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Kinder Morgan Energy Partners Message Board

  • bexar241 bexar241 Sep 21, 2013 12:46 PM Flag

    SEC Investigation of Use of Non-GAAP & DCF; Restatement; 10Q delay; Loss of Tax Status

    The harm caused by KMI on KMP LP investors goes beyond the manipulation of maintenance capex vs. expansion capex. Is cash truly cash? In LINN, now the SEC has weighed in with a restatement requirement to end use of DCF and non-GAAP financial measures directing LINN to return to proper use of GAAP Net Cash Provided By Operating Activities. Presently for KMI and when it suits the GP's share of DCF, cash has somehow included non-cash items such as "Book-Up"s like the $558 million 2Q13 non-GAAP revaluation of 50% Eagle Ford holdings. Hiding behind its disclosure that it may breach any conflict of interest law, KMI has for years gamed DCF with Book-Ups and expense classifications. If allowed at all, Eagle Ford should have been below the GP/LP split line. GAAP would not have allowed that $558 million classification as cash and, in time, as the SEC gets to KMI / KMP and KMI's purposely complicated assortment of cash and tax engineering, there may be a restatement required disallowing the Eagle Ford non-cash MTM gains forcing KMI to return to KMP wrongly distributed cash. To put this manipulation into perspective, the KMI treatment of loss on discontinued operations in 1H12 was fully attributed by management to the account of the LP holders. Gains, even non-GAAP, non cash gains get counted in DCF when measuring the cut taken by KMI, while losses on disposition (whether cash or non-cash) get attributed only against the LP holders. KMI, its bankers and brokers only want you to look at the fake dividend yield. IRS 7704 rule on 90% of "Qualifying Income" may be in trouble for 2013 after restatement for the Eagle Ford Book-Up unless KMI is running two sets of books (one for tax where Eagle Ford isn't counted as cash, the other showing Eagle Ford as "cash" classified to aid and abet the siphoning of partnership DCF to KMI. The pending KMP $2.2 billion S-1 shelf common unit dilution appears to be at risk for delay and revision upon any SEC review in line with Linn.

    Sentiment: Sell

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    • Bexlax,Too bad my printer can't print your post history on toilet tissue.)

    • You the Man. Finally someone with common sense tells it like it is. I've been a CPA for 25 years and can tell you this guy has hit it on the head.

    • How someone makes up new yahoo id then post a bunch on nonsense that is like the garbage put out by the hockey puck. What drugs are you on?
      The SEC has just reworded LINE's accounting, not caused ANY significant changes that will change future distributions. LINE just needs to meet production targets that it fell short of the past Q and weak NGL pricing further caused the weak results. The accounting issues are a bunch of nonsense in the end.
      Hockey puck was wrong on LINE and is wrong on KMP. He is just another Kurt Wulff. Someone just trying to attract attention to sell his "analysis"

      • 1 Reply to princetonhockeyplayer
      • Dear Mr. Good Ole Boy:

        There is a saying in Texas that a man is all hat and no cattle. Take down your hat for a moment and Lookie yonder at the LINN S-4. One can see a whole ranch full of cattle. Take page 236: "LINN may not have sufficient net cash provided by operating activities to pay its distribution at the current level, or at all, and as a result, future dividends to LinnCo shareholders may be reduced or eliminated.” In fact, when DCF is now required by GAAP (with SEC enforcement that will soon get around to KMP) to exclude acquisition adjustments and to include option premiums, Linn discloses it may need to raise funds by debt or dilution or by cutting distributions. Oh and take a gander at the next page 237 to see the impact that Linn had to restate 1H13 Excess Cash from plus $220 million to minus $38 million. I guess in your paid pumper Texas language that technically qualifies as reworded accounting". Everything's big in Texas. Oh yeah, been an investment banker and fund manager for 30 years. This will be fun to watch and a win for objective research.

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