x
|
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
|
Kansas
|
|
48-0290000
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(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)
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer þ
|
Smaller
reporting company o
|
|
Page
|
|
|
||
3-4
|
||
5-6
|
||
7-8
|
||
9-64
|
||
|
||
65-103
|
||
|
||
103
|
||
|
||
103
|
||
|
||
|
||
104
|
||
|
||
104-107
|
||
|
||
107
|
||
|
||
107
|
||
|
||
107
|
||
|
||
107
|
||
|
||
108
|
||
|
||
109
|
September
30,
2008
|
December
31,
2007
|
||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and Cash Equivalents
|
$
|
126.6
|
$
|
148.6
|
|||
Restricted
Deposits
|
27.6
|
67.9
|
|||||
Accounts,
Notes and Interest Receivable, Net
|
981.4
|
975.2
|
|||||
Inventories
|
44.2
|
37.8
|
|||||
Gas
Imbalances
|
6.3
|
26.9
|
|||||
Assets
Held for Sale
|
-
|
3,353.3
|
|||||
Fair
Value of Derivative Instruments
|
37.8
|
37.1
|
|||||
Other
|
42.1
|
36.8
|
|||||
1,266.0
|
4,683.6
|
||||||
|
|||||||
Property,
Plant and Equipment, Net
|
|||||||
Property,
Plant and Equipment
|
16,648.9
|
15,080.9
|
|||||
Accumulated
Depreciation, Depletion and Amortization
|
(744.6
|
)
|
(277.0
|
)
|
|||
15,904.3
|
14,803.9
|
||||||
Notes
Receivable – Related Parties
|
192.8
|
87.9
|
|||||
Investments
|
1,824.9
|
1,996.2
|
|||||
Goodwill
|
4,775.7
|
8,174.0
|
|||||
Other
Intangibles, Net
|
256.2
|
321.1
|
|||||
Assets
Held for Sale, Non-current
|
-
|
5,634.6
|
|||||
Fair
Value of Derivative Instruments, Non-current
|
260.0
|
142.4
|
|||||
Deferred
Charges and Other Assets
|
228.8
|
257.3
|
|||||
Total
Assets
|
$
|
24,708.7
|
$
|
36,101.0
|
September
30,
2008
|
December
31,
2007
|
||||||
LIABILITIES
AND STOCKHOLDER’S EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Current
Maturities of Long-term Debt
|
$
|
289.7
|
$
|
79.8
|
|||
Notes
Payable
|
270.0
|
888.1
|
|||||
Cash
Book Overdrafts
|
74.2
|
30.7
|
|||||
Accounts
Payable
|
841.0
|
943.7
|
|||||
Accrued
Interest
|
95.9
|
242.7
|
|||||
Accrued
Taxes
|
252.7
|
728.2
|
|||||
Gas
Imbalances
|
19.9
|
23.7
|
|||||
Liabilities
Held for Sale
|
-
|
168.2
|
|||||
Fair
Value of Derivative Instruments
|
611.6
|
594.7
|
|||||
Other
|
274.0
|
240.0
|
|||||
2,729.0
|
3,939.8
|
||||||
|
|||||||
Long-term
Debt
|
|||||||
Outstanding
Notes and Debentures
|
10,800.6
|
14,714.6
|
|||||
Deferrable
Interest Debentures Issued to Subsidiary Trusts
|
35.7
|
283.1
|
|||||
Preferred
Interest in General Partner of Kinder Morgan Energy
Partners
|
100.0
|
100.0
|
|||||
Value
of Interest Rate Swaps
|
233.8
|
199.7
|
|||||
|
11,170.1
|
15,297.4
|
|||||
|
|||||||
Deferred
Income Taxes, Non-current
|
1,714.6
|
1,849.4
|
|||||
Liabilities
Held for Sale, Non-current
|
-
|
2,424.1
|
|||||
Fair
Value of Derivative Instruments, Non-current
|
1,018.7
|
836.8
|
|||||
Other
Long-term Liabilities and Deferred Credits
|
579.7
|
618.0
|
|||||
14,483.1
|
21,025.7
|
||||||
Minority
Interests in Equity of Subsidiaries
|
3,474.3
|
3,314.0
|
|||||
Commitments
and Contingencies (Notes 13 and 18)
|
|||||||
|
|||||||
Stockholder’s
Equity
|
|||||||
Common
Stock – Authorized and Outstanding – 100 Shares, Par Value $0.01 Per
Share
|
-
|
-
|
|||||
Additional
Paid-in Capital
|
7,811.9
|
7,822.2
|
|||||
Retained
Earnings (Deficit)
|
(3,399.2
|
)
|
247.0
|
||||
Accumulated
Other Comprehensive Loss
|
(390.4
|
)
|
(247.7
|
)
|
|||
4,022.3
|
7,821.5
|
||||||
Total
Liabilities and Stockholder’s Equity
|
$
|
24,708.7
|
$
|
36,101.0
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
Operating
Revenues
|
|||||||
Natural
Gas Sales
|
$
|
2,183.3
|
$
|
1,451.8
|
|||
Transportation
and Storage
|
700.9
|
849.2
|
|||||
Oil
and Product Sales
|
412.4
|
308.0
|
|||||
Total
Operating Revenues
|
3,296.6
|
2,609.0
|
|||||
|
|||||||
Operating
Costs and Expenses
|
|||||||
Gas
Purchases and Other Costs of Sales
|
2,179.2
|
1,482.8
|
|||||
Operations
and Maintenance
|
360.8
|
357.0
|
|||||
General
and Administrative
|
85.9
|
77.9
|
|||||
Depreciation,
Depletion and Amortization
|
217.2
|
204.1
|
|||||
Taxes,
Other Than Income Taxes
|
48.0
|
46.6
|
|||||
Other
Expense (Income), Net
|
7.2
|
(2.4
|
)
|
||||
Total
Operating Costs and Expenses
|
2,898.3
|
2,166.0
|
|||||
|
|||||||
Operating
Income
|
398.3
|
443.0
|
|||||
|
|||||||
Other
Income and (Expenses)
|
|||||||
Earnings
of Equity Investees
|
42.9
|
26.7
|
|||||
Interest
Expense, Net
|
(141.5
|
)
|
(252.6
|
)
|
|||
Interest
Expense – Deferrable Interest Debentures, Net
|
(0.5
|
)
|
(5.4
|
)
|
|||
Minority
Interests
|
(106.8
|
)
|
(52.4
|
)
|
|||
Other,
Net
|
4.4
|
5.4
|
|||||
Total
Other Income and (Expenses)
|
(201.5
|
)
|
(278.3
|
)
|
|||
|
|||||||
Income
from Continuing Operations Before Income Taxes
|
196.8
|
164.7
|
|||||
Income
Taxes
|
87.9
|
74.6
|
|||||
Income
from Continuing Operations
|
108.9
|
90.1
|
|||||
Loss
from Discontinued Operations, Net of Tax
|
(0.2
|
)
|
(4.4
|
)
|
|||
|
|||||||
Net
Income
|
$
|
108.7
|
$
|
85.7
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
Operating
Revenues
|
||||||||||||
Natural
Gas Sales
|
$
|
6,369.8
|
$
|
2,013.7
|
$
|
2,430.6
|
||||||
Transportation
and Storage
|
2,187.5
|
1,124.7
|
1,350.5
|
|||||||||
Oil
and Product Sales
|
1,194.8
|
407.5
|
384.0
|
|||||||||
Total
Operating Revenues
|
9,752.1
|
3,545.9
|
4,165.1
|
|||||||||
|
||||||||||||
Operating
Costs and Expenses
|
||||||||||||
Gas
Purchases and Other Costs of Sales
|
6,433.9
|
2,040.0
|
2,490.4
|
|||||||||
Operations
and Maintenance
|
977.4
|
463.8
|
476.1
|
|||||||||
General
and Administrative
|
264.0
|
107.9
|
283.6
|
|||||||||
Depreciation,
Depletion and Amortization
|
651.0
|
276.3
|
261.0
|
|||||||||
Taxes,
Other Than Income Taxes
|
151.6
|
62.1
|
74.4
|
|||||||||
Other
Expense (Income), Net
|
4.5
|
(6.4
|
)
|
(2.3
|
)
|
|||||||
Goodwill
Impairment
|
4,033.3
|
-
|
377.1
|
|||||||||
Total
Operating Costs and Expenses
|
12,515.7
|
2,943.7
|
3,960.3
|
|||||||||
|
||||||||||||
Operating
Income (Loss)
|
(2,763.6
|
)
|
602.2
|
204.8
|
||||||||
|
||||||||||||
Other
Income and (Expenses)
|
||||||||||||
Earnings
of Equity Investees
|
141.9
|
35.9
|
38.3
|
|||||||||
Interest
Expense, Net
|
(493.8
|
)
|
(336.1
|
)
|
(241.1
|
)
|
||||||
Interest
Expense – Deferrable Interest Debentures, Net
|
5.6
|
(7.3
|
)
|
(9.1
|
)
|
|||||||
Minority
Interests
|
(359.4
|
)
|
(86.9
|
)
|
(90.7
|
)
|
||||||
Other,
Net
|
18.1
|
6.1
|
0.6
|
|||||||||
Total
Other Income and (Expenses)
|
(687.6
|
)
|
(388.3
|
)
|
(302.0
|
)
|
||||||
|
||||||||||||
Income
(Loss) from Continuing Operations Before Income Taxes
|
(3,451.2
|
)
|
213.9
|
(97.2
|
)
|
|||||||
Income
Taxes
|
194.4
|
95.9
|
135.5
|
|||||||||
Income
(Loss) from Continuing Operations
|
(3,645.6
|
)
|
118.0
|
(232.7
|
)
|
|||||||
Income
(Loss) from Discontinued Operations, Net of Tax
|
(0.6
|
)
|
(2.1
|
)
|
298.6
|
|||||||
|
||||||||||||
Net
Income (Loss)
|
$
|
(3,646.2
|
)
|
$
|
115.9
|
$
|
65.9
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
Cash
Flows from Operating Activities
|
||||||||||||
Net
Income (Loss)
|
$
|
(3,646.2
|
)
|
$
|
115.9
|
$
|
65.9
|
|||||
Adjustments
to Reconcile Net Income to Net Cash Flows from Operating
Activities
|
||||||||||||
(Income)
Loss from Discontinued Operations, Net of Tax
|
0.6
|
13.2
|
(287.9
|
)
|
||||||||
Loss
from Goodwill Impairment
|
4,033.3
|
-
|
377.1
|
|||||||||
Loss
on Early Extinguishment of Debt
|
23.6
|
-
|
4.4
|
|||||||||
Depreciation,
Depletion and Amortization
|
651.0
|
278.6
|
264.9
|
|||||||||
Deferred
Income Taxes
|
46.4
|
14.2
|
138.7
|
|||||||||
Equity
in Earnings of Equity Investees
|
(141.9
|
)
|
(36.8
|
)
|
(39.1
|
)
|
||||||
Distributions
from Equity Investees
|
185.0
|
45.1
|
48.2
|
|||||||||
Minority
Interests in Income of Consolidated Subsidiaries
|
359.4
|
86.9
|
90.7
|
|||||||||
Gains
from Property Casualty Indemnifications
|
-
|
-
|
(1.8
|
)
|
||||||||
Net
Losses (Gains) on Sales of Assets
|
4.4
|
(7.0
|
)
|
(2.6
|
)
|
|||||||
Mark-to-Market
Interest Rate Swap Gain
|
(19.8
|
)
|
-
|
-
|
||||||||
Foreign
Currency Loss
|
0.2
|
-
|
15.5
|
|||||||||
Changes
in Gas in Underground Storage
|
(28.0
|
)
|
34.5
|
(84.2
|
)
|
|||||||
Changes
in Working Capital Items
|
(851.7
|
)
|
(13.6
|
)
|
(202.9
|
)
|
||||||
(Payment
for) Proceeds from Termination of Interest Rate Swaps
|
(2.5
|
)
|
(2.2
|
)
|
51.9
|
|||||||
Kinder
Morgan Energy Partners’ Rate Reparations, Refunds and Reserve
Adjustments
|
(10.7
|
)
|
-
|
-
|
||||||||
Other,
Net
|
(19.3
|
)
|
(16.7
|
)
|
54.4
|
|||||||
Cash
Flows Provided by Continuing Operations
|
583.8
|
512.1
|
493.2
|
|||||||||
Net
Cash Flows (Used in) Provided by Discontinued Operations
|
(0.7
|
)
|
(2.5
|
)
|
109.8
|
|||||||
Net
Cash Flows Provided by Operating Activities
|
583.1
|
509.6
|
603.0
|
|||||||||
|
||||||||||||
Cash
Flows from Investing Activities
|
||||||||||||
Purchase
of Predecessor Stock
|
-
|
(11,534.3
|
)
|
-
|
||||||||
Capital
Expenditures
|
(1,922.8
|
)
|
(656.1
|
)
|
(652.8
|
)
|
||||||
Proceeds
from Sale of 80% Interest in NGPL PipeCo LLC, Net of $1.1
Million Cash Sold
|
2,899.3
|
-
|
-
|
|||||||||
Proceeds
from NGPL PipeCo LLC Restricted Cash
|
3,106.4
|
-
|
-
|
|||||||||
Acquisitions
|
(16.4
|
)
|
(119.7
|
)
|
(42.1
|
)
|
||||||
Net
Proceeds from (Investments in) Margin Deposits
|
40.3
|
(22.9
|
)
|
(54.8
|
)
|
|||||||
Distributions
from Equity Investees
|
92.5
|
-
|
-
|
|||||||||
Other
Investments
|
(342.1
|
)
|
(17.5
|
)
|
(29.7
|
)
|
||||||
Change
in Natural Gas Storage and NGL Line Fill Inventory
|
(2.5
|
)
|
6.3
|
8.4
|
||||||||
Property
Casualty Indemnifications
|
-
|
-
|
8.0
|
|||||||||
Net
Proceeds (Cost of Removal) from Sales of Other Assets
|
113.3
|
10.6
|
(1.5
|
)
|
||||||||
Net
Cash Flows Provided by (Used in) Continuing Investing
Activities
|
3,968.0
|
(12,333.6
|
)
|
(764.5
|
)
|
|||||||
Net
Cash Flows Provided by Discontinued Investing Activities
|
-
|
190.9
|
1,488.2
|
|||||||||
Net
Cash Flows Provided by (Used in) Investing Activities
|
$
|
3,968.0
|
$
|
(12,142.7
|
)
|
$
|
723.7
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30, 2008
|
Four
Months
Ended
September
30, 2007
|
Five
Months Ended
May
31, 2007
|
||||||||||
Cash
Flows from Financing Activities
|
||||||||||||
Short-term
Debt, Net
|
$
|
(323.1
|
)
|
$
|
62.7
|
$
|
(247.5
|
)
|
||||
Long-term
Debt Issued
|
1,600.1
|
5,805.0
|
1,000.0
|
|||||||||
Long-term
Debt Retired
|
(5,878.3
|
)
|
(827.7
|
)
|
(302.4
|
)
|
||||||
Issuance
of Kinder Morgan, G.P., Inc. Preferred Stock
|
-
|
100.0
|
||||||||||
Discount
on Early Extinguishment of Debt
|
69.2
|
-
|
-
|
|||||||||
Cash
Book Overdraft
|
43.5
|
(2.0
|
)
|
(14.9
|
)
|
|||||||
Common
Stock Issued
|
-
|
-
|
9.9
|
|||||||||
Excess
Tax Benefits from Share-based Payment Arrangements
|
-
|
-
|
56.7
|
|||||||||
Cash
Paid to Share-based Award Holders Due to Going Private
Transaction
|
-
|
(181.1
|
)
|
-
|
||||||||
Issuance
of Kinder Morgan Management, LLC Shares
|
-
|
-
|
297.9
|
|||||||||
Contributions
from Successor Investors
|
-
|
5,112.0
|
-
|
|||||||||
Short-term
Advances (to) from Unconsolidated Affiliates
|
2.7
|
(2.7
|
)
|
2.3
|
||||||||
Cash
Dividends, Common Stock
|
-
|
-
|
(234.9
|
)
|
||||||||
Minority
Interests, Contributions
|
385.0
|
-
|
-
|
|||||||||
Minority
Interests, Distributions
|
(463.3
|
)
|
(127.6
|
)
|
(248.9
|
)
|
||||||
Debt
Issuance Costs
|
(14.3
|
)
|
(66.6
|
)
|
(13.1
|
)
|
||||||
Other,
Net
|
8.9
|
0.5
|
(4.3
|
)
|
||||||||
Net
Cash Flows (Used in) Provided by Continuing Financing
Activities
|
(4,569.6
|
)
|
9,872.5
|
300.8
|
||||||||
Net
Cash Flows Provided by Discontinued Financing Activities
|
-
|
-
|
140.1
|
|||||||||
Net
Cash Flows (Used in) Provided by Financing Activities
|
(4,569.6
|
)
|
9,872.5
|
440.9
|
||||||||
Effect
of Exchange Rate Changes on Cash
|
(3.5
|
)
|
(2.4
|
)
|
7.6
|
|||||||
Cash
Balance Included in Assets Held for Sale
|
-
|
-
|
(2.7
|
)
|
||||||||
|
||||||||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(22.0
|
)
|
(1,763.0
|
)
|
1,772.5
|
|||||||
Cash
and Cash Equivalents at Beginning of Period
|
148.6
|
1,902.3
|
129.8
|
|||||||||
Cash
and Cash Equivalents at End of Period
|
$
|
126.6
|
$
|
139.3
|
$
|
1,902.3
|
1.
|
General
|
2.
|
Significant
Accounting Policies
|
(In
millions)
|
|||
The
Total Purchase Price Consisted of the Following
|
|||
Cash
Paid
|
$
|
5,112.0
|
|
Kinder
Morgan, Inc. Shares Contributed
|
2,719.2
|
||
Equity
Contributed
|
7,831.2
|
||
Cash
from Issuances of Long-term Debt
|
4,696.2
|
||
Total
Purchase Price
|
$
|
12,527.4
|
|
|
|||
The
Allocation of the Purchase Price is as Follows
|
|||
Current
Assets
|
$
|
1,551.2
|
|
Investments
|
897.8
|
||
Goodwill
|
13,674.3
|
||
Property,
Plant and Equipment, Net
|
15,520.0
|
||
Deferred
Charges and Other Assets
|
1,639.8
|
||
Current
Liabilities
|
(3,279.5
|
)
|
|
Other
Liabilities and Deferred Credits
|
|||
Deferred
Income Taxes, Non-current
|
(2,519.4
|
)
|
|
Other
Deferred Credits
|
(1,786.3
|
)
|
|
Long-term
Debt
|
(9,855.9
|
)
|
|
Minority
Interests in Equity of Subsidiaries
|
(3,314.6
|
)
|
|
$
|
12,527.4
|
Number
of
Shares
|
Price
per
Share
|
Total
Value
|
|||||||||
Shares
Purchased with Cash
|
107.6
|
$
|
107.50
|
$
|
11,561.3
|
||||||
Shares
Contributed
|
|||||||||||
Richard
D. Kinder
|
24.0
|
$
|
101.00
|
2,424.0
|
|||||||
Other
Knight Inc. Management and Board Members
|
2.7
|
$
|
107.50
|
295.2
|
|||||||
Total
Shares Contributed
|
26.7
|
2,719.2
|
|||||||||
Total
Shares Outstanding as of May 31, 2007
|
134.3
|
14,280.5
|
|||||||||
Less:
Portion of Shares Acquired using Knight Inc. Cash on Hand
|
(1,756.8
|
)
|
|||||||||
Add:
Cash Contributions by Management At or After May 30, 2007
|
3.7
|
||||||||||
Purchase
Price
|
$
|
12,527.4
|
3.
|
Goodwill
|
December
31,
2007
|
Acquisitions
and
Purchase
Price
Adjustments1
|
Impairment
of
Assets
|
Other2
|
September
30,
2008
|
|||||||||||||||||
(In
millions)
|
|||||||||||||||||||||
Products
Pipelines – KMP
|
$
|
2,179.4
|
$
|
(43.1
|
)
|
$
|
(1,266.5
|
)
|
$
|
(6.9
|
)
|
$
|
862.9
|
||||||||
Natural
Gas Pipelines – KMP
|
3,201.0
|
266.8
|
(2,090.2
|
)
|
(10.6
|
)
|
1,367.0
|
||||||||||||||
CO2
– KMP
|
1,077.6
|
457.2
|
-
|
(3.7
|
)
|
1,531.1
|
|||||||||||||||
Terminals
– KMP
|
1,465.9
|
(3.2
|
)
|
(676.6
|
)
|
(4.5
|
)
|
781.6
|
|||||||||||||
Kinder
Morgan Canada – KMP
|
250.1
|
-
|
-
|
(17.0
|
)
|
233.1
|
|||||||||||||||
Consolidated
Total
|
$
|
8,174.0
|
$
|
677.7
|
$
|
(4,033.3
|
)
|
$
|
(42.7
|
)
|
$
|
4,775.7
|
1
|
Adjustments
relate primarily to a reallocation between goodwill and property, plant,
and equipment in our final purchase price
allocation.
|
2
|
Adjustments
include (i) the translation of goodwill denominated in foreign currencies
and (ii) reductions in the allocation of equity method goodwill due to
reductions in our ownership percentage of Kinder Morgan Energy
Partners.
|
4.
|
Other
Intangibles
|
September
30,
2008
|
December
31,
2007
|
||||||||||
(In
millions)
|
|||||||||||
Customer
Relationships, Contracts and Agreements
|
|||||||||||
Gross
Carrying Amount1
|
$
|
270.9
|
$
|
321.3
|
|||||||
Accumulated
Amortization
|
(25.7
|
)
|
(11.6
|
)
|
|||||||
Net
Carrying Amount
|
245.2
|
309.7
|
|||||||||
Technology-based
Assets, Lease Values and Other
|
|||||||||||
Gross
Carrying Amount
|
11.7
|
11.7
|
|||||||||
Accumulated
Amortization
|
(0.7
|
)
|
(0.3
|
)
|
|||||||
Net
Carrying Amount
|
11.0
|
11.4
|
|||||||||
Total
Other Intangibles, Net
|
$
|
256.2
|
$
|
321.1
|
|
1
|
The
change in the Gross Carrying Amount is primarily due to (i) a decrease of
approximately $18 million for Kinder Morgan Energy Partners’ allocated
purchase price to Marine Terminals, Inc.’s bulk terminal assets and (ii) a
decrease of approximately $32 million for Knight Inc.’s allocated purchase
price to the assets belonging to the Products Pipelines, Natural Gas
Pipelines, CO2, and
Terminals segments, related to the Going Private transaction. These
adjustments had the effect of increasing “Goodwill” and decreasing “Other
Intangibles, Net” by the described
amounts.
|
Successor
Company
|
Predecessor
Company
|
|||||||||||||||||||
Three
Months Ended
September
30,
|
Nine
Months
Ended
September
30,
|
Four
Months Ended
September
30,
|
Five
Months Ended
May
31,
|
|||||||||||||||||
2008
|
2007
|
2008
|
2007
|
2007
|
||||||||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||||||||||
Customer
Relationships, Contracts and Agreements
|
$
|
4.6
|
$
|
3.9
|
$
|
14.1
|
$
|
5.1
|
$
|
6.1
|
||||||||||
Technology-based
Assets, Lease Value and Other
|
0.2
|
0.1
|
0.4
|
0.1
|
0.2
|
|||||||||||||||
Total
Amortization
|
$
|
4.8
|
$
|
4.0
|
$
|
14.5
|
$
|
5.2
|
$
|
6.3
|
5.
|
Minority
Interests
|
September
30,
2008
|
December
31,
2007
|
||||||
(In
millions)
|
|||||||
Kinder
Morgan Energy Partners
|
$
|
1,717.8
|
$
|
1,616.0
|
|||
Kinder
Morgan Management
|
1,705.8
|
1,657.7
|
|||||
Triton
Power Company LLC
|
41.4
|
29.2
|
|||||
Other
|
9.3
|
11.1
|
|||||
$
|
3,474.3
|
$
|
3,314.0
|
6.
|
Related
Party Transactions
|
September
30,
2008
|
December
31,
2007
|
||||||
(In
millions)
|
|||||||
Derivative
Assets (Liabilities)
|
|||||||
Assets:
Fair Value of Derivative Instruments, Non-current
|
$
|
13.6
|
$
|
-
|
|||
Current
Liabilities: Fair Value of Derivative Instruments
|
$
|
(256.3
|
)
|
$
|
(239.8
|
)
|
|
Liabilities
and Stockholder’s Equity: Fair Value of Derivative Instruments,
Non-current
|
$
|
(594.2
|
)
|
$
|
(386.5
|
)
|
7.
|
Cash
Flow Information
|
|
Changes
in Working Capital Items (Net of Effects of Acquisitions and
Sales)
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Accounts
Receivable
|
$
|
(55.5
|
)
|
$
|
70.2
|
$
|
(31.9
|
)
|
||||
Materials
and Supplies Inventory
|
(7.3
|
)
|
0.8
|
(1.7
|
)
|
|||||||
Other
Current Assets
|
29.0
|
3.6
|
0.5
|
|||||||||
Accounts
Payable
|
(89.3
|
)
|
(7.8
|
)
|
26.3
|
|||||||
Accrued
Interest
|
(145.3
|
)
|
(51.1
|
)
|
(22.5
|
)
|
||||||
Accrued
Taxes
|
(502.3
|
)
|
(47.0
|
)
|
(114.0
|
)
|
||||||
Other
Current Liabilities
|
(81.0
|
)
|
17.7
|
(59.6
|
)
|
|||||||
$
|
(851.7
|
)
|
$
|
(13.6
|
)
|
$
|
(202.9
|
)
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30, 2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Cash
Paid During the Period for
|
||||||||||||
Interest,
Net of Amount Capitalized
|
$
|
623.0
|
$
|
390.3
|
$
|
381.8
|
||||||
Income
Taxes Paid, Including Prior Period Amounts
|
$
|
622.9
|
$
|
141.8
|
$
|
133.3
|
8.
|
Income
Taxes
|
Successor
Company
|
Predecessor
Company
|
|||||||||||||||||||
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
Four
Months Ended
September
30,
|
Five
Months Ended
May
31,
|
|||||||||||||||||
2008
|
2007
|
2008
|
2007
|
2007
|
||||||||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||||||||||
Income
Taxes
|
$
|
87.9
|
$
|
74.6
|
$
|
194.4
|
$
|
95.9
|
$
|
135.5
|
||||||||||
Effective
Tax Rate1
|
44.7
|
%
|
45.3
|
%
|
33.4
|
%
|
44.8
|
%
|
48.4
|
%
|
|
1
|
Excludes
goodwill impairment charges related to non-deductible goodwill; see Note
3.
|
9.
|
Comprehensive
Income (Loss)
|
Successor
Company
|
|||||||
Three
Months
Ended
September 30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Net
Income
|
$
|
108.7
|
$
|
85.7
|
|||
Other
Comprehensive Income (Loss), Net of Tax
|
|||||||
Change
in Fair Value of Derivatives Utilized for
Hedging Purposes
|
543.4
|
(25.5
|
)
|
||||
Reclassification
of Change in Fair Value of Derivatives
to Net Income
|
(70.5
|
)
|
(20.2
|
)
|
|||
Employee
Benefit Plans
|
|||||||
Prior
Service Cost Arising During Period
|
(0.1
|
)
|
-
|
||||
Net
Gain Arising During Period
|
0.2
|
-
|
|||||
Amortization
of Net Loss Included in Net
Periodic Benefit Costs
|
-
|
(0.1
|
)
|
||||
Change
in Foreign Currency Translation Adjustment
|
(22.8
|
)
|
14.1
|
||||
Other
Comprehensive Income (Loss), Net of Tax
|
450.2
|
(31.7
|
)
|
||||
|
|||||||
Comprehensive
Income
|
$
|
558.9
|
$
|
54.0
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30, 2008
|
Four
Months
Ended
September
30, 2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Net
Income (Loss)
|
$
|
(3,646.2
|
)
|
$
|
115.9
|
$
|
65.9
|
|||||
Other
Comprehensive Income (Loss), Net of Tax
|
||||||||||||
Change
in Fair Value of Derivatives Utilized for Hedging Purposes
|
(253.5
|
)
|
(44.5
|
)
|
(21.3
|
)
|
||||||
Reclassification
of Change in Fair Value of Derivatives
to Net Income
|
140.9
|
(21.1
|
)
|
10.3
|
||||||||
Employee
Benefit Plans
|
||||||||||||
Prior
Service Cost Arising During Period
|
0.2
|
-
|
(1.7
|
)
|
||||||||
Net
Gain Arising During Period
|
1.3
|
-
|
11.4
|
|||||||||
Amortization
of Prior Service Cost Included in Net
Periodic Benefit Costs
|
-
|
-
|
(0.4
|
)
|
||||||||
Amortization
of Net Loss Included in Net Periodic Benefit Costs
|
(0.1
|
)
|
(0.1
|
)
|
1.4
|
|||||||
Change
in Foreign Currency Translation Adjustment
|
(31.5
|
)
|
12.7
|
40.1
|
||||||||
Other
Comprehensive Income (Loss), Net of Tax
|
(142.7
|
)
|
(53.0
|
)
|
39.8
|
|||||||
|
||||||||||||
Comprehensive
Income (Loss)
|
$
|
(3,788.9
|
)
|
$
|
62.9
|
$
|
105.7
|
10.
|
Kinder
Morgan Management, LLC
|
11.
|
Business
Combinations, Investments, and
Sales
|
12.
|
Discontinued
Operations
|
Successor
Company
|
Predecessor
Company
|
|||||||||||||||||||
Three
Months Ended
September
30,
|
Nine
Months
Ended
September
30,
|
Four
Months
Ended
September
30,
|
Five
Months
Ended
May
31,
|
|||||||||||||||||
2008
|
2007
|
2008
|
2007
|
2007
|
||||||||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||||||||||
Operating
Revenues
|
$
|
-
|
$
|
14.4
|
$
|
-
|
$
|
19.2
|
$
|
921.8
|
||||||||||
Income
(Loss) from Discontinued Operations Before Income Taxes
|
(0.2
|
)
|
(1.4
|
)
|
(0.6
|
)
|
0.9
|
393.2
|
||||||||||||
Income
Taxes
|
-
|
(3.0
|
)
|
-
|
(3.0
|
)
|
(94.6
|
)
|
||||||||||||
Income
(Loss) from Discontinued Operations
|
$
|
(0.2
|
)
|
$
|
(4.4
|
)
|
$
|
(0.6
|
)
|
$
|
(2.1
|
)
|
298.6
|
13.
|
Financing
|
September
30, 2008
|
|||||||||||||
Short-term
Notes
Payable
|
Commercial
Paper
Outstanding
|
Weighted-
Average
Interest
Rate
|
|||||||||||
(In
millions)
|
|||||||||||||
Knight
Inc. – Secured Debt1
|
$
|
270.0
|
$
|
-
|
3.62
|
%
|
|||||||
Kinder
Morgan Energy Partners – Unsecured Debt2
|
$
|
295.0
|
$
|
-
|
5.00
|
%
|
|
____________
|
|
1
|
The
average short-term debt outstanding (and related weighted-average interest
rate) was $196.8 million (3.61%) and $185.6 million (4.38%) during the
three and nine months ended September 30, 2008,
respectively.
|
|
2
|
The
average short-term debt outstanding (and related weighted-average interest
rate) was $163.5 million (3.34%) and $329.6 million (3.48%) during the
three and nine months ended September 30, 2008,
respectively.
|
Debt
Paid Down
and/or
Retired
|
|||||
(In
millions)
|
|||||
Knight
Inc.
|
|||||
Senior
Secured Credit Term Loan Facilities
|
|||||
Tranche
A Term Loan, Due 2013
|
$
|
995.0
|
|||
Tranche
B Term Loan, Due 2014
|
3,183.5
|
||||
Credit
Facility
|
|||||
$1.0
billion Secured Revolver, Due May 2013
|
375.0
|
||||
Total
Paid Down and/or Retired
|
$
|
4,553.5
|
Par
Value of
Debt
Repurchased
|
|||||
(In
millions)
|
|||||
Knight
Inc.
|
|||||
Debentures
|
|||||
6.50%
Series, Due 2013
|
$
|
18.9
|
|||
6.67%
Series, Due 2027
|
143.0
|
||||
7.25%
Series, Due 2028
|
461.0
|
||||
7.45%
Series, Due 2098
|
124.1
|
||||
Senior
Notes
|
|||||
6.50%
Series, Due 2012
|
160.7
|
||||
Kinder
Morgan Finance Company, LLC
|
|||||
6.40%
Series, Due 2036
|
513.6
|
||||
Deferrable
Interest Debentures Issued to Subsidiary Trusts
|
|||||
8.56%
Junior Subordinated Deferrable Interest Debentures
Due 2027
|
87.3
|
||||
7.63%
Junior Subordinated Deferrable Interest Debentures
Due 2028
|
160.6
|
||||
Repurchase
of Outstanding Debt Securities
|
$
|
1,669.2
|
14.
|
Business
Segments
|
|
·
|
Products
Pipelines – KMP (excluding associated terminals) – $1.19
billion,
|
|
·
|
Products
Pipelines Terminals – KMP (separate from Products Pipelines – KMP for
goodwill impairment purposes) - $70
million,
|
|
·
|
Natural
Gas Pipelines – KMP – $2.09 billion,
and
|
|
·
|
Terminals
– KMP – $677 million, for a total impairment of $4.03
billion.
|
Three
Months
Ended
September
30,
2008
|
Three
Months
Ended
September
30,
2007
|
||||||
(In
millions)
|
|||||||
Segment
Earnings before Depreciation, Depletion, Amortization and Amortization of
Excess Cost of Equity Investments
|
|||||||
NGPL1
|
$
|
11.5
|
$
|
158.1
|
|||
Power
|
1.6
|
5.0
|
|||||
Products
Pipelines – KMP2,4
|
(22.4
|
)
|
127.0
|
||||
Natural
Gas Pipelines – KMP2,4
|
337.6
|
142.3
|
|||||
CO2 –
KMP2
|
237.7
|
184.2
|
|||||
Terminals
– KMP2
|
117.3
|
84.4
|
|||||
Kinder
Morgan Canada – KMP2
|
44.5
|
31.0
|
|||||
Total
Segment Earnings Before DD&A
|
727.8
|
732.0
|
|||||
Depreciation,
Depletion and Amortization
|
(217.2
|
)
|
(204.1
|
)
|
|||
Amortization
of Excess Cost of Equity Investments
|
(1.4
|
)
|
(1.4
|
)
|
|||
Other
Operating Income
|
11.1
|
0.2
|
|||||
General
and Administrative Expense
|
(85.9
|
)
|
(77.9
|
)
|
|||
Interest
and Other, Net3
|
(246.4
|
)
|
(304.9
|
)
|
|||
Add
Back: Income Taxes Included in Segments Above2
|
8.8
|
20.8
|
|||||
Income
from Continuing Operations Before Income Taxes
|
$
|
196.8
|
$
|
164.7
|
Revenues
from External Customers
|
|||||||
NGPL1
|
$
|
-
|
$
|
311.3
|
|||
Power
|
17.5
|
21.0
|
|||||
Products
Pipelines – KMP
|
205.6
|
202.7
|
|||||
Natural
Gas Pipelines – KMP
|
2,359.4
|
1,526.8
|
|||||
CO2 –
KMP
|
339.6
|
256.8
|
|||||
Terminals
– KMP
|
306.0
|
247.1
|
|||||
Kinder
Morgan Canada – KMP
|
57.2
|
43.3
|
|||||
Other
|
11.3
|
-
|
|||||
Total
Revenues
|
$
|
3,296.6
|
$
|
2,609.0
|
|||
Intersegment
Revenues
|
|||||||
NGPL1
|
$
|
-
|
$
|
2.1
|
|||
Terminals
– KMP
|
0.2
|
0.1
|
|||||
Total
Intersegment Revenues
|
$
|
0.2
|
$
|
2.2
|
Depreciation,
Depletion and Amortization
|
|||||||
NGPL1
|
$
|
-
|
$
|
17.8
|
|||
Power
|
-
|
0.1
|
|||||
Products
Pipelines – KMP
|
30.0
|
25.1
|
|||||
Natural
Gas Pipelines – KMP
|
24.2
|
20.9
|
|||||
CO2 –
KMP
|
116.0
|
109.6
|
|||||
Terminals
– KMP
|
39.4
|
24.8
|
|||||
Kinder
Morgan Canada – KMP
|
7.6
|
5.8
|
|||||
Total
Consolidated Depreciation, Depletion and Amortization
|
$
|
217.2
|
$
|
204.1
|
Capital
Expenditures – Continuing Operations
|
|||||||
NGPL1
|
$
|
-
|
$
|
54.8
|
|||
Products
Pipelines – KMP
|
46.6
|
68.1
|
|||||
Natural
Gas Pipelines – KMP
|
280.8
|
63.7
|
|||||
CO2 –
KMP
|
135.8
|
111.7
|
|||||
Terminals
– KMP
|
105.4
|
139.0
|
|||||
Kinder
Morgan Canada – KMP
|
83.2
|
70.0
|
|||||
Other
|
0.3
|
-
|
|||||
Total
Capital Expenditures – Continuing Operations
|
$
|
652.1
|
$
|
507.3
|
1
|
Effective
February 15, 2008, we sold an 80% ownership interest in NGPL PipeCo LLC to
Myria. As a result of the sale, beginning February 15, 2008, we account
for our 20% ownership interest in NGPL PipeCo LLC as an equity method
investment.
|
2
|
Income
taxes of Kinder Morgan Energy Partners of $8.8 million and $20.8 million
for the three months ended September 30, 2008 and 2007, respectively, are
included in segment earnings before depreciation, depletion, amortization
and amortization of excess cost of equity
investments.
|
3
|
Includes
(i) interest expense, (ii) minority interests and (iii) miscellaneous
other income and expenses not allocated to business
segments.
|
4
|
2008
amount includes non-cash goodwill impairment charge (see Note
3).
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Segment
Earnings (Loss) before Depreciation, Depletion, Amortization and
Amortization of Excess Cost of Equity
Investments
|
||||||||||||
NGPL1
|
$
|
116.2
|
$
|
217.5
|
$
|
267.4
|
||||||
Power
|
4.4
|
7.4
|
8.9
|
|||||||||
Products
Pipelines – KMP2,
4
|
(859.3
|
)
|
174.4
|
224.4
|
||||||||
Natural
Gas Pipelines – KMP2,
4
|
(1,546.9
|
)
|
192.1
|
228.5
|
||||||||
CO2 –
KMP2
|
721.6
|
241.4
|
210.0
|
|||||||||
Terminals
– KMP2,
4
|
(293.2
|
)
|
122.7
|
172.3
|
||||||||
Kinder
Morgan Canada – KMP2,5
|
114.0
|
42.7
|
(332.0
|
)
|
||||||||
Total
Segment Earnings (Loss) Before DD&A
|
(1,743.2
|
)
|
998.2
|
779.5
|
||||||||
Depreciation,
Depletion and Amortization
|
(651.0
|
)
|
(276.3
|
)
|
(261.0
|
)
|
||||||
Amortization
of Excess Cost of Equity Investments
|
(4.3
|
)
|
(1.9
|
)
|
(2.4
|
)
|
||||||
Other
Operating Income
|
27.9
|
0.6
|
2.9
|
|||||||||
General
and Administrative Expense
|
(264.0
|
)
|
(107.9
|
)
|
(283.6
|
)
|
||||||
Interest
and Other, Net3
|
(836.7
|
)
|
(419.6
|
)
|
(348.2
|
)
|
||||||
Add
Back: Income Taxes Included in Segments Above2
|
20.1
|
20.8
|
15.6
|
|||||||||
Income
(Loss) from Continuing Operations Before Income Taxes
|
$
|
(3,451.2
|
)
|
$
|
213.9
|
$
|
(97.2
|
)
|
Revenues
from External Customers
|
||||||||||||
NGPL1
|
$
|
132.1
|
$
|
410.5
|
$
|
424.5
|
||||||
Power
|
38.2
|
29.9
|
19.9
|
|||||||||
Products
Pipelines – KMP
|
602.5
|
269.4
|
331.8
|
|||||||||
Natural
Gas Pipelines – KMP
|
6,916.6
|
2,114.7
|
2,637.6
|
|||||||||
CO2 –
KMP
|
1,002.1
|
336.6
|
324.2
|
|||||||||
Terminals
– KMP
|
886.4
|
326.6
|
364.2
|
|||||||||
Kinder
Morgan Canada – KMP
|
145.4
|
58.2
|
62.9
|
|||||||||
Other
|
28.8
|
-
|
-
|
|||||||||
Total
Revenues
|
$
|
9,752.1
|
$
|
3,545.9
|
$
|
4,165.1
|
Intersegment
Revenues
|
||||||||||||
NGPL1
|
$
|
0.9
|
$
|
2.7
|
$
|
2.0
|
||||||
Natural
Gas Pipelines – KMP
|
-
|
-
|
3.0
|
|||||||||
Terminals
– KMP
|
0.7
|
0.2
|
0.3
|
|||||||||
Other
|
(0.9
|
)
|
-
|
-
|
||||||||
Total
Intersegment Revenues
|
$
|
0.7
|
$
|
2.9
|
$
|
5.3
|
Depreciation,
Depletion and Amortization
|
||||||||||||
NGPL1
|
$
|
9.3
|
$
|
23.7
|
$
|
45.3
|
||||||
Power
|
-
|
0.1
|
(4.2
|
)
|
||||||||
Products
Pipelines – KMP
|
86.7
|
33.6
|
33.6
|
|||||||||
Natural
Gas Pipelines – KMP
|
75.5
|
27.7
|
26.8
|
|||||||||
CO2 –
KMP
|
338.8
|
149.4
|
116.3
|
|||||||||
Terminals
– KMP
|
117.8
|
34.3
|
34.4
|
|||||||||
Kinder
Morgan Canada – KMP
|
22.9
|
7.3
|
8.2
|
|||||||||
Other
|
-
|
0.2
|
0.6
|
|||||||||
Total
Consolidated Depreciation, Depletion and Amortization
|
$
|
651.0
|
$
|
276.3
|
$
|
261.0
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Capital
Expenditures – Continuing Operations
|
||||||||||||
NGPL1
|
$
|
10.2
|
$
|
69.9
|
$
|
77.3
|
||||||
Products
Pipelines – KMP
|
167.4
|
91.4
|
79.5
|
|||||||||
Natural
Gas Pipelines – KMP
|
697.6
|
96.2
|
66.6
|
|||||||||
CO2 –
KMP
|
384.2
|
140.1
|
133.3
|
|||||||||
Terminals
– KMP
|
346.0
|
180.9
|
169.9
|
|||||||||
Kinder
Morgan Canada – KMP
|
319.2
|
76.0
|
109.0
|
|||||||||
Other
|
(3.3
|
)
|
1.6
|
17.2
|
||||||||
Total
Capital Expenditures – Continuing Operations
|
$
|
1,921.3
|
$
|
656.1
|
$
|
652.8
|
1
|
Effective
February 15, 2008, we sold an 80% ownership interest in NGPL PipeCo LLC to
Myria. As a result of the sale, beginning February 15, 2008, we account
for our 20% ownership interest in NGPL PipeCo LLC as an equity method
investment.
|
2
|
Income
taxes of Kinder Morgan Energy Partners of $20.1 million, $20.8 million and
$15.6 million for the nine months ended September 30, 2008, the four
months ended September 30, 2007 and the five months ended May 31, 2007,
respectively, are included in segment earnings before depreciation,
depletion, amortization and amortization of excess cost of equity
investments.
|
3
|
Includes
(i) interest expense, (ii) minority interests and (iii) miscellaneous
other income and expenses not allocated to business
segments.
|
4
|
Nine
months ended September 30, 2008 includes non-cash goodwill impairment
charges (see Note 3).
|
5
|
Five
months ended May 31, 2007 includes a non-cash goodwill impairment charge
(see Note 3).
|
September
30, 2008
|
|||
(In
millions)
|
|||
Assets
|
|||
NGPL1
|
$
|
724.2
|
|
Power
|
62.6
|
||
Products
Pipelines – KMP
|
5,516.7
|
||
Natural
Gas Pipelines – KMP
|
7,412.7
|
||
CO2 –
KMP
|
4,436.9
|
||
Terminals
– KMP
|
4,299.1
|
||
Kinder
Morgan Canada – KMP
|
1,803.6
|
||
Total
segment assets
|
24,255.8
|
||
Other2
|
452.9
|
||
Total
Consolidated Assets
|
$
|
24,708.7
|
1
|
Effective
February 15, 2008, we sold an 80% ownership interest in NGPL PipeCo LLC to
Myria. As a result of the sale, beginning February 15, 2008, we account
for our 20% ownership interest in NGPL PipeCo LLC as an equity method
investment.
|
2
|
Includes
assets of cash, restricted deposits, market value of derivative
instruments (including interest rate swaps) and miscellaneous corporate
assets (such as information technology and telecommunications equipment)
not allocated to individual
segments.
|
15.
|
Accounting
for Derivative Instruments and Hedging
Activities
|
September
30,
2008
|
December
31,
2007
|
||||||
(In
millions)
|
|||||||
Derivatives
Asset (Liability)
|
|||||||
Current
Assets: Fair Value of Derivative Instruments
|
$
|
36.9
|
$
|
37.1
|
|||
Current
Assets: Assets Held for Sale
|
$
|
-
|
$
|
8.4
|
|||
Assets:
Fair Value of Derivative Instruments
|
$
|
49.3
|
$
|
4.4
|
|||
Current
Liabilities: Fair Value of Derivative Instruments,
Non-current
|
$
|
(611.6
|
)
|
$
|
(594.7
|
)
|
|
Current
Liabilities: Liabilities Held for Sale
|
$
|
-
|
$
|
(0.4
|
)
|
||
Liabilities
and Stockholders’ Equity: Fair Value of Derivative Instruments,
Non-current
|
$
|
(1,007.2
|
)
|
$
|
(836.8
|
)
|
|
·
|
Level
1 Inputs—quoted prices (unadjusted) in active markets for identical assets
or liabilities that the reporting entity has the ability to access at the
measurement date;
|
|
·
|
Level
2 Inputs—inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. If
the asset or liability has a specified (contractual) term, a Level 2 input
must be observable for substantially the full term of the asset or
liability; and
|
|
·
|
Level
3 Inputs—unobservable inputs for the asset or liability. These
unobservable inputs reflect the entity’s own assumptions about the
assumptions that market participants would use in pricing the asset or
liability, and are developed based on the best information available in
the circumstances (which might include the reporting entity’s own
data).
|
Asset
Fair Value Measurements as of September 30, 2008 Using
|
||||||||||||||||
Total
|
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
(In
millions)
|
||||||||||||||||
Energy
Commodity Derivative Contracts1
|
$
|
86.2
|
$
|
1.8
|
$
|
31.8
|
$
|
52.6
|
||||||||
Interest
Rate Swap Agreements
|
$
|
210.7
|
$
|
-
|
$
|
210.7
|
$
|
-
|
Liability
Fair Value Measurements as of September 30, 2008 Using
|
||||||||||||||||
Total
|
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
(In
millions)
|
||||||||||||||||
Energy
Commodity Derivative Contracts2
|
$
|
(1,618.8
|
)
|
$
|
(0.1
|
)
|
$
|
(1,485.5
|
)
|
$
|
(133.2
|
)
|
||||
Interest
Rate Swap Agreements
|
$
|
(11.5
|
)
|
$
|
-
|
$
|
(11.5
|
)
|
$
|
-
|
||||||
Cross
Currency Swaps
|
$
|
(13.3
|
)
|
$
|
-
|
$
|
(13.3
|
)
|
$
|
-
|
1
|
Level
2 consists primarily of OTC West Texas Intermediate derivatives. Level 3
consists primarily of West Texas Sour derivatives and West Texas
Intermediate options.
|
2
|
Level
1 consists primarily of New York Mercantile Exchange (“NYMEX”) Natural Gas
futures. Level 2 consists primarily of OTC West Texas
Intermediate derivatives. Level 3 consists primarily of West Texas Sour
derivatives and West Texas Intermediate
options.
|
Significant
Unobservable
Inputs (Level
3)
|
|||||||
Three
Months
Ended
September
30,
2008
|
Nine
Months
Ended
September
30,
2008
|
||||||
(In
millions)
|
|||||||
Net
Asset (Liability)
|
|||||||
Beginning
Balance
|
$
|
(233.0
|
)
|
$
|
(100.3
|
)
|
|
Realized
and Unrealized Net Losses
|
133.4
|
(52.9
|
)
|
||||
Purchases
and Settlements
|
19.0
|
72.6
|
|||||
Balance
as of September 30, 2008
|
$
|
(80.6
|
)
|
$
|
(80.6
|
)
|
|
Change
in Unrealized Net Losses Relating to Contracts Still Held as of September
30, 2008
|
$
|
138.5
|
$
|
(22.3
|
)
|
16.
|
Employee
Benefits
|
Successor
Company
|
Predecessor
Company
|
|||||||||||||||||||
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
Four
Months Ended
September
30,
|
Five
Months Ended
May
31,
|
|||||||||||||||||
2008
|
2007
|
2008
|
2007
|
2007
|
||||||||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||||||||||
Service
Cost
|
$
|
2.9
|
$
|
2.7
|
$
|
8.5
|
$
|
3.6
|
$
|
4.5
|
||||||||||
Interest
Cost
|
3.6
|
3.3
|
10.8
|
4.5
|
5.6
|
|||||||||||||||
Expected
Return on Assets
|
(5.8
|
)
|
(5.7
|
)
|
(17.4
|
)
|
(7.7
|
)
|
(9.6
|
)
|
||||||||||
Amortization
of Prior Service Credit
|
-
|
-
|
-
|
-
|
0.1
|
|||||||||||||||
Amortization
of Net Loss
|
-
|
-
|
-
|
-
|
0.2
|
|||||||||||||||
Net
Periodic Pension Cost
|
$
|
0.7
|
$
|
0.3
|
$
|
1.9
|
$
|
0.4
|
$
|
0.8
|
Successor
Company
|
Predecessor
Company
|
|||||||||||||||||||
Three
Months Ended
September
30,
|
Nine
Months
Ended
September
30,
|
Four
Months
Ended
September
30,
|
Five
Months
Ended
May
31,
|
|||||||||||||||||
2008
|
2007
|
2008
|
2007
|
2007
|
||||||||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||||||||||
Service
Cost
|
$
|
0.1
|
$
|
0.1
|
$
|
0.3
|
$
|
0.1
|
$
|
0.2
|
||||||||||
Interest
Cost
|
1.2
|
1.1
|
3.4
|
1.5
|
1.9
|
|||||||||||||||
Expected
Return on Assets
|
(1.8
|
)
|
(1.6
|
)
|
(5.0
|
)
|
(2.1
|
)
|
(2.7
|
)
|
||||||||||
Amortization
of Prior Service Credit
|
-
|
-
|
-
|
-
|
(0.7
|
)
|
||||||||||||||
Amortization
of Net Loss
|
(0.1
|
)
|
-
|
(0.4
|
)
|
-
|
2.0
|
|||||||||||||
Net
Periodic Pension Cost
|
$
|
(0.6
|
)
|
$
|
(0.4
|
)
|
$
|
(1.7
|
)
|
$
|
(0.5
|
)
|
$
|
0.7
|
Predecessor
Company
|
|||||
For
the Period
January
1 – May 17,
2007
|
|||||
(In
millions)
|
|||||
Service
Cost
|
$
|
2.7
|
|||
Interest
Cost
|
4.4
|
||||
Expected
Return on Assets
|
(5.5
|
)
|
|||
Other
|
0.1
|
||||
Net
Periodic Pension Cost
|
$
|
1.7
|
Predecessor
Company
|
|||||
For
the Period
January
1 – May 17,
2007
|
|||||
(In
millions)
|
|||||
Service
Cost
|
$
|
0.6
|
|||
Interest
Cost
|
1.4
|
||||
Net
Periodic Postretirement Benefit Cost
|
$
|
2.0
|
17.
|
Regulatory
Matters
|
|
·
|
the
Standards of Conduct apply only to the relationship between interstate
natural gas transmission pipelines and their marketing affiliates, not
their energy affiliates;
|
|
·
|
all
risk management personnel can be
shared;
|
|
·
|
the
requirement to post discretionary tariff actions was eliminated (but
interstate natural gas pipelines must still maintain a log of
discretionary tariff waivers);
|
|
·
|
lawyers
providing legal advice may be shared employees;
and
|
|
·
|
new
interstate natural gas transmission pipelines are not subject to the
Standards of Conduct until they commence
service.
|
18.
|
Litigation,
Environmental and Other
Contingencies
|
|
·
|
FERC
Docket No. OR92-8, et
al.—Complainants/Protestants: Chevron; Navajo; ARCO; BP WCP;
Western Refining; ExxonMobil ; Tosco; and Texaco (Ultramar is an
intervenor)—Defendant: SFPP
|
|
·
|
FERC
Docket No. OR92-8-025—Complainants/Protestants: BP WCP; ExxonMobil ;
Chevron; ConocoPhillips; and Ultramar—Defendant:
SFPP
|
|
·
|
FERC
Docket No. OR96-2, et
al.—Complainants/Protestants: All Shippers except Chevron (which is
an intervenor)—Defendant: SFPP
|
|
·
|
FERC
Docket Nos. OR02-4 and OR03-5—Complainant/Protestant: Chevron—Defendant:
SFPP
|
|
·
|
FERC
Docket No. OR04-3—Complainants/Protestants: America West Airlines;
Southwest Airlines; Northwest Airlines; and Continental
Airlines—Defendant: SFPP
|
|
·
|
FERC
Docket Nos. OR03-5, OR05-4 and OR05-5—Complainants/Protestants: BP WCP;
ExxonMobil; and ConocoPhillips (other shippers intervened)—Defendant:
SFPP
|
|
·
|
FERC
Docket No. OR03-5-001—Complainants/Protestants: BP WCP; ExxonMobil ; and
ConocoPhillips (other shippers intervened)—Defendant:
SFPP
|
|
·
|
FERC
Docket No. OR07-1—Complainant/Protestant: Tesoro—Defendant:
SFPP
|
|
·
|
FERC
Docket No. OR07-2—Complainant/Protestant: Tesoro—Defendant:
SFPP
|
|
·
|
FERC
Docket No. OR07-3—Complainants/Protestants: BP WCP; Chevron; ExxonMobil;
Tesoro; and Valero Marketing—Defendant:
SFPP
|
|
Complaint
alleges that SFPP’s North Line indexed rate increase was not just and
reasonable. The FERC dismissed the complaint and denied rehearing.
Petitions for review were filed by BP WCP and ExxonMobil at the D.C.
Court. This proceeding is currently in abeyance pending a decision by the
D.C. Court in the Tesoro review proceeding related to Docket No.
OR07-16;
|
|
·
|
FERC
Docket No. OR07-4—Complainants/Protestants: BP WCP; Chevron; and
ExxonMobil—Defendants: SFPP; Kinder Morgan G.P., Inc.; and Knight
Inc.
|
|
·
|
FERC
Docket Nos. OR07-5 and OR07-7 (consolidated)—Complainants/Protestants:
ExxonMobil and Tesoro—Defendants: Calnev; Kinder Morgan G.P., Inc.; and
Knight Inc.
|
|
·
|
FERC
Docket No. OR07-6—Complainant/Protestant: ConocoPhillips—Defendant:
SFPP
|
|
·
|
FERC
Docket Nos. OR07-8 and OR07-11 (consolidated)—Complainants/Protestants: BP
WCP and ExxonMobil —Defendant: SFPP
|
|
·
|
FERC
Docket No. OR07-9—Complainant/Protestant: BP WCP—Defendant:
SFPP
|
|
·
|
FERC
Docket No. OR07-14—Complainants/Protestants: BP WCP and
Chevron—Defendants: SFPP; Calnev, and several
affiliates
|
|
·
|
FERC
Docket No. OR07-16—Complainant/Protestant: Tesoro—Defendant:
Calnev
|
|
·
|
FERC
Docket No. OR07-18—Complainants/Protestants: Airline Complainants;
Chevron; and Valero Marketing—Defendant:
Calnev
|
|
·
|
FERC
Docket No. OR07-19—Complainant/Protestant: ConocoPhillips—Defendant:
Calnev
|
|
·
|
FERC
Docket No. OR07-20—Complainant/Protestant: BP WCP—Defendant:
SFPP
|
|
·
|
FERC
Docket No. OR07-22—Complainant/Protestant: BP WCP—Defendant:
Calnev
|
|
·
|
FERC
Docket No. OR08-13—Complainants/Protestants: BP WCP and
ExxonMobil—Defendant: SFPP
|
|
·
|
FERC
Docket No. OR08-15—Complainants/Protestants: BP WCP and
ExxonMobil—Defendant: SFPP
|
|
·
|
FERC
Docket No. IS05-230 (North Line rate case)—Complainants/Protestants:
Shippers—Defendant: SFPP
|
|
·
|
FERC
Docket No. IS05-327—Complainants/Protestants: Shippers—Defendant:
SFPP
|
|
·
|
FERC
Docket No. IS06-283 (East Line rate case)—Complainants/Protestants:
Shippers—Defendant: SFPP
|
|
·
|
FERC
Docket No. IS06-296—Complainant/Protestant: ExxonMobil —Defendant:
Calnev
|
|
·
|
FERC
Docket No. IS06-356—Complainants/Protestants: Shippers—Defendant:
SFPP
|
|
·
|
FERC
Docket No. IS07-137 (Ultra Low Sulfur Diesel (ULSD)
surcharge)—Complainants/Protestants: Shippers—Defendant:
SFPP
|
|
·
|
FERC
Docket No. IS07-229—Complainants/Protestants: BP WCP and ExxonMobil
—Defendant: SFPP
|
|
·
|
FERC
Docket No. IS07-234—Complainants/Protestants: BP WCP and ExxonMobil
—Defendant: Calnev
|
|
·
|
FERC
Docket No. IS08-28—Complainants/Protestants: ConocoPhillips; Chevron; BP
WCP; ExxonMobil ; Southwest Airlines; Western; and Valero—Defendant:
SFPP
|
|
·
|
FERC
Docket No. IS08-302—Complainants/Protestants: Chevron; BP WCP; ExxonMobil;
and Tesoro—Defendant: SFPP
|
|
·
|
FERC
Docket No. IS08-389—Complainants/Protestants: ConocoPhillips, Valero,
Southwest Airlines Co., Navajo, Western—Defendant:
SFPP
|
|
·
|
FERC
Docket No. IS08-390—Complainants/Protestants: BP WCP, ExxonMobil,
ConocoPhillips, Valero, Chevron, the Airlines—Defendant:
SFPP
|
|
·
|
Motions
to compel payment of interim damages (various
dockets)—Complainants/Protestants: Shippers—Defendants: SFPP; Kinder
Morgan G.P., Inc.; and Knight Inc.
|
19.
|
Recent
Accounting Pronouncements
|
20.
|
Subsequent
Events
|
|
·
|
Natural
Gas Pipeline Company of America and certain affiliates, referred to as
Natural Gas Pipeline Company of America or NGPL, a major interstate
natural gas pipeline and storage system. In February 2008, we sold an 80%
ownership interest in NGPL PipeCo LLC for
approximately $5.9 billion; see Note 11 of the accompanying Notes to
Consolidated Financial Statements. Our remaining 20% interest is recorded
as an equity investment within the “Investments” caption of the
accompanying interim Consolidated Balance
Sheets;
|
|
·
|
Power,
a business that owns and operates a natural gas-fired electric generation
facility. On January 25, 2008, we sold our interests in three natural
gas-fired power plants in Colorado to Bear Stearns. The sale was effective
January 1, 2008, and we received net proceeds of $63.1
million;
|
|
·
|
Products
Pipelines – KMP, the ownership and operation of refined petroleum products
pipelines that deliver gasoline, diesel fuel, jet fuel and natural gas
liquids to various markets, plus the ownership and/or operation of
associated product terminals and petroleum pipeline transmix
facilities;
|
|
·
|
Natural
Gas Pipelines – KMP, the ownership and operation of major interstate and
intrastate natural gas pipeline and storage
systems;
|
|
·
|
CO2 –
KMP, (i) the production, transportation and marketing of carbon dioxide,
or “CO2,” to
oil fields that use CO2 to
increase production of oil, (ii) ownership interests in and/or operation
of oil fields in West Texas and (iii) the ownership and operation of a
crude oil pipeline system in West
Texas;
|
|
·
|
Terminals
– KMP, the ownership and/or operation of liquids and bulk terminal
facilities and rail transloading and materials handling facilities located
throughout the United States; and
|
|
·
|
Kinder
Morgan Canada – KMP, the ownership and operation of (i) Trans Mountain, a
pipeline system that transports crude oil and refined petroleum products
from Edmonton, Alberta, Canada to marketing terminals and refineries in
British Columbia, Canada and the state of Washington, (ii) Express, a
pipeline system in which we own a one-third interest that transports crude
oil from Hardisty, Alberta, Canada through Casper, Wyoming to the Wood
River, Illinois area and (iii) Jet Fuel, a 25-mile long pipeline
transporting jet fuel to Vancouver International Airport. In August 2008,
we sold the Express pipeline system and the Jet Fuel pipeline to Kinder
Morgan Energy Partners. In prior periods, Knight Inc. reported the results
of the Trans Mountain pipeline system in the Trans Mountain – KMP segment,
the Express pipeline system in the Express segment and the results of Jet
Fuel were included in the “Other” caption in the Consolidated Financial
Results table in the Management’s Discussion and Analysis of Financial
Condition and Results of
Operations.
|
Three
Months Ended
September
30,
|
Increase/(Decrease)
Change
from 2007
|
||||||||||||||
2008
|
2007
|
$
|
%
|
||||||||||||
(In
millions, except percentages)
|
|||||||||||||||
Segment
Earnings before Depreciation, Depletion and Amortization Expense and
Amortization of Excess Cost of Equity Investments1
|
|||||||||||||||
NGPL2
|
$
|
11.5
|
$
|
158.1
|
$
|
(146.6
|
)
|
(93
|
)%
|
||||||
Power
|
1.6
|
5.0
|
(3.4
|
)
|
(68
|
)%
|
|||||||||
Products
Pipelines – KMP3
|
(22.4
|
)
|
127.0
|
(149.4
|
)
|
(118
|
)%
|
||||||||
Natural
Gas Pipelines – KMP4
|
337.6
|
142.3
|
195.3
|
137
|
%
|
||||||||||
CO2 –
KMP
|
237.7
|
184.2
|
53.5
|
29
|
%
|
||||||||||
Terminals
– KMP
|
117.3
|
84.4
|
32.9
|
39
|
%
|
||||||||||
Kinder
Morgan Canada – KMP5
|
44.5
|
31.0
|
13.5
|
44
|
%
|
||||||||||
Segment
Earnings before DD&A
|
727.8
|
732.0
|
(4.2
|
)
|
(1
|
)%
|
|||||||||
Depreciation,
Depletion and Amortization Expense
|
(217.2
|
)
|
(204.1
|
)
|
(13.1
|
)
|
(6
|
)%
|
|||||||
Amortization
of Excess Cost of Equity Investments
|
(1.4
|
)
|
(1.4
|
)
|
-
|
-
|
%
|
||||||||
Other
Operating Income
|
11.1
|
0.2
|
10.9
|
5,450
|
%
|
||||||||||
General
and Administrative Expense
|
(85.9
|
)
|
(77.9
|
)
|
(8.0
|
)
|
(10
|
)%
|
|||||||
Interest
and Other, Net
|
(246.4
|
)
|
(304.9
|
)
|
58.5
|
19
|
%
|
||||||||
Income
from Continuing Operations before Income Taxes1
|
188.0
|
143.9
|
44.1
|
31
|
%
|
||||||||||
Income
Taxes1
|
(79.1
|
)
|
(53.8
|
)
|
(25.3
|
)
|
(47
|
)%
|
|||||||
Income
from Continuing Operations
|
108.9
|
90.1
|
18.8
|
21
|
%
|
||||||||||
Loss
from Discontinued Operations, Net of Tax
|
(0.2
|
)
|
(4.4
|
)
|
4.2
|
95
|
%
|
||||||||
Net
Income
|
$
|
108.7
|
$
|
85.7
|
$
|
23.0
|
27
|
%
|
1
|
Kinder
Morgan Energy Partners’ income taxes of $8.8 million and $20.8 million for
the three months ended September 30, 2008 and 2007, respectively, are
included in segment earnings.
|
2
|
Effective
February 15, 2008, we sold an 80% ownership interest in NGPL PipeCo LLC to
Myria. As a result of the sale, beginning February 15, 2008, we account
for our 20% ownership interest in NGPL PipeCo LLC as an equity method
investment.
|
3
|
Three
months ended September 30, 2008 includes a non-cash goodwill impairment
charge of $152.6 million.
|
4
|
Three
months ended September 30, 2008 includes a non-cash goodwill impairment
adjustment of $152.6 million.
|
5
|
Includes
earnings of the Trans Mountain pipeline system, our interest in the
Express pipeline system and the Jet Fuel pipeline system; see Note 14 of
the accompanying Notes to Consolidated Financial
Statements.
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Segment
Earnings (Loss) before Depreciation, Depletion and Amortization Expense
and Amortization of Excess Cost of Equity Investments1
|
||||||||||||
NGPL2
|
$
|
116.2
|
$
|
217.5
|
$
|
267.4
|
||||||
Power
|
4.4
|
7.4
|
8.9
|
|||||||||
Products
Pipelines – KMP3
|
(859.3
|
)
|
174.4
|
224.4
|
||||||||
Natural
Gas Pipelines – KMP4
|
(1,546.9
|
)
|
192.1
|
228.5
|
||||||||
CO2 –
KMP
|
721.6
|
241.4
|
210.0
|
|||||||||
Terminals
– KMP5
|
(293.2
|
)
|
122.7
|
172.3
|
||||||||
Kinder
Morgan Canada – KMP6
|
114.0
|
42.7
|
(332.0
|
)
|
||||||||
Segment
Earnings (Loss) before DD&A
|
(1,743.2
|
)
|
998.2
|
779.5
|
||||||||
Depreciation,
Depletion and Amortization Expense
|
(651.0
|
)
|
(276.3
|
)
|
(261.0
|
)
|
||||||
Amortization
of Excess Cost of Equity Investments
|
(4.3
|
)
|
(1.9
|
)
|
(2.4
|
)
|
||||||
Other
Operating Income
|
27.9
|
0.6
|
2.9
|
|||||||||
General
and Administrative Expense
|
(264.0
|
)
|
(107.9
|
)
|
(283.6
|
)
|
||||||
Interest
and Other, Net
|
(836.7
|
)
|
(419.6
|
)
|
(348.2
|
)
|
||||||
Income
(Loss) from Continuing Operations before Income Taxes1
|
(3,471.3
|
)
|
193.1
|
(112.8
|
)
|
|||||||
Income
Taxes1
|
(174.3
|
)
|
(75.1
|
)
|
(119.9
|
)
|
||||||
Income
(Loss) from Continuing Operations
|
(3,645.6
|
)
|
118.0
|
(232.7
|
)
|
|||||||
Income
(Loss) from Discontinued Operations, Net of Tax
|
(0.6
|
)
|
(2.1
|
)
|
298.6
|
|||||||
Net
Income (Loss)
|
$
|
(3,646.2
|
)
|
$
|
115.9
|
$
|
65.9
|
1
|
Kinder
Morgan Energy Partners’ income taxes for the nine months ended September
30, 2008, the four months ended September 30, 2007, and the five months
ended May 31, 2007, were $20.1 million, $20.8 million, and $15.6 million
respectively, and are included in segment
earnings.
|
2
|
Effective
February 15, 2008, we sold an 80% ownership interest in NGPL PipeCo LLC to
Myria. As a result of the sale, beginning February 15, 2008, we account
for our 20% ownership interest in NGPL PipeCo LLC as an equity method
investment.
|
3
|
Nine
months ended September 30, 2008 includes a non-cash goodwill impairment
charge of $1.26 billion.
|
4
|
Nine
months ended September 30, 2008 includes a non-cash goodwill impairment
charge of $2.09 billion.
|
5
|
Nine
months ended September 30, 2008 includes a non-cash goodwill impairment
charge of $0.68 billion.
|
6
|
Includes
earnings of the Trans Mountain pipeline system, our interest in the
Express pipeline system and the Jet Fuel pipeline system and a non-cash
goodwill impairment charge for the five months ended May 31,
2007.
