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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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FORM 8-K/A
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) January 30, 1998
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K N ENERGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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KANSAS 1-6446 48-0290000
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
370 VAN GORDON STREET
P.O. BOX 281304
LAKEWOOD, COLORADO
(Address of Principal 80228-8304
Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (303) 989-1740
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ITEM 7. FINANCIAL STATEMENTS.
(a) UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
Unaudited pro forma condensed statement of income for the six months
ended June 30, 1998 and related notes are included herein.
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2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
K N Energy, Inc.
Dated: October 7, 1998 By: /s/ Martha B. Wyrsch
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Martha B. Wyrsch
Vice President, General Counsel
and Secretary
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UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
The following unaudited pro forma income statement gives effect to (i)
KN Energy, Inc.'s ("K N") January 30, 1998 acquisition of MidCon Corp.
("MidCon") from Occidental Petroleum Corporation ("Occidental") (the
"Acquisition"), (ii) the March 1998 sale by K N of 12.5 million shares of
common stock in an underwritten public offering (the "Equity Offering"), (iii)
the March 1998 underwritten public offering of an aggregate principal amount of
$2.35 billion of senior notes of varying maturities (the "Debt Offerings") and
(iv) the April 1998 underwritten public offering of $175 million aggregate
liquidation amount of 7.63% Capital Securities (the "Capital Securities
Offering" and, together with the Equity Offering and the Debt Offerings, the
"Prior Offerings"). The unaudited pro forma condensed statement of income
assumes that the Acquisition and the Prior Offerings occurred at January 1,
1998. A pro forma balance sheet has not been included because K N's June 30,
1998 balance sheet included in its second-quarter 1998 Report on Form 10-Q
reflects the impact of the Acquisition. A pro forma income statement for the
twelve months ended December 31, 1997 has not been included because such income
statement was included in K N's Report on Form 8-K filed on June 5, 1998. The
Acquisition was recorded as a purchase for accounting purposes and,
accordingly, the assets acquired and liabilities assumed have been reflected
at their estimated respective fair market values.
The unaudited pro forma income statement should be read in conjunction with
the historical financial statements of K N and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of K N included in
K N's 1997 Annual Report on Form 10-K and first- and second-quarter 1998 Reports
on Form 10-Q and the historical financial statements of MidCon included in K N's
Report on Form 8-K/A dated February 12, 1998. The unaudited pro forma condensed
statement of income is not necessarily indicative of the financial results that
would have occurred had the Acquisition been consummated on the date indicated,
nor is it necessarily indicative of future financial results.
The pro forma adjustments are based on preliminary assumptions and
estimates made by K N's management and do not reflect adjustments for
anticipated operating efficiencies and cost savings which K N expects to
achieve as a result of the Acquisition. The actual allocation of the
consideration paid by K N for MidCon may differ from that reflected in the
unaudited pro forma combined condensed financial statements after a more
extensive review of the fair market values of the assets acquired and
liabilities assumed has been completed.
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UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
Six Months Ended June 30, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
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K N ENERGY MIDCON(1) ADJUSTMENTS COMBINED
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Operating Revenues ......................... $2,206,240 $268,055 $2,474,295
---------- -------- ----------
Operating Costs and Expenses:
Gas Purchases and Other Costs of Sales .... 1,726,876 194,382 1,921,258
Operations and Maintenance ................ 189,239 28,200 $ (400)(a) 217,039
Depreciation and Amortization ............. 89,199 13,174 (254)(b) 102,119
Taxes, Other Than Income Taxes ............ 25,287 3,754 29,041
Merger-related Costs ...................... 5,763 -- -- 5,763
---------- -------- -------- ---------
Total Operating Costs and
Expenses .............................. 2,036,364 239,510 (654) 2,275,220
---------- -------- -------- ----------
Operating Income ........................... 169,876 28,545 654 199,075
---------- -------- -------- ----------
Other Income and (Deductions):
Interest Expense, Net ..................... (113,833) (22,443) (15,680)(c) (143,491)
1,128 (d)
4,479 (e)
2,858 (f)
Minority Interests ........................ (6,996) (162) (4,280)(f) (11,438)
Other, Net ................................ 13,171 1,250 (1,126)(d) 13,138
(137)(g)
(20)(f)
---------- -------- -------- ----------
Total Other Income and (Deductions) ........ (107,658) (21,355) (12,778) (141,791)
---------- -------- -------- ----------
Income Before Income Taxes ................. 62,218 7,190 (12,124) 57,284
Income Taxes ............................... 23,021 2,660 (4,580)(h) 21,101
---------- -------- -------- ----------
Net Income ................................. 39,197 4,530 (7,544) 36,183
Less -- Preferred Stock Dividends .......... 175 -- -- 175
---------- -------- -------- ----------
Earnings Available For Common Stock ........ $ 39,022 $ 4,530 $ (7,544) $ 36,008
---------- -------- -------- ----------
Diluted Earnings Per Common Share .......... $ 0.96 $ 0.79
Number of Shares Used in Computing
Diluted Earnings Per Common Share ......... 40,545 4,765 (e) 45,310
Dividends Per Common Share(2) .............. $ 0.56 $ 0.56
</TABLE>
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(1) MidCon's results of operations for January 1998.
(2) Represents K N's historical dividends per common share.
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements
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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
(a) Gives pro forma effect to the termination of MidCon's Employee Stock
Ownership Plan instituted in November 1996, and the removal of the
associated administrative expenses.
(b) The pro forma adjustment to depreciation and amortization consists of
the following:
<TABLE>
<CAPTION>
(Thousands)
-----------
<S> <C>
Elimination of MidCon's historical depreciation and amortization................................................. $(13,174)
K N's recomputed depreciation and amortization................................................................... 12,920
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Total....................................................................................................... $(254)
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</TABLE>
(c) The pro forma adjustment to interest expense consists of the
following:
<TABLE>
<CAPTION>
(Thousands)
-----------
<S> <C>
Elimination of MidCon's historical interest expense on its ESOP Note............................................. $(9,183)
Elimination of MidCon's historical interest expense on its $1.6 billion payable to Occidental.................... (10,533)
Interest expense on the Debt Offerings at 6.78%.................................................................. 30,120
Interest expense at 5.80% on the Substitute Note................................................................. 6,739
Interest savings associated with the repayment of $329.2 million outstanding under
K N's previous short-term credit facility...................................................................... (1,860)
Fee for letter of credit at 0.625% used to collateralize the Substitute Note..................................... 397
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Total....................................................................................................... $15,680
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</TABLE>
(d) To eliminate facility fees and interest income associated with
MidCon's participation in a sale of receivables facility, which
participation terminated concurrently with the closing of the
Acquisition.
(e) To record the Equity Offering and application of the net proceeds of
$623.9 million to reduce short term borrowings and purchase $460.1
million of U.S. government securities as a portion of the collateral
for the Substitute Note. The U.S. government securities are assumed
to earn interest at 5.15%.
(f) To record the Capital Securities Offering and application of the net
proceeds of $173.1 million to purchase U.S. government securities to
replace a portion of the letters of credit that collateralized the
Substitute Note. Distributions on the Capital Securities are payable
at an annual rate of 7.63%. The U.S. government securities are assumed
to earn interest at 5.15%.
(g) To record amortization of debt issuance cost associated with the Debt
Offerings.
(h) Represents the tax effect at the effective rate (equal to (i) the
statutory federal income tax rate plus (ii) the statutory state income
tax rate, net of federal income benefit) for all pre-tax pro forma
adjustments not representing permanent book/tax differences.
