the third largest energy company in North America with a combined enterprise value of approximately $110 billion. It owns an interest in or operates approximately 80,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, CO and other products, and its terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel. Kinder Morgan, Inc. (NYSE: KMI) owns the general partner interests of Kinder Morgan Energy Partners, L.P. (NYSE: KMP) and El Paso Pipeline Partners, L.P. (NYSE: EPB), along with limited partner interests in KMP and EPB and shares in Kinder Morgan Management, LLC (NYSE: KMR). For more information please visit www.kindermorgan.com. Please join Kinder Morgan at 4:30 p.m. Eastern Time on Wednesday, Jan. 15, at www.kindermorgan.com for a LIVE webcast conference call on the company’s fourth quarter and year-end earnings. The non-generally accepted accounting principles, or non-GAAP, financial measure of cash available to pay dividends is presented in this news release. 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 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 relative to share price). 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. These forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, based on information currently available to them. Although Kinder Morgan believes that these forward-looking statements 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 reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they were made, and except to the extent required by law, Kinder Morgan undertakes no obligation to update or review any forward-looking statement because of new information, future events or other factors. Because of these uncertainties, readers should not place undue reliance on these forward-looking statements. Kinder Morgan, Inc. and Subsidiaries Preliminary Cash Available to Pay Dividends (Non-GAAP, Unaudited) (In millions, except per share amounts) Three Months Ended December Year Ended December 31, 31, 2013 2012 2013 2012 KMP distributions to us From ownership of general $ 462 $ 397 $ 1,756 $ 1,454 partner interest (1) On KMP units owned by us 37 34 147 120 (2) On KMR shares owned by us 22 20 83 73 (3) Total KMP distributions 521 451 1,986 1,647 to us EPB distributions to us From ownership of general 56 46 211 118 partner interest (4) On EPB units owned by us 58 55 230 157 (5) Total EPB distributions 114 101 441 275 to us Cash generated from KMP and 635 552 2,427 1,922 EPB General and administrative (9 ) (9 ) (50 ) (35 ) expenses and other (6) Interest (10 ) (14 ) (132 ) (181 ) expense Cash taxes (7) (130 ) (109 ) (516 ) (419 ) Cash available for distribution 486 420 1,729 1,287 to us from KMP and EPB Cash available from other assets Cash generated from other 84 115 375 439 assets (8) EP debt assumed (71 ) (81 ) (316 ) (235 ) interest expense (9) EP acquisition debt interest (17 ) (15 ) (75 ) (80 ) expense (10) Cash available for distribution (4 ) 19 (16 ) 124 to us from other assets Cash available to pay $ 482 $ 439 $ 1,713 $ 1,411 dividends (11) Weighted Average Shares Outstanding 1,041 1,039 1,040 908 for Dividends (12) Cash Available Per Average $ 0.46 $ 0.42 $ 1.65 $ 1.55 Share Outstanding Declared $ 0.41 $ 0.37 $ 1.60 $ 1.40 Dividend Notes Based on (i) Kinder Morgan Energy Partners, L.P. (KMP) distributions of $1.36 and $5.33 per common unit declared for the three months and year ended December 31, 2013, respectively, and $1.29 and $4.98 per common unit declared for the three months and year ended December 31, 2012, respectively; (ii) 381 million and 340 million aggregate common units, Class B units and i-units (collectively KMP units) outstanding as of April 29, 2013 and April 30, 2012, respectively; (iii) 433 million and 347 million KMP units outstanding as of July 31, 2013 and 2012, respectively; (iv) 438 million and 365 million KMP units outstanding as of October 31, 2013 and 2012, respectively; (v) 444 million KMP units estimated to be outstanding as of January 31, 2014 and 373 million (1) KMP units outstanding as of January 31, 2013; (vi) waived incentive distributions of $4 million for the year ended December 31, 2013 and $7 million and $26 million for the three months and year ended December 31, 2012, respectively, related to KMP's acquisition of its initial 50% interest in May 2010, and subsequently, the remaining 50% interest in May 2011 of KinderHawk; and (vii) waived incentive distributions of $25 million and $75 million for the three months and year ended December 31, 2013, respectively, as a result of KMP's acquisition of Copano. In addition, we as the general partner of KMP, agreed to waive a portion of our future