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Segment
Earnings Before DD&A
|
$
|
11.5
|
$
|
158.1
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Segment
Earnings Before DD&A
|
$
|
116.2
|
$
|
217.5
|
$
|
267.4
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Operating
Revenues
|
$
|
17.5
|
$
|
21.0
|
|||
Operating
Expenses and Minority Interests
|
(15.9
|
)
|
(19.3
|
)
|
|||
Equity
in Earnings of Thermo Cogeneration Partnership
|
-
|
3.3
|
|||||
Segment
Earnings Before DD&A
|
$
|
1.6
|
$
|
5.0
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Operating
Revenues
|
$
|
38.2
|
$
|
29.9
|
$
|
19.9
|
||||||
Operating
Expenses and Minority Interests
|
(33.8
|
)
|
(27.1
|
)
|
(16.1
|
)
|
||||||
Equity
in Earnings of Thermo Cogeneration Partnership
|
-
|
4.6
|
5.1
|
|||||||||
Segment
Earnings Before DD&A
|
$
|
4.4
|
$
|
7.4
|
$
|
8.9
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Operating
Revenues1
|
$
|
205.6
|
$
|
202.7
|
|||
Operating
Expenses2
|
(78.7
|
)
|
(80.1
|
)
|
|||
Other
Income (Expense)3
|
(0.3
|
)
|
0.6
|
||||
Goodwill
Impairment4
|
(152.6
|
)
|
-
|
||||
Earnings
from Equity Investments5
|
3.3
|
7.3
|
|||||
Interest
Income and Other Income, Net6
|
0.4
|
2.9
|
|||||
Income
Tax Benefit (Expense)
|
(0.1
|
)
|
(6.4
|
)
|
|||
Segment
Earnings (Loss) Before DD&A
|
$
|
(22.4
|
)
|
$
|
127.0
|
||
|
|||||||
Operating Statistics
(MMBbl)
|
|||||||
Gasoline
|
101.1
|
111.2
|
|||||
Diesel
Fuel
|
40.0
|
42.1
|
|||||
Jet
Fuel
|
29.6
|
31.9
|
|||||
Total
Refined Product Volumes
|
170.7
|
185.2
|
|||||
Natural
Gas Liquids
|
5.8
|
7.4
|
|||||
Total
Delivery Volumes7
|
176.5
|
192.6
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Operating
Revenues1
|
$
|
602.5
|
$
|
269.4
|
$
|
331.8
|
||||||
Operating
Expenses2
|
(209.6
|
)
|
(103.1
|
)
|
(116.4
|
)
|
||||||
Other
Income (Expense)3
|
(0.6
|
)
|
1.7
|
(0.6
|
)
|
|||||||
Goodwill
Impairment4
|
(1,266.5
|
)
|
-
|
-
|
||||||||
Earnings
from Equity Investments5
|
13.6
|
10.2
|
12.4
|
|||||||||
Interest
Income and Other Income (Expense), Net6
|
2.2
|
3.5
|
4.7
|
|||||||||
Income
Tax Expense
|
(0.9
|
)
|
(7.3
|
)
|
(7.5
|
)
|
||||||
Segment
Earnings (Loss) Before DD&A
|
$
|
(859.3
|
)
|
$
|
174.4
|
$
|
224.4
|
|||||
|
||||||||||||
Operating Statistics
(MMBbl)
|
||||||||||||
Gasoline
|
299.5
|
149.2
|
182.8
|
|||||||||
Diesel
Fuel
|
120.2
|
55.6
|
66.6
|
|||||||||
Jet
Fuel
|
89.2
|
42.7
|
51.3
|
|||||||||
Total
Refined Product Volumes
|
508.9
|
247.5
|
300.7
|
|||||||||
Natural
Gas Liquids
|
18.7
|
9.1
|
13.7
|
|||||||||
Total
Delivery Volumes7
|
527.6
|
256.6
|
314.4
|
1
|
Three
and nine months ended September 30, 2008 amounts include a $5.1 million
negative impact to revenues from the proposed settlement of certain
litigation matters related to Kinder Morgan Energy Partners’ Pacific
operations’ East Line
pipeline.
|
2
|
Three
and nine months ended September 30, 2008 amounts include $4.2 million in
expense from the proposed settlement of certain litigation matters related
to Kinder Morgan Energy Partners’ Pacific operations’ East Line pipeline,
and $0.1 million expense related to hurricane clean-up and
repair activities. Nine months ended September 30, 2008 amount includes a
$3.0 million positive impact to expense related to Kinder Morgan Energy
Partners’ Pacific operations and a $3.0 million negative impact to expense
related to Kinder Morgan Energy Partners’ Calnev Pipeline associated with
legal liability adjustments. Four months ended September 30, 2007 amount
includes a $15.0 million expense for a litigation settlement reached with
Contra Costa County, California, and a $3.2 million expense from the
settlement of certain litigation matters related to Kinder Morgan Energy
Partners’ West Coast refined products terminal operations. Five months
ended May 31, 2007 amount includes an expense of $2.2 million associated
with environmental liability
adjustments.
|
3
|
Three
and nine months ended September 30, 2008 amounts include a $0.3 million
negative impact to segment earnings resulting from valuation adjustments
related to assets sold in September 2008 and four months ended September
30, 2007 amount includes a $1.8 million charge to segment earnings
resulting from valuation adjustments related to assets sold in June 2007;
both were recorded in the application of the purchase method of accounting
to the Going Private transaction.
|
4
|
Three
and nine months ended September 30, 2008 include non-cash goodwill
impairment charges of $152.6 million and $1,266.5 million, respectively;
see Note 3 of the accompanying Notes to Consolidated Financial
Statements.
|
5
|
Three
and nine months ended September 30, 2008 amounts include an expense of
$0.1 million reflecting Kinder Morgan Energy Partners’ portion of
Plantation Pipe Line Company’s expenses related to hurricane clean-up and
repair activities.
|
6
|
Three
and nine month 2008 amounts include charges to income of $0.7 million and
$1.4 million, respectively, resulting from unrealized foreign currency
losses on long-term debt transactions. Three and four months ended
September 30, 2007 amounts include income of $0.9 million and $1.7
million, respectively, resulting from unrealized foreign currency gains on
long-term debt transactions.
|
7
|
Includes
Pacific, Plantation, Calnev, Central Florida, Cochin and Cypress pipeline
volumes.
|
EBDA
Increase/(Decrease)
|
Revenues
Increase/(Decrease)
|
||||||||||||
(In
millions, except percentages)
|
|||||||||||||
Pacific
Operations
|
$
|
(9.2
|
)
|
(13
|
)%
|
$
|
(2.3
|
)
|
(2
|
)
|
|||
Cochin
Pipeline System
|
(1.0
|
)
|
(10
|
)%
|
(3.5
|
)
|
(21
|
)%
|
|||||
Southeast
Terminals
|
3.9
|
34
|
%
|
8.8
|
55
|
%
|
|||||||
West
Coast Terminals
|
2.3
|
20
|
%
|
2.7
|
15
|
%
|
|||||||
Central
Florida Pipeline
|
1.1
|
11
|
%
|
1.6
|
14
|
%
|
|||||||
All
Other (Including Eliminations)
|
(0.7
|
)
|
(2
|
)%
|
0.7
|
2
|
%
|
||||||
Total
Products Pipelines
|
$
|
(3.6
|
)
|
(3
|
)%
|
$
|
8.0
|
4
|
%
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Pacific
Operation
|
$
|
182.4
|
$
|
90.2
|
$
|
105.1
|
||||||
Cochin
Pipeline System
|
24.7
|
15.4
|
15.3
|
|||||||||
Southeast
Terminals
|
38.8
|
14.9
|
16.6
|
|||||||||
West
Coast Terminals
|
36.9
|
(0.2
|
)
|
19.3
|
||||||||
Central
Florida Pipeline
|
31.9
|
12.6
|
15.3
|
|||||||||
Goodwill
Impairment Charge
|
(1,266.5
|
)
|
-
|
-
|
||||||||
All
Other (Including Eliminations)
|
92.5
|
41.5
|
52.8
|
|||||||||
Total
Segment Earnings Before DD&A
|
$
|
(859.3
|
)
|
$
|
174.4
|
$
|
224.4
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Pacific
Operation
|
$
|
281.5
|
$
|
130.2
|
$
|
156.0
|
||||||
Cochin
Pipeline System
|
38.7
|
22.4
|
32.3
|
|||||||||
Southeast
Terminals
|
63.0
|
22.3
|
29.9
|
|||||||||
West
Coast Terminals
|
57.0
|
24.1
|
29.1
|
|||||||||
Central
Florida Pipeline
|
38.8
|
15.5
|
19.3
|
|||||||||
All
Other (Including Eliminations)
|
123.5
|
55.0
|
65.1
|
|||||||||
Total
Segment Operating Revenues
|
$
|
602.5
|
$
|
269.5
|
$
|
331.7
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Operating
Revenues
|
$
|
2,359.4
|
$
|
1,526.8
|
|||
Operating
Expenses1
|
(2,203.3
|
)
|
(1,387.5
|
)
|
|||
Other
Income
|
0.1
|
0.4
|
|||||
Goodwill
Impairment3
|
152.6
|
-
|
|||||
Earnings
from Equity Investments
|
25.5
|
4.0
|
|||||
Interest
Income and Other Income, Net
|
3.9
|
-
|
|||||
Income
Tax Benefit (Expense)
|
(0.6
|
)
|
(1.4
|
)
|
|||
Segment
Earnings Before DD&A
|
$
|
337.6
|
$
|
142.3
|
|||
|
|||||||
Operating
Statistics (Trillion Btus)
|
|||||||
Natural
Gas Transport Volumes 5
|
559.0
|
441.7
|
|||||
Natural
Gas Sales Volumes 6
|
220.0
|
224.4
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Operating
Revenues
|
$
|
6,916.6
|
$
|
2,114.7
|
$
|
2,640.6
|
||||||
Operating
Expenses1
|
(6,463.5
|
)
|
(1,929.7
|
)
|
(2,418.5
|
)
|
||||||
Other
Income (Expense)2
|
2.8
|
1.8
|
(0.1
|
)
|
||||||||
Goodwill
Impairment3
|
(2,090.2
|
)
|
-
|
-
|
||||||||
Earnings
from Equity Investments4
|
80.4
|
5.3
|
8.9
|
|||||||||
Interest
Income and Other Income, Net
|
8.8
|
-
|
0.2
|
|||||||||
Income
Tax Benefit (Expense)
|
(1.8
|
)
|
-
|
(2.6
|
)
|
|||||||
Segment
Earnings (Loss) Before DD&A
|
$
|
(1,546.9
|
)
|
$
|
192.1
|
$
|
228.5
|
|||||
|
||||||||||||
Operating
Statistics (Trillion Btus)
|
||||||||||||
Natural
Gas Transport Volumes5
|
1,599.5
|
568.8
|
707.4
|
|||||||||
Natural
Gas Sales Volumes6
|
660.0
|
295.2
|
345.8
|
1
|
Three
and nine month 2008 amounts include (i) a $12.2 million positive impact to
income and a $0.9 million negative impact to income, respectively,
resulting from unrealized mark to market gains and losses due to the
discontinuance of hedge accounting at Casper Douglas; and (ii) a $4.4
million expense related to hurricane clean-up and repair activities.
Beginning in the second quarter of 2008, the Casper and Douglas gas
processing operations discontinued hedge accounting. Amount also includes
positive impact to segment earnings of $0.5 million for the nine month
periods ended September 30, 2008, and of $0.3 million and $0.7 million for
the three and four month periods ended September 30, 2007, respectively,
resulting from valuation adjustments related to derivative contracts in
place at the time of the Going Private transaction and recorded in the
application of the purchase method of
accounting.
|
2
|
Four
months ended September 30, 2007 amounts include a $1.4 million expense
resulting from valuation adjustments, related to assets sold in June 2007,
recorded in the application of the purchase method of accounting to the
Going Private transaction.
|
3
|
Three
and nine months ended September 30, 2008 include non-cash goodwill
impairment adjustments of $152.6 million and $2,090.2 million,
respectively; see Note 3 of the accompanying Notes to Consolidated
Financial Statements.
|
4
|
Five
months ended May 31, 2007 amount includes an expense of $1.0 million
reflecting Kinder Morgan Energy Partners’ portion of a loss from the early
extinguishment of debt by Red Cedar Gathering
Company.
|
5
|
Includes
Kinder Morgan Interstate Gas Transmission LLC, Trailblazer Pipeline
Company LLC, TransColorado Gas Transmission Company LLC, Rockies Express
Pipeline LLC, and Texas intrastate natural gas pipeline group pipeline
volumes.
|
6
|
Represents
Texas intrastate natural gas pipeline group
volumes.
|
EBDA
Increase/(Decrease)
|
Revenues
Increase/(Decrease)
|
||||||||||||
(In
millions, except percentages)
|
|||||||||||||
Rockies
Express Pipeline
|
$
|
23.0
|
568
|
%
|
$
|
n/a
|
n/a
|
||||||
Texas
Intrastate Natural Gas Pipeline Group
|
13.6
|
18
|
%
|
834.7
|
59
|
%
|
|||||||
TransColorado
Pipeline
|
3.1
|
28
|
%
|
2.9
|
23
|
%
|
|||||||
Kinder
Morgan Louisiana Pipeline
|
3.0
|
n/a
|
-
|
-
|
|||||||||
Casper
and Douglas Gas Processing
|
(3.0
|
)
|
(48
|
)%
|
3.9
|
14
|
%
|
||||||
Trailblazer
Pipeline
|
(2.7
|
)
|
20
|
%
|
(1.1
|
)
|
(7
|
)
|
|||||
All
Others
|
(1.8
|
)
|
(5
|
)%
|
(7.9
|
)
|
(13
|
)%
|
|||||
Intrasegment
Eliminations
|
-
|
-
|
0.1
|
27
|
%
|
||||||||
Total
Natural Gas Pipelines
|
$
|
35.2
|
25
|
%
|
$
|
832.6
|
55
|
%
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Rockies
Express Pipeline
|
$
|
58.7
|
$
|
(5.4
|
)
|
$
|
(4.3
|
)
|
||||
Texas
Intrastate Natural Gas Pipeline Group
|
288.0
|
106.0
|
133.0
|
|||||||||
TransColorado
Pipeline
|
41.6
|
14.5
|
17.9
|
|||||||||
Kinder
Morgan Louisiana Pipeline
|
6.0
|
-
|
-
|
|||||||||
Casper
and Douglas Gas Processing
|
8.9
|
10.2
|
7.3
|
|||||||||
Trailblazer
Pipeline
|
34.5
|
18.0
|
18.1
|
|||||||||
Goodwill
Impairment Charge
|
(2,090.2
|
)
|
-
|
-
|
||||||||
All
Others
|
105.6
|
48.8
|
56.5
|
|||||||||
Total
Segment Earnings Before DD&A
|
$
|
(1,546.9
|
)
|
$
|
192.1
|
$
|
228.5
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Texas
Intrastate Natural Gas Pipeline Group
|
$
|
6,575.5
|
$
|
1,964.2
|
$
|
2,492.4
|
||||||
TransColorado
Pipeline
|
47.5
|
17.1
|
20.7
|
|||||||||
Casper
and Douglas Gas Processing
|
111.4
|
35.9
|
34.7
|
|||||||||
Trailblazer
Pipeline
|
42.5
|
21.5
|
22.6
|
|||||||||
All
Others
|
143.0
|
76.5
|
70.7
|
|||||||||
Eliminations
|
(3.3
|
)
|
(0.5
|
)
|
(0.5
|
)
|
||||||
Total
Segment Operating Revenues
|
$
|
6,916.6
|
$
|
2,114.7
|
$
|
2,640.6
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Operating
Revenues1
|
$
|
339.6
|
$
|
256.8
|
|||
Operating
Expenses
|
(105.4
|
)
|
(75.8
|
)
|
|||
Earnings
from Equity Investments
|
4.2
|
4.1
|
|||||
Other
Income, Net
|
-
|
-
|
|||||
Income
Tax Benefit (Expense)
|
(0.7
|
)
|
(0.9
|
)
|
|||
Segment
Earnings Before DD&A
|
$
|
237.7
|
$
|
184.2
|
|||
|
|||||||
Operating
Statistics
|
|||||||
Carbon
Dioxide Delivery Volumes(Bcf)2
|
171.3
|
150.4
|
|||||
SACROC
Oil Production (Gross)(MBbl/d)3
|
27.9
|
27.3
|
|||||
SACROC
Oil Production (Net)(MBbl/d)4
|
23.3
|
22.8
|
|||||
Yates
Oil Production (Gross)(MBbl/d)5
|
27.1
|
27.1
|
|||||
Yates
Oil Production (Net)(MBbl/d)4
|
12.0
|
12.0
|
|||||
Natural
Gas Liquids Sales Volumes (Net)(MBbl/d)4
|
7.6
|
10.0
|
|||||
Realized
Weighted Average Oil Price per Bbl5,
6
|
$
|
51.45
|
$
|
36.77
|
|||
Realized
Weighted Average Natural Gas Liquids Price per Bbl6,
7
|
$
|
77.97
|
$
|
53.68
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Operating
Revenues1
|
$
|
1,002.1
|
$
|
336.6
|
$
|
324.2
|
||||||
Operating
Expenses
|
(292.7
|
)
|
(101.1
|
)
|
(121.5
|
)
|
||||||
Earnings
from Equity Investments
|
15.3
|
5.6
|
8.7
|
|||||||||
Other
Income (Expense), Net
|
(0.2
|
)
|
0.1
|
(0.1
|
)
|
|||||||
Income
Tax Benefit (Expense)
|
(2.9
|
)
|
0.2
|
(1.3
|
)
|
|||||||
Segment
Earnings Before DD&A
|
$
|
721.6
|
$
|
241.4
|
$
|
210.0
|
||||||
|
||||||||||||
Operating
Statistics
|
||||||||||||
Carbon
Dioxide Delivery Volumes(Bcf)2
|
530.1
|
200.3
|
272.3
|
|||||||||
SACROC
Oil Production (Gross)(MBbl/d)3
|
27.6
|
27.5
|
29.1
|
|||||||||
SACROC
Oil Production (Net)(MBbl/d)4
|
23.0
|
22.9
|
24.2
|
|||||||||
Yates
Oil Production (Gross)(MBbl/d)3
|
27.9
|
27.4
|
26.4
|
|||||||||
Yates
Oil Production (Net)(MBbl/d)4
|
12.4
|
12.0
|
11.7
|
|||||||||
Natural
Gas Liquids Sales Volumes (Net)(MBbl/d)4
|
8.7
|
10.0
|
9.7
|
|||||||||
Realized
Weighted Average Oil Price per Bbl5,
6
|
$
|
51.50
|
$
|
36.25
|
$
|
35.03
|
||||||
Realized
Weighted Average Natural Gas Liquids Price per Bbl6,
7
|
$
|
73.37
|
$
|
53.02
|
$
|
45.04
|
1
|
Amounts
include increases in segment earnings resulting from valuation adjustments
of $34.5 million and $102.0 million for the three and nine month periods
ended September 30, 2008, respectively, and $46.2 million and $59.1
million (net of a $0.6 million loss on sale of assets) for the three and
four month periods ended September 30, 2007, respectively, primarily
related to derivative contracts in place at the time of the Going Private
transaction and recorded in the application of the purchase method of
accounting.
|
2
|
Includes
Cortez, Central Basin, Canyon Reef Carriers, Centerline and Pecos pipeline
volumes.
|
3
|
Represents
100% of the production from the field. Kinder Morgan Energy Partners owns
an approximately 97% working interest in the SACROC unit and an
approximately 50% working interest in the Yates
unit.
|
4
|
Net
to Kinder Morgan Energy Partners, after royalties and outside working
interests.
|
5
|
Includes
all of Kinder Morgan Energy Partners’ crude oil production
properties.
|
6
|
Hedge
gains/losses for crude oil and natural gas liquids are included with crude
oil.
|
7
|
Includes
production attributable to leasehold ownership and production attributable
to Kinder Morgan Energy Partners’ ownership in processing plants and third
party processing agreements.
|
EBDA
Increase/(Decrease)
|
Revenues
Increase/(Decrease)
|
||||||||||||
(In
millions, except percentages)
|
|||||||||||||
Sales
and Transportation Activities
|
$
|
39.6
|
94
|
%
|
$
|
47.8
|
105
|
%
|
|||||
Oil
and Gas Producing Activities
|
25.7
|
27
|
%
|
56.9
|
32
|
%
|
|||||||
Intrasegment
Eliminations
|
-
|
-
|
(10.1
|
)
|
(88
|
)%
|
|||||||
Total
|
$
|
65.3
|
47
|
%
|
$
|
94.6
|
45
|
%
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Sales
and Transportation Activities
|
$
|
323.8
|
$
|
117.1
|
$
|
67.2
|
||||||
Oil
and Gas Producing Activities
|
397.8
|
124.3
|
142.8
|
|||||||||
Total
Segment Earnings Before DD&A
|
$
|
721.6
|
$
|
241.4
|
$
|
210.0
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Sales
and Transportation Activities
|
$
|
347.4
|
$
|
120.0
|
$
|
71.3
|
||||||
Oil
and Gas Producing Activities
|
714.3
|
231.4
|
271.7
|
|||||||||
Intersegment
Eliminations
|
(59.6
|
)
|
(14.8
|
)
|
(18.8
|
)
|
||||||
Total
Segment Operating Revenues
|
$
|
1,002.1
|
$
|
336.6
|
$
|
324.2
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Operating
Revenues
|
$
|
306.2
|
$
|
247.2
|
|||
Operating
Expenses1
|
(175.0
|
)
|
(158.0
|
)
|
|||
Other
Income (Expense)2
|
(6.9
|
)
|
1.5
|
||||
Earnings
from Equity Investments
|
0.7
|
0.3
|
|||||
Interest
Income and Other Income (Expense), Net
|
(1.3
|
)
|
0.3
|
||||
Income
Tax Expense4
|
(6.4
|
)
|
(6.9
|
)
|
|||
Segment
Earnings Before DD&A
|
$
|
117.3
|
$
|
84.4
|
|||
|
|||||||
Operating
Statistics
|
|||||||
Bulk
Transload Tonnage (MMtons)5
|
26.8
|
24.5
|
|||||
Liquids
Leaseable Capacity (MMBbl)
|
54.2
|
46.3
|
|||||
Liquids
Utilization
|
98.2
|
%
|
96.5
|
%
|
Successor
Company
|
Predecessor
Company
|
||||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
|||||||||||
(In
millions)
|
(In
millions)
|
||||||||||||
Operating
Revenues
|
$
|
887.1
|
$
|
326.8
|
$
|
364.5
|
|||||||
Operating
Expenses1
|
(483.9
|
)
|
(198.7
|
)
|
(192.2
|
)
|
|||||||
Other
Income (Expense)2
|
(6.5
|
)
|
2.9
|
3.0
|
|||||||||
Goodwill
Impairment3
|
(676.6
|
)
|
-
|
-
|
|||||||||
Earnings
from Equity Investments
|
2.4
|
0.3
|
-
|
||||||||||
Interest
Income and Other Income (Expense), Net
|
1.4
|
-
|
0.3
|
||||||||||
Income
Tax Expense4
|
(17.1
|
)
|
(8.6
|
)
|
(3.3
|
)
|
|||||||
Segment
Earnings (Loss) Before DD&A
|
$
|
(293.2
|
)
|
$
|
122.7
|
$
|
172.3
|
||||||
|
|||||||||||||
Operating
Statistics
|
|||||||||||||
Bulk
Transload Tonnage (MMtons)5
|
76.5
|
31.3
|
41.4
|
||||||||||
Liquids
Leaseable Capacity (MMBbl)
|
54.2
|
46.3
|
43.6
|
||||||||||
Liquids
Utilization
|
98.2
|
%
|
96.5
|
%
|
97.5
|
%
|
1
|
Three
and nine month 2008 amounts include $3.6 million of expense related to
hurricane clean-up and repair activities, a $1.5 million expense related
to fire damage and repair activities, and a combined $1.5 million expense
from the settlement
|
|
of
certain litigation matters related to Kinder Morgan Energy Partners’
Elizabeth River bulk terminal and its Staten Island liquids terminal.
Three and four month 2007 amounts include $25.0 million in expense from
the settlement of certain litigation matters related to the Cora coal
terminal.
|
2
|
Three
and nine month 2008 amounts include losses of $5.3 million from asset
write-offs related to fire damage, and losses of $0.8 million from asset
write-offs related to hurricane damage. Both the three and nine months
ended September 30, 2008 amounts include expenses of $2.9 million
resulting from valuation adjustments related to assets sold, recorded in
the application of the purchase method of accounting. The five months
ended May 31, 2007 amount includes income of $1.8 million from property
casualty gains associated with the 2005 hurricane
season.
|
3
|
2008
amounts include a non-cash goodwill impairment charge; see Note 3 of the
accompanying Notes to Consolidated Financial
Statements.
|
4
|
Three
and nine month 2008 amounts include a decrease of $0.4 million of expenses
related to hurricane clean-up and repair
activities.
|
5
|
Volumes
for acquired terminals are included for all
periods.
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Operating
Revenues
|
$
|
57.2
|
$
|
44.6
|
|||
Operating
Expenses
|
(18.6
|
)
|
(19.9
|
)
|
|||
Earnings
from Equity Investment
|
3.4
|
8.6
|
|||||
Interest
Income and Other Income, Net
|
3.5
|
2.9
|
|||||
Income
Tax Benefit (Expense)
|
(1.0
|
)
|
(5.2
|
)
|
|||
Segment
Earnings Before DD&A
|
$
|
44.5
|
$
|
31.0
|
|||
|
|||||||
Operating
Statistics
|
|||||||
Transport
Volumes (MMBbl)
|
22.6
|
25.3
|
Successor
Company
|
Predecessor
Company
|
||||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
|||||||||||
(In
millions)
|
(In
millions)
|
||||||||||||
Operating
Revenues
|
$
|
145.4
|
$
|
59.1
|
$
|
62.0
|
|||||||
Operating
Expenses
|
(51.3
|
)
|
(24.9
|
)
|
(23.1
|
)
|
|||||||
Other
Income (Expense)
1
|
-
|
-
|
(377.1
|
)
|
|||||||||
Earnings
from Equity Investments
|
7.7
|
11.3
|
5.4
|
||||||||||
Interest
Income and Other Income, Net
|
9.6
|
2.3
|
1.7
|
||||||||||
Income
Tax Benefit (Expense)
|
2.6
|
(5.1
|
)
|
(0.9
|
)
|
||||||||
Segment
Earnings (Loss) Before DD&A
|
$
|
114.0
|
$
|
42.7
|
$
|
(332.0
|
)
|
||||||
|
|||||||||||||
Operating
Statistics
|
|||||||||||||
Transport
Volumes (MMBbl)
|
63.5
|
33.7
|
36.4
|
1
|
Five
month period 2007 amount represents a goodwill impairment expense, see
Note 3 of the accompanying Notes to Consolidated Financial
Statements.
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Knight
Inc. General and Administrative Expense
|
$
|
11.5
|
$
|
16.0
|
|||
Kinder
Morgan Energy Partners General and Administrative Expense
|
74.4
|
61.9
|
|||||
Consolidated
General and Administrative Expense
|
$
|
85.9
|
$
|
77.9
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30, 2008
|
Four
Months
Ended
September
30, 2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Knight
Inc. General and Administrative Expense
|
$
|
40.1
|
$
|
21.3
|
138.6
|
|||||||
Kinder
Morgan Energy Partners General and Administrative Expense
|
223.9
|
86.6
|
136.2
|
|||||||||
Terasen
General and Administrative Expense
|
-
|
-
|
8.8
|
|||||||||
Consolidated
General and Administrative Expense
|
$
|
264.0
|
$
|
107.9
|
283.6
|
Successor
Company
|
|||||||
Three
Months Ended
September
30,
|
|||||||
2008
|
2007
|
||||||
(In
millions)
|
|||||||
Interest
Expense and Other, Net
|
|||||||
Interest
Expense, Net
|
$
|
(141.5
|
)
|
$
|
(252.6
|
)
|
|
Interest
Expense – Deferrable Interest Debentures
|
(0.5
|
)
|
(5.4
|
)
|
|||
Other,
Net
|
2.4
|
5.5
|
|||||
Consolidated
Interest Expense and Other, Net
|
(139.6
|
)
|
(252.5
|
)
|
|||
Minority
Interest
|
|||||||
Kinder
Morgan Management
|
(19.5
|
)
|
(10.0
|
)
|
|||
Kinder
Morgan Energy Partners
|
(78.5
|
)
|
(34.5
|
)
|
|||
Triton
|
(9.3
|
)
|
(7.7
|
)
|
|||
Other
|
0.5
|
(0.2
|
)
|
||||
Consolidated
Minority Interests Expense
|
(106.8
|
)
|
(52.4
|
)
|
|||
$
|
(246.4
|
)
|
$
|
(304.9
|
)
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30, 2008
|
Four
Months
Ended
September
30, 2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Interest
Expense
|
||||||||||||
Interest
Expense, Net
|
$
|
(493.8
|
)
|
$
|
(336.1
|
)
|
$
|
(241.1
|
)
|
|||
Interest
Expense – Deferrable Interest Debentures
|
5.6
|
(7.3
|
)
|
(9.1
|
)
|
|||||||
Other,
Net
|
10.9
|
10.7
|
(7.3
|
)
|
||||||||
Consolidated
Interest Expense
|
(477.3
|
)
|
(332.7
|
)
|
(257.5
|
)
|
||||||
Minority
Interest
|
||||||||||||
Kinder
Morgan Management
|
(72.2
|
)
|
(16.3
|
)
|
(17.1
|
)
|
||||||
Kinder
Morgan Energy Partners
|
(271.8
|
)
|
(58.0
|
)
|
(75.1
|
)
|
||||||
Triton
|
(15.0
|
)
|
(12.0
|
)
|
2.3
|
|||||||
Other
|
(0.4
|
)
|
(0.6
|
)
|
(0.8
|
)
|
||||||
Consolidated
Minority Interests Expense
|
(359.4
|
)
|
(86.9
|
)
|
(90.7
|
)
|
||||||
$
|
(836.7
|
)
|
$
|
(419.6
|
)
|
$
|
(348.2
|
)
|
Significant
Unobservable Inputs (Level 3)
|
|||||||||||||||||||||||
Assets
|
Liabilities
|
||||||||||||||||||||||
September
30,
2008
|
December
31,
2007
|
Change
|
September
30,
2008
|
December
31,
2007
|
Change
|
||||||||||||||||||
(In
millions)
|
(In
millions)
|
||||||||||||||||||||||
Natural
Gas Basis Swaps
|
$
|
4.9
|
$
|
2.8
|
$
|
2.1
|
$
|
(7.0
|
)
|
$
|
(4.7
|
)
|
$
|
(2.3
|
)
|
||||||||
WTS
Oil Swaps
|
0.0
|
0.0
|
0.0
|
(90.1
|
)
|
(94.5
|
)
|
4.4
|
|||||||||||||||
WTI
Options
|
46.7
|
0.0
|
46.7
|
(28.7
|
)
|
0.0
|
(28.7
|
)
|
|||||||||||||||
Other
|
1.0
|
1.0
|
0.0
|
(7.4
|
)
|
(4.9
|
)
|
(2.5
|
)
|
||||||||||||||
Total
|
$
|
52.6
|
$
|
3.8
|
$
|
48.8
|
$
|
(133.2
|
)
|
$
|
(104.1
|
)
|
$
|
(29.1
|
)
|
|
·
|
Natural
gas basis swaps’ fair market values are obtained through a pricing service
and derived by combining raw inputs from NYMEX with proprietary
quantitative models and processes. Although the prices are originating
from a liquid market (NYMEX), we believe the effort to validate these
prices would not be worth the benefit received. As a result, we have
classified the valuation of these derivatives as Level
3.
|
|
·
|
Oil
swaps’ fair market values are obtained from a broker using their
proprietary model for similar assets and liabilities; quotes are
non-binding.
|
|
·
|
Oil
future options’ fair market values are established using an internal
model. Internal models incorporate the use of options pricing and
estimates of the present value of cash flows based upon underlying
contractual terms. The models reflect management’s estimates, taking into
account observable market prices, estimated market prices in the absence
of quoted market prices, the risk-free market discount rate, volatility
factors, estimated correlations of commodity prices and contractual
volumes.
|
|
·
|
Cash flow from
operations
|
|
·
|
Credit facility
availability
|
|
·
|
Long-term debt and equity
markets
|
|
·
|
Kinder Morgan Energy Partners
equity infusion
|
|
·
|
Credit
Ratings
|
Successor
Company
|
Predecessor
Company
|
|||||||||||||||
September
30,
2008
|
December
31,
2007
|
December
31,
2006
|
December
31,
2005
|
|||||||||||||
(Dollars
in millions)
|
(Dollars
in millions)
|
|||||||||||||||
Long-term
Debt
|
||||||||||||||||
Outstanding
Notes and Debentures
|
$
|
10,800.6
|
$
|
14,714.6
|
$
|
10,623.9
|
$
|
6,286.8
|
||||||||
Deferrable
Interest Debentures Issued to Subsidiary Trusts
|
35.7
|
283.1
|
283.6
|
283.6
|
||||||||||||
Preferred
Interest in General Partner of KMP
|
100.0
|
100.0
|
-
|
-
|
||||||||||||
Capital
Securities
|
-
|
-
|
106.9
|
107.2
|
||||||||||||
Value
of Interest Rate Swaps
|
233.8
|
199.7
|
46.4
|
51.8
|
||||||||||||
11,170.1
|
15,297.4
|
11,060.8
|
6,729.4
|
|||||||||||||
Minority
Interests
|
3,474.3
|
3,314.0
|
3,095.5
|
1,247.3
|
||||||||||||
Common
Equity, Excluding Accumulated Other Comprehensive Loss
|
4,412.7
|
8,069.2
|
3,657.5
|
4,051.4
|
||||||||||||
19,057.1
|
26,680.6
|
17,813.8
|
12,028.1
|
|||||||||||||
Value
of Interest Rate Swaps
|
(233.8
|
)
|
(199.7
|
)
|
(46.4
|
)
|
(51.8
|
)
|
||||||||
Capitalization
|
18,823.3
|
26,480.9
|
17,767.4
|
11,976.3
|
||||||||||||
Short-term
Debt, Less Cash and Cash Equivalents1
|
433.1
|
819.3
|
2,046.7
|
841.4
|
||||||||||||
Invested
Capital
|
$
|
19,256.4
|
$
|
27,300.2
|
$
|
19,814.1
|
$
|
12,817.7
|
||||||||
|
||||||||||||||||
Capitalization
|
||||||||||||||||
Outstanding
Notes and Debentures
|
57.4%
|
55.5%
|
59.8%
|
52.5%
|
||||||||||||
Minority
Interests
|
18.5%
|
12.5%
|
17.4%
|
10.4%
|
||||||||||||
Common
Equity
|
23.4%
|
30.5%
|
20.6%
|
33.8%
|
||||||||||||
Deferrable
Interest Debentures Issued to Subsidiary Trusts
|
0.2%
|
1.1%
|
1.6%
|
2.4%
|
||||||||||||
Preferred
Interest in General Partner of KMP
|
0.5%
|
0.4%
|
-%
|
-%
|
||||||||||||
Capital
Securities
|
-%
|
-%
|
0.6%
|
0.9%
|
||||||||||||
|
||||||||||||||||
Invested
Capital
|
||||||||||||||||
Net
Debt2,
3
|
58.3%
|
56.9%
|
63.9%
|
55.6%
|
||||||||||||
Common
Equity, Excluding Accumulated Other Comprehensive Loss and Including
Deferrable Interest Debentures Issued to Subsidiary Trusts, Preferred
Interest in General Partner of KMP, Capital Securities and Minority
Interests
|
41.7%
|
43.1%
|
36.1%
|
44.4%
|
1
|
Cash
and cash equivalents were $126.6 million, $148.6 million, $129.8 million
and $116.6 million at September 30, 2008 and December 31, 2007, 2006 and
2005, respectively.
|
2
|
Outstanding
notes and debentures plus short-term debt, less cash and cash
equivalents.
|
3
|
Our
ratio of net debt to invested capital, not including the effects of
consolidating Kinder Morgan Energy Partners, was 40.3%, 45.6% and 56.2% at
September 30, 2008 and December 31, 2007 and 2006,
respectively.
|
At
September 30, 2008
|
At
October 31, 2008
|
||||||||||
Short-term
Debt
Outstanding
|
Available
Borrowing
Capacity
|
Short-term
Debt
Outstanding
|
Available
Borrowing
Capacity
|
||||||||
(In
millions)
|
|||||||||||
Credit
Facilities
|
|||||||||||
Knight
Inc.
|
|||||||||||
$1.0
billion, six-year secured revolver, due May 2013
|
$
|
270.0
|
$
|
668.0
|
$
|
277.9
|
$
|
660.1
|
|||
|
|||||||||||
Kinder
Morgan Energy Partners
|
|||||||||||
$1.85
billion, five-year unsecured revolver, due August 2010
|
$
|
295.0
|
$
|
810.3
|
$
|
279.7
|
$
|
978.8
|
Successor
Company
|
Predecessor
Company
|
|||||||||||
Nine
Months
Ended
September
30,
2008
|
Four
Months
Ended
September
30,
2007
|
Five
Months
Ended
May
31, 2007
|
||||||||||
(In
millions)
|
(In
millions)
|
|||||||||||
Net
Cash Provided by (Used in):
|
||||||||||||
Operating
Activities
|
$
|
583.1
|
$
|
509.6
|
$
|
603.0
|
||||||
Investing
Activities
|
3,968.0
|
(12,142.7
|
)
|
723.7
|
||||||||
Financing
Activities
|
(4,569.6
|
)
|
9,872.5
|
440.9
|
||||||||
Effect
of Exchange Rate Changes on Cash
|
(3.5
|
)
|
(2.4
|
)
|
7.6
|
|||||||
Cash
Balance Included in Assets Held for Sale
|
-
|
-
|
(2.7
|
)
|
||||||||
Net
(Decrease) Increase in Cash and Cash Equivalents
|
$
|
(22.0
|
)
|
$
|
(1,763.0
|
)
|
$
|
1,772.5
|
|
·
|
price
trends and overall demand for natural gas liquids, refined petroleum
products, oil, carbon dioxide, natural gas, electricity, coal and other
bulk materials and chemicals in North
America;
|
|
·
|
economic
activity, weather, alternative energy sources, conservation and
technological advances that may affect price trends and
demand;
|
|
·
|
changes
in tariff rates charged by our pipeline subsidiaries implemented by the
FERC, Canada National Energy Board or other regulatory agency and, with
respect to Kinder Morgan Energy Partners, the California Public Utilities
Commission;
|
|
·
|
our
ability to acquire new businesses and assets and integrate those
operations into existing operations, as well as the ability to expand our
facilities;
|
|
·
|
difficulties
or delays experienced by railroads, barges, trucks, ships or pipelines in
delivering products to or from our terminals or
pipelines;
|
|
·
|
our
ability to successfully identify and close acquisitions and make
cost-saving changes in operations;
|
|
·
|
shut-downs
or cutbacks at major refineries, petrochemical or chemical plants, ports,
utilities, military bases or other businesses that use our services or
provide services or products to us;
|
|
·
|
crude
oil and natural gas production from exploration and production areas that
we serve, such as the Permian Basin area of West Texas, the U.S. Rocky
Mountains and the Alberta oil
sands;
|
|
·
|
changes
in laws or regulations, third-party relations and approvals and decisions
of courts, regulators and governmental bodies that may adversely affect
our business or our ability to
compete;
|
|
·
|
changes
in accounting pronouncements that impact the measurement of our results of
operations, the timing of when such measurements are to be made and
recorded, and the disclosures surrounding these
activities;
|
|
·
|
our
ability to offer and sell equity securities and our ability to sell debt
securities or obtain debt financing in sufficient amounts to implement
that portion of our business plan that contemplates growth through
acquisitions of operating businesses and assets and expansions of our
facilities;
|
|
·
|
our
indebtedness, which could make us vulnerable to general adverse economic
and industry conditions, limit our ability to borrow additional funds,
and/or place us at competitive disadvantages compared to our competitors
that have less debt or have other adverse
consequences;
|
|
·
|
interruptions
of electric power supply to our facilities due to natural disasters, power
shortages, strikes, riots, terrorism, war or other
causes;
|
|
·
|
our
ability to obtain insurance coverage without significant levels of
self-retention of risk;
|
|
·
|
acts
of nature, sabotage, terrorism or other similar acts causing damage
greater than our insurance coverage
limits;
|
|
·
|
capital
and credit markets conditions, inflation and interest
rates;
|
|
·
|
the
political and economic stability of the oil producing nations of the
world;
|
|
·
|
national,
international, regional and local economic, competitive and regulatory
conditions and developments;
|
|
·
|
our
ability to achieve cost savings and revenue
growth;
|
|
·
|
foreign
exchange fluctuations;
|
|
·
|
the
timing and extent of changes in commodity prices for oil, natural gas,
electricity and certain agricultural
products;
|
|
·
|
the
extent of our success in discovering, developing and producing oil and gas
reserves, including the risks inherent in exploration and development
drilling, well completion and other development
activities;
|
|
·
|
engineering
and mechanical or technological difficulties that we may experience with
operational equipment, in well completions and workovers, and in drilling
new wells;
|
|
·
|
the
uncertainty inherent in estimating future oil and natural gas production
or reserves that Kinder Morgan Energy Partners may
experience;
|
|
·
|
the
ability to complete expansion projects on time and on
budget;
|
|
·
|
the
timing and success of our business development efforts;
and
|
|
·
|
unfavorable
results of litigation and the fruition of contingencies referred to in the
accompanying Notes to Consolidated Financial
Statements.
|
|
·
|
limiting
our ability to obtain additional financing to fund our working capital,
capital expenditures, debt service requirements or potential growth or for
other purposes;
|
|
·
|
limiting
our ability to use operating cash flow in other areas of our business
because we must dedicate a substantial portion of these funds to make
payments on our debt;
|
|
·
|
placing
us at a competitive disadvantage compared to competitors with less debt;
and
|
|
·
|
increasing
our vulnerability to adverse economic and industry
conditions.
|
|
4.1
|
Certain
instruments with respect to the long-term debt of Knight Inc. and its
consolidated subsidiaries that relate to debt that does not exceed 10% of
the total assets of Knight Inc. and its consolidated subsidiaries are
omitted pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, 17 C.F.R.
sec.229.601. Knight Inc. hereby agrees to furnish supplementally to the
Securities and Exchange Commission a copy of each such instrument upon
request.
|
|
10.1
|
First
Amendment to Retention and Relocation Agreement dated as of July 16, 2008,
between Knight Inc. and Scott E. Parker (filed as Exhibit 10.1 to Knight
Inc. Form 8-K, filed July 25, 2008 and incorporated herein by
reference).
|
|
31.1*
|
Section
13a – 14(a) / 15d – 14(a) Certification of Chief Executive
Officer
|
|
31.2*
|
Section
13a – 14(a) / 15d – 14(a) Certification of Chief Financial
Officer
|
|
32.1*
|
Section
1350 Certification of Chief Executive
Officer
|
|
32.2*
|
Section
1350 Certification of Chief Financial
Officer
|
|
KNIGHT
INC.
(Registrant)
|
November
12, 2008
|
/s/
Kimberly A. Dang
|
Kimberly
A. Dang
Vice
President and Chief Financial Officer
(Principal
Financial and Accounting Officer)
|