Kinder Morgan Inc. (NYSE:KMI)

Inventory Turnover

The inventory turnover ratio exhibited fluctuations over the periods analyzed, generally ranging between approximately 8.8 and 11.5. The ratio peaked around the fourth quarter of 2018, indicating more efficient inventory management at that time. Subsequently, there was a decline during 2019, with a slight recovery observed in the first quarter of 2020. This suggests varying efficiency in inventory usage over time.

Receivables Turnover

The receivables turnover ratio demonstrated some variability but generally remained within a range of around 9.4 to 11.4. Notably, there was a dip toward the end of 2016 and again at the close of 2018, indicating slower collection of receivables during these periods. However, the ratio showed an improvement during mid-2019, reflecting enhanced effectiveness in managing credit sales.

Payables Turnover

The payables turnover ratio increased steadily from below 3 in early 2016 to a high above 4 by mid-2019. The increase indicates that the company was paying its suppliers more quickly during this period. A slight reduction occurred toward early 2020, but levels remained elevated compared to the start of the dataset.

Working Capital Turnover

Data on working capital turnover was only available for the fourth quarter of 2018, showing a value of 50.52. Without additional periods, no trend analysