Kinder Morgan, Inc. Increases Quarterly Dividend to $0.38 Per Share

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Kinder Morgan, Inc. Increases Quarterly Dividend to $0.38 Per Share

Dividend 19% Higher Than First Quarter 2012

HOUSTON--(BUSINESS WIRE)-- Kinder Morgan, Inc. (NYS: KMI) today reported first quarter cash available to pay dividends of $513 million compared to $303 million for the same period a year ago and remains on track to meet its published annual budget of $1.632 billion in dividends. The board of directors increased the quarterly cash dividend to $0.38 per share ($1.52 annualized), which is payable on May 16, 2013, to shareholders of record as of April 29, 2013. This represents an increase of 19 percent from the first quarter 2012 cash dividend per share of $0.32 ($1.28 annualized) and is up from the fourth quarter 2012 dividend of $0.37 ($1.48 annualized) per share.


Chairman and CEO Richard D. Kinder said, "KMI had an excellent first quarter led by continued strong performance at Kinder Morgan Energy Partners (NYS: KMP) , along with good results at El Paso Pipeline Partners (NYS: EPB) and from the natural gas assets obtained in the acquisition of El Paso Corporation which closed in May 2012." KMI's growth will continue to be driven by its ownership of the general partners of KMP and EPB, which generate stable and increasing cash flow from their diversified assets. For 2013, KMP expects a 6 percent increase in declared cash distributions per unit versus 2012, and EPB expects a 13 percent increase in its declared cash distributions per unit compared to the previous year.

"Looking ahead, KMI is well positioned for future growth in North America," Kinder said. "We currently have identified more than $12 billion in expansion and joint venture investments across the Kinder Morgan companies, and we are pursuing customer commitments for many more projects."

2013 Outlook

As previously announced, KMI expects to declare dividends of $1.57 per share for 2013, a 12 percent increase over its 2012 declared dividend of $1.40 per share. Growth in 2013 is expected to be driven by continued strong performance at KMP, along with contributions from EPB and the natural gas assets that KMI acquired in the El Paso Corporation transaction.

Other News

  • KMI completed the sale (dropdown) of its remaining 50 percent stakes in El Paso Natural Gas pipeline and certain midstream assets to KMP in March. KMI used the proceeds from the approximately $1.655 billion transaction to pay down debt that was associated with the May 2012 purchase of El Paso Corporation. The company expects to sell its 50 percent membership interest in Gulf LNG to EPB later this year.

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 73,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel. Kinder Morgan, Inc. (NYS: KMI) owns the general partner interests of Kinder Morgan Energy Partners, L.P. (NYS: KMP) and El Paso Pipeline Partners, L.P. (NYS: EPB) , along with limited partner interests in KMP and EPB and shares in Kinder Morgan Management, LLC (NYS: KMR) . For more information please visit www.kindermorgan.com.

Please join Kinder Morgan at 4:30 p.m. Eastern Time on Wednesday, April 17 atwww.kindermorgan.comfor a LIVE webcast conference call on the company's first quarter earnings.

The non-generally accepted accounting principles, or non-GAAP, financial measure ofcash 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). 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)
 
Three Months Ended March 31,
20132012
KMP distributions to us
From ownership of general partner interest (1)$412$331
On KMP units owned by us (2)3626
On KMR shares owned by us (3) 20  17 
Total KMP distributions to us 468  374 
 
EPB distributions to us
From ownership of general partner interest (4)49-
On EPB units owned by us (5) 56  - 
Total EPB distributions to us 105  - 
 
Cash generated from KMP and EPB573374
General and administrative expenses and other (6)(11)(3)
Interest expense(54)(77)
Cash taxes 6  (2)
Cash available for distribution to us from KMP and EPB 514  292 
 
Cash available from other assets
Cash generated from other assets (7)11111
EP debt assumed (8)(87)-
EP acquisition debt interest expense (9) (25) - 
Cash available for distribution to us from other assets (1) 11 
 
Cash available to pay dividends$513 $303 
 
Diluted Weighted Average Number of Shares Outstanding1,038708
 
Cash Available Per Average Share Outstanding$0.49$0.43
Declared Dividend$0.38$0.32
 
Notes
(1) Based on (i) Kinder Morgan Energy Partners, L.P. (KMP) distributions of $1.30 and $1.20 per common unit declared for the three months ended March 31, 2013 and 2012, respectively, (ii) 381 million and 340 million aggregate common units, Class B units and i-units (collectively, KMP units) estimated to be outstanding as of April 29, 2013 and outstanding at April 30, 2012, respectively, (iii) waived incentive distributions of $4 million and $6 million for the first quarter 2013 and 2012, respectively. In conjunction with KMP's acquisition of its initial 50% interest in May 2010, and subsequently, the remaining 50% interest in May 2011 of KinderHawk, we as general partner of KMP have agreed to waive receipt of a portion of our incentive distributions related to this investment from the first quarter of 2010 through the first quarter of 2013.
(2)Based on 28 million and 22 million KMP units owned by us as of March 31, 2013 and 2012, respectively, multiplied by the KMP per unit distribution declared, as outlined in footnote (1) above.

(3)

Assumes that we sold the Kinder Morgan Management, LLC (KMR) shares that we estimate to be received as distributions for the three months ended March 31, 2013 and received as distributions for the three months ended March 31, 2012. We did not sell any KMR shares in the first three months of 2013 or 2012. We intend periodically to sell the KMR shares we receive as distributions to generate cash.
(4)Based on (i) El Paso Pipelines Partners, L.P. (EPB) distributions of $0.62 per common unit declared for the three months ended March 31, 2013 and (ii) 216 million common units estimated to be outstanding as of April 30, 2013.
(5)Based on 90 million EPB units owned by us as of March 31, 2013, multiplied by the EPB per unit distribution declared, as outlined in footnote (4) above.
(6)Represents general and administrative expense, corporate sustaining capital expenditures, and other income and expense.
(7)Represents cash available from former El Paso Corporation (EP) assets that remain at KMI and our 20% interest in NGPL. Amounts include our share of pre-tax earnings, plus depreciation, depletion and amortization, and less cash taxes and sustaining capital expenditures from equity investees.
(8)Represents interest expense on debt assumed from the EP acquisition.
(9)2013 amount represents interest associated with Kinder Morgan, Inc.'s (KMI) remaining debt issued to finance the cash portion of the El Paso Corporation (EP) acquisition purchase price in May 2012.
   
Kinder Morgan, Inc. and Subsidiaries
Preliminary Consolidated Statements of Income (1)
(Unaudited)
(In millions, except per share amounts)
 
 
Three Months Ended March 31,
20132012
 
Revenue$3,060 $1,857 
 
Costs, expenses and other
Operating expenses1,389886
Depreciation, depletion and amortization412274
General and administrative140129
Taxes, other than income taxes9850
Other expense 1  2 
 2,040  1,341 
 
Operating income1,020516
 
Other income (expense)
Earnings from equity investments10165
Amortization of excess cost of equity investments(9)(2)
Interest, net(402)(179)
Gain on sale of investments in Express225-
Other, net 2  1 
 
Income before income taxes937401
 
Income tax expense (279) (96)
 
Income from continuing operations658305
 
Income from discontinued operations-50
Loss on remeasurement to fair value and disposal of discontinued operations (2) (428)
Loss from discontinued operations (2) (378)
 
Net income (loss)656(73)
 
Net (income) loss attributable to noncontrolling interests (364) 94 
 
Net income attributable to KMI$292 $21 
 
Class P Shares
Basic and Diluted Earnings Per Common Share From Continuing Operations (2)$0.28$0.23
Basic and Diluted Loss Per Common Share From Discontinued Operations -  (0.20)
Total Basic and Diluted Earnings Per Common Share$0.28 $0.03 
 
Class A Shares (2)
Basic and Diluted Earnings Per Common Share From Continuing Operations (2)$0.21
Basic and Diluted Loss Per Common Share From Discontinued Operations (0.20)
Total Basic and Diluted Earnings Per Common Share$0.01 
 
Basic Weighted Average Number of Shares Outstanding
Class P Shares 1,036  171 
Class A Shares 536 
 
Diluted Weighted Average Number of Shares Outstanding (3)
Class P Shares 1,038  708 
Class A Shares 536 
 
Declared dividend per common share$0.38 $0.32 
 
Notes
(1) Includes the operations of EP and its consolidated subsidiaries 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.
(2)In the three months ended March 31, 2012, the Class A shares earnings per share as compared to the Class P shares earnings per share were primarily reduced by the dividends paid to the Class B shares on February 15, 2012. On December 26, 2012, all remaining Class A, B and C shares were converted into Class P shares and cancelled.
(3)Includes weighted-average restricted shares outstanding. The outstanding KMI warrants and convertible preferred securities (assumed from the May 25, 2012 EP acquisition) were anti-dilutive during the three months ended March 31, 2013.
   
Kinder Morgan, Inc. and Subsidiaries
Preliminary Reconciliation of Cash Available to Pay Dividends from Income from Continuing Operations
(Unaudited)
(In millions)
 
Three Months Ended March 31,
20132012
Income from continuing operations (1)$658$305
Income from discontinued operations (1) (2)-50
Depreciation, depletion and amortization (1) (3)412281
Amortization of excess cost of equity investments (1)92
Earnings from equity investments (1) (4)(101)(87)
Distributions from equity investments10180
Distributions from equity investments in excess of cumulative earnings3748
KMP certain items (5)(202)4
KMI certain items (6)(16)10
Difference between cash and book taxes28089
Difference between cash and book interest expense for KMI(25)(36)
Sustaining capital expenditures (7)(60)(44)
KMP declared distribution on its limited partner units owned by the public (8)(439)(364)
EPB declared distribution on its limited partner units owned by the public (9)(78)-
Difference between equity investment distributable cash flow and distributions received (10)5012
Other (11) (113) (47)
 
Cash available to pay dividends$513 $303 
 
Notes
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