DCF per share Consistent with Previous Guidance of 6 to 10 Percent
above 2015 Dividend
KMI to take required action to maintain investment grade rating and
stable outlook
2016 cash flow sufficient to fund growth capital needs in 2016
KMI will announce capital funding plan and dividend policy in the
coming days
In its third quarter earnings call, Kinder Morgan, Inc. (NYSE: KMI)
indicated an expected 2016 growth range of 6 to 10 percent over its 2015
target dividend of $2.00 per share. KMI has now completed its 2016
budget process and expects to generate 2016 distributable cash flow of
slightly over $5 billion, which would be sufficient to support dividend
growth in the range discussed in the third quarter call. Alternatively,
this cash flow can be used to fund some or all of KMI’s equity needs for
2016. KMI’s board will be reviewing the dividend policy and financing
plans in the coming days and the company will announce that policy and
plan when finalized. KMI will construct its 2016 plan to maintain an
investment grade rating with all three agencies. Further KMI does not
plan to issue equity at current prices.
Kinder Morgan, Inc. (NYSE: KMI) is the largest energy infrastructure
company in North America. It owns an interest in or operates
approximately 84,000 miles of pipelines and approximately 165 terminals.
The company’s pipelines transport natural gas, gasoline, crude oil, CO2
and other products, and its terminals store petroleum products and
chemicals, and handle bulk materials like coal and petroleum coke.
Kinder Morgan is the largest midstream and third largest energy company
in North America. For more information please visit www.kindermorgan.com.
The non-generally accepted accounting principles, or non-GAAP,
financial measures of distributable cash flow before certain items, both
in the aggregate and per share, and segment earnings before
depreciation, depletion, amortization and amortization of excess cost of
equity investments, or DD&A, and certain items, are presented in this
news release.
Distributable cash flow before certain items 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. Distributable cash flow
before certain items 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. Distributable cash flow before certain items is
also a quantitative measure used in the investment community because the
value of a share of an entity like KMI that pays out 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 as compared to its stock price).
The economic substance behind our use of distributable cash flow
before certain items 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 distributable
cash flow before certain items is net income. A reconciliation of
distributable cash flow before certain items to net income is provided
in this release. Distributable cash flow before certain items per
share is distributable cash flow before certain items divided by average
outstanding shares, including restricted stock awards that participate
in dividends. “Certain items” are items that are required by GAAP
to be reflected in net income, but typically either (1) do not have a
cash impact, for example, asset impairments, or (2) by their nature are
separately identifiable from our normal business operations and in our
view are likely to occur only sporadically, for example certain legal
settlements, hurricane impacts and casualty losses. Management
uses this measure and believes it is important to users of our financial
statements because it believes the measure more effectively reflects our
business’ ongoing cash generation capacity than a similar measure with
the certain items included.
For similar reasons, management uses segment earnings before DD&A and
certain items in its analysis of segment performance and management of
our business. General and administrative expenses are generally
not controllable by our segment operating managers, and therefore, are
not included when we measure business segment operating performance. We
believe segment earnings before DD&A and certain items is a significant
performance metric because it enables us and external users of our
financial statements to better understand the ability of our segments to
generate cash on an ongoing basis. We believe it is useful to
investors because it is a measure that management believes is important
and that our chief operating decision makers use for purposes of making
decisions about allocating resources to our segments and assessing the
segments’ respective performance.
We believe the GAAP measure most directly comparable to segment
earnings before DD&A and certain items is segment earnings before DD&A.
Segment earnings before DD&A and certain items is calculated by
adjusting for the certain items attributable to a segment, which are
specifically identified in the footnotes to the accompanying tables,
from segment earnings before DD&A. Segment earnings before
DD&A as presented in our GAAP financials are included on the first page
of the tables presenting our financial results.
Our non-GAAP measures described above should not be considered
alternatives to GAAP net income or other GAAP measures and have
important limitations as analytical tools. Our computations of
distributable cash flow before certain items, and segment earnings
before DD&A and certain items may differ from similarly titled measures
used by others. You should not consider these non-GAAP measures
in isolation or as substitutes for an analysis of our results as
reported under GAAP. Management compensates for the limitations
of these non-GAAP measures 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.
Important Information Relating to
Forward-Looking Statements
This news release includes forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995 and
Section 21E of the Securities and Exchange Act of 1934. Generally the
words “expects,” “believes,” anticipates,” “plans,” “will,” “shall,”
“estimates,” and similar expressions identify forward-looking
statements, which are generally not historical in nature.
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 any such forward-looking
statements will materialize. Important factors that could cause actual
results to differ materially from those expressed in or implied from
these forward-looking statements include the risks and uncertainties
described in Kinder Morgan’s reports filed with the Securities and
Exchange Commission, including its Annual Report on Form 10-K for the
year-ended December 31, 2014 (under the headings “Risk Factors” and
“Information Regarding Forward-Looking Statements” and elsewhere) and
its subsequent reports, which are available through the SEC’s EDGAR
system at www.sec.gov and on our website at ir.kindermorgan.com.
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 any forward-looking statement because of new
information, future events or other factors. Because of these risks and
uncertainties, readers should not place undue reliance on these
forward-looking statements.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151204005644/en/
Copyright Business Wire 2015