incentive distributions related to the Copano acquisition in the amounts of $120 million in 2014, $120 million in 2015, $110 million in 2016, and annual amounts thereafter decreasing by $5 million per year from the 2016 level. Based on 28 million in 2013, and 22 million as of March 31 and (2) June 30, 2012, and 26 million as of September 30 and December 31, 2012, KMP units owned by us, multiplied by the KMP per unit distribution declared, as outlined in footnote (1) above. Assumes that we sold the Kinder Morgan Management, LLC (KMR) shares that we estimate to be received as distributions for the three months and year ended December 31, 2013 and received as (3) distributions for the three months and year ended December 31, 2012, respectively. We did not sell any KMR shares in 2013 or 2012. We intend periodically to sell the KMR shares we receive as distributions to generate cash. Based on (i) El Paso Pipelines Partners, L.P. (EPB) distributions of $0.65 and $2.55 per common unit declared for the three months and year ended December 31, 2013, respectively, and $0.61 and $1.74 per common unit declared for the three and nine months ended December 31, 2012; (ii) 216 million common units outstanding as of (4) April 29, 2013; (iii) 218 million and 208 million common units outstanding as of July 31, 2013 and 2012, respectively; (iv) 218 million and 216 million common units outstanding as of October 31, 2013 and 2012, respectively; and (v) 218 million common units estimated to be outstanding as of January 31, 2014 and 216 million common units outstanding as of January 31, 2013. Based on 90 million EPB units owned by us as of December 31, 2013 (5) and 2012, multiplied by the EPB per unit distribution declared, as outlined in footnote (4) above. Represents corporate general and administrative expenses, (6) corporate sustaining capital expenditures, and other income and expense. 2013 and 2012 Cash taxes were calculated based on the income and (7) expenses included in the table, deductions related to the income included, and use of net operating loss carryforwards of $300 million and $200 million, respectively. Represents cash available from former El Paso Corporation (EP) assets that remain at KMI , including TGP, EPNG and El Paso midstream assets for the periods presented prior to their (8) drop-down to KMP, and our 20% interest in NGPL, net of general and administrative expenses related to KMI's EP assets. Amounts include our share of pre-tax earnings, plus depreciation, depletion and amortization, and less cash taxes and sustaining capital expenditures from equity investees. (9) Represents interest expense on debt assumed from the May 25, 2012 EP acquisition. Represents interest associated with Kinder Morgan, Inc.'s (KMI) (10) remaining debt issued to finance the cash portion of EP acquisition purchase price. Excludes $310 million in after-tax expenses associated with the EP acquisition and EP Energy sale for the year ended December 31, 2012. This included (i) $101 million in employee severance, retention and bonus costs; (ii) $55 million of accelerated EP stock based compensation allocated to the post-combination period (11) under applicable GAAP rules; (iii) $37 million in advisory fees; (iv) $68 million write-off associated with the EP acquisition (primarily due to debt repayments) or amortization of capitalized financing fees; (v) $51 million for legal fees and reserves, net of recoveries; and (vi) $19 million benefit associated with pension income. Includes weighted average common stock outstanding and (i) for 2013, approximately 6 million of unvested restricted stock awards (12) issued to management employees that contain rights to dividends and (ii) for 2012, Class B shares, Class C shares and unvested restricted stock awards. Kinder Morgan, Inc. and Subsidiaries Preliminary Consolidated Statements of Income (1) (Unaudited) (In millions, except per share amounts) Three Months Ended December Year Ended December 31, 31, 2013 2012 2013 2012 Revenue $ 3,872 $ 3,079 $ 14,070 $ 9,973 Costs, expenses and other Operating 2,019 1,504 7,365 4,759 expenses Depreciation, depletion and 479 409 1,806 1,419 amortization General and 132 113 613 929 administrative Taxes, other than income 100 79 395 286 taxes Other expense (18 ) 9 (99 ) (13 ) 2,712 2,114 10,080 7,380 Operating 1,160 965 3,990 2,593 income Other income (expense) Earnings from equity 33 (85 ) 327 153 investments Amortization of excess cost (10 ) (14 ) (39 ) (23 ) of equity investments Interest, net (428 ) (406 ) (1,675 ) (1,399 ) Gain on remeasurement of previously held equity interest in Eagle Ford Gathering to fair value - - 558 - Gain on sale of investments - - 224 - in Express Other, net 18 (10 ) 53 19 Income from continuing operations 773 450 3,438 1,343 before income taxes Income tax (67 ) 26 (742 ) (139 ) expense Income from continuing 706 476 2,696 1,204 operations Income from discontinued - 15 - 160 operations, net of tax Loss on sale and remeasurement of KMP's FTC Natural Gas Pipelines disposal group to fair value, (2 ) (3 ) (4 ) (937 ) net of tax Loss from discontinued (2 ) 12 (4 ) (777 ) operations Net income 704 488 2,692 427 Net income attributable to (366 ) (268 ) (1,499 ) (112 ) noncontrolling interests Net income attributable $ 338 $ 220 $ 1,193 $ 315 to KMI Class P Shares Basic and Diluted Earnings Per Common Share $ 0.33 $ 0.21 $ 1.15 $ 0.56 From Continuing Operations (2) Basic and Diluted Loss Per Common - - - (0.21 ) Share From Discontinued Operations Total Basic and Diluted $ 0.33 $ 0.21 $ 1.15 $ 0.35 Earnings Per Common Share Class A Shares (2) Basic and Diluted Earnings Per Common Share $ 0.19 $ 0.47 From Continuing Operations (2) Basic and Diluted Loss Per Common - (0.21 ) Share From Discontinued Operations Total Basic and Diluted $ 0.19 $ 0.26 Earnings Per Common Share Basic Weighted Average Number of Shares Outstanding Class P Shares 1,035 742 1,036 461 Class A Shares 294 446 Diluted Weighted Average Number of Shares Outstanding (3) Class P Shares 1,035 1,039 1,036 908 Class A Shares 294 446 Declared dividend per $ 0.41 $ 0.37 $ 1.60 $ 1.40 common share Notes Includes the operations of EP and its consolidated subsidiaries (1) for the periods after May 25, 2012 and earnings per share reflect the issuance of 330 million shares that were used to provide for the equity portion of the EP acquisition purchase price. The Class A shares earnings per share as compared to the Class P shares earnings per share has been primarily reduced by the (2) dividends paid to the Class B shares on February 15, May 16, August 15, and November 15, 2012. On December 26, 2012, all remaining Class A, B and C shares were converted into Class P shares and cancelled. The outstanding KMI warrants and convertible preferred securities (3) (assumed from the May 25, 2012 EP acquisition) were anti-dilutive during the periods presented. Kinder Morgan, Inc. and Subsidiaries Preliminary Reconciliation of Cash Available to Pay Dividends from Income from Continuing Operations (Unaudited) (In millions) Three Months Ended Year Ended December 31, December 31, 2013 2012 2013 2012 Income from continuing $ 706 $ 476 $ 2,696 $ 1,204 operations (1) Income from discontinued operations, - 15 - 160 net of tax (1) (2) Income attributable - - - (37 ) to EPB (3) Distributions declared by EPB for the second quarter and - - - 82 payable in the third quarter of 2012 to KMI (3) Depreciation, depletion and 479 409 1,806 1,426 amortization (1) (4) Amortization of excess cost of 10 14 39 23 equity investments (1) Earnings from equity (98 ) 79 (392 ) (223 ) investments (5) Distributions from equity 95 91 398 381 investments Distributions from equity investments 68 41 185 200 in excess of cumulative earnings Difference between equity investment 21 68 157 160 distributable cash flow and distributions received (6) KMP certain (23 ) 59 (559 ) 92 items (7) KMI certain 56 (2 ) 55 482 items (8) KMI deferred tax - (92 ) - (57 ) adjustment (9) Difference between cash (70 ) (52 ) 105 (264 ) and book taxes Difference between cash and book 41 37 14 23 interest expense for KMI Sustaining capital (148 ) (161 ) (405 ) (393 ) expenditures (10) KMP declared distribution on its limited (544 ) (428 ) (2,031 ) (1,583 ) partner units owned by the public (11) EPB declared distribution on its limited (83 ) (77 ) (324 ) (214 ) partner units owned by the public (12) Other (13) (28 ) (38 ) (31 ) (51 ) Cash available to $ 482 $ 439 $ 1,713 $ 1,411 pay dividends Notes (1) Consists of the corresponding line items in the preceding Preliminary Unaudited Consolidated Statements of Income. (2) 2012 amounts primarily represent income from KMP's FTC Natural Gas Pipelines disposal group, net of tax. On May 25, 2012, we began recognizing income from our investment (3) in EPB, and we received in the third quarter the full distribution for the second quarter of 2012 as we were the holder of record as of July 31, 2012. (4) Year ended 2012 amount includes $7 million associated with KMP's FTC Natural Gas Pipelines disposal group. 