Kinder Morgan Inc. (NYSE:KMI)

The common-size income statement reveals a business model characterized by high gross margins but significant volatility in net profitability, driven primarily by non-recurring impairment charges and divestitures. A shift in revenue classification is evident in the first quarter of 2020, transitioning from a three-part legacy structure to a new reporting format centered on services and commodity sales.

Revenue Composition and Mix

From early 2015 through 2018, revenue was distributed among services (averaging between 53% and 66%), natural gas sales (15% to 24%), and product sales and other (16% to 25%). By March 2020, the reporting structure shifted, with services accounting for 64.13% and commodity sales representing 34.35% of total revenues.

Gross Profitability and Cost of Sales

Gross profit margins exhibit a general upward trajectory over the analyzed period. While margins fluctuated between 67% and 77% from 2015 to 2018, there was a notable improvement starting in 2019, culminating in a peak of 78.65% in March 2020. This trend is mirrored by a gradual reduction in the cost of sales, which declined from a peak of -32.36% in June 2017 to -21.35% by March 2020.

Operating Expense Trends

Operations and maintenance costs remained relatively stable, typically ranging between -14% and -20% of revenue. Depreciation, depletion, and amortization costs showed minimal variance, consistently representing between -15% and -19% of revenues. General and administrative expenses were well-controlled, generally staying below 6% of revenue and reaching a low of -2.91% in December 2018.

Operating Income and Non-Recurring Items

Operating income demonstrates extreme volatility due to significant one-time events. A substantial decline occurred in December 2015, where operating income fell to -6.71% following a goodwill impairment loss of -31.63%. Further volatility is observed in the gains and losses on impairments and divestitures, with significant swings such as a 27.71% gain in December 2019 followed by a -31.26% loss in March 2020, the latter of which dragged operating income down to 1.38%.

Financial Costs and Net Profitability

Interest expenses have remained remarkably consistent as a percentage of revenue, fluctuating narrowly between -12.19% and -15.05%. Net income available to common stockholders reflects the instability of the operating layer, with periods of strong profitability (peaking at 19.70% in September 2018) punctuated by deep losses, most notably in December 2017 (-28.77%) and March 2020 (-9.85%).