2013 amounts exclude a $65 million impairment of our investment in NGPL Holdco LLC. 2012 includes $6 million and $70 million for the (5) three months and year ended December 31, 2012, respectively, associated with KMP's FTC Natural Gas Pipelines disposal group's investment in Rockies Express Pipeline LLC. Consists of the difference between cash available for (6) distributions and the distributions received from our equity investments. Consists of items such as hedge ineffectiveness, legal and environmental reserves, gain/loss on sale, insurance proceeds from casualty losses, and asset acquisition and/or disposition expenses. Year ended 2013 includes (i) $558 million gain on remeasurement of previously held equity interest in Eagle Ford (7) Gathering to fair value; (ii) $177 million for legal reserves related to the rate case and other litigation and environmental matters on KMP's west coast Products Pipelines; and (iii) $140 million, net of tax, gain on the sale of Express. For more information, see KMP’s 4th Quarter 2013 Earnings Release filed on Form 8-K with the SEC on January 15, 2014. 2013 amounts include NGPL Holdco LLC impairment discussed above in footnote (5). The year ended December 31, 2012 primarily represents pre-tax (income) expense associated with the EP acquisition and EP Energy sale and includes (i) $160 million in employee severance, retention and bonus costs; (ii) $87 million of (8) accelerated EP stock based compensation allocated to the post-combination period under applicable GAAP rules; (iii) $37 million in advisory fees; (iv) $108 million write-off (primarily due to repayments) or amortization of capitalized financing fees; (v) $68 million for legal fees and reserves, net of recoveries; and (vi) $29 million benefit associated with pension income. (9) 2012 amounts represent an increase in our state effective tax rate as a result of the EP acquisition. (10) We define sustaining capital expenditures as capital expenditures that do not expand the capacity of an asset. Declared distribution multiplied by limited partner units outstanding on the applicable record date less units owned by us. (11) 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. (12) Declared distribution multiplied by EPB limited partner units outstanding on the applicable record date less units owned by us. Consists of items such as timing and other differences between earnings and cash, KMP’s and EPB's cash flow in excess of their (13) distributions, non-cash purchase accounting adjustments related to the EP acquisition and going private transaction primarily associated with non-cash amortization of debt fair value adjustments. Kinder Morgan, Inc. and Subsidiaries Preliminary Consolidated Balance Sheets (Unaudited) (In millions) December 31, December 31, 2013 2012 (1) ASSETS Cash and cash equivalents - KMI $ 116 $ 71 Cash and cash equivalents - KMP 377 529 Cash and cash equivalents - EPB 78 114 Other current assets 3,257 2,960 Property, plant and equipment, net - 2,563 2,735 KMI Property, plant and equipment, net - 27,405 22,330 KMP Property, plant and equipment, net - 5,879 5,931 EPB Investments 5,951 5,804 Goodwill - KMI 17,935 18,193 Goodwill - KMP 6,547 5,417 Goodwill - EPB 22 22 Deferred charges and other assets 4,965 4,139 TOTAL ASSETS $ 75,095 $ 68,245 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Short-term debt - KMI $ 725 $ 1,153 Short-term debt - KMP 1,504 1,155 Short-term debt - EPB 77 93 Other current liabilities 3,733 2,827 Long-term debt - KMI 9,221 9,148 Long-term debt - KMP 18,410 15,907 Long-term debt - EPB 4,179 4,254 Preferred interest in general 100 100 partner of KMP Debt fair value adjustments (2) 1,977 2,591 Deferred income taxes 4,637 4,071 Other long-term liabilities 2,247 2,846 Total liabilities 46,810 44,145 Shareholders' Equity Accumulated other comprehensive loss (24 ) (118 ) Other shareholders' equity 13,117 13,984 Total KMI equity 13,093 13,866 Noncontrolling interests 15,192 10,234 Total shareholders' equity 28,285 24,100 TOTAL LIABILITIES AND SHAREHOLDERS' $ 75,095 $ 68,245 EQUITY Debt, net of cash KMI (3) $ 9,830 $ 10,230 KMP 19,537 16,533 EPB 4,178 4,233 Total Consolidated Debt $ 33,545 $ 30,996 Notes (1) December 2012 balance sheet recast to reflect the transfer of assets among entities under common control. Amounts include the fair value adjustments related to interest (2) rate swaps, debt discounts and premiums, and purchase price allocation adjustments, including adjustments to record EP's debt, including EPB debt, at its May 25, 2012 fair value. (3) Amounts exclude the preferred interest in general partner of KMP. Contact: Kinder Morgan, Inc. Media Relations Larry Pierce, (713) 369-9407 firstname.lastname@example.org or Investor Relations (713) 369-9490 email@example.com www.kindermorgan.com
KMI Cash Available to Pay Dividends up 21% over 2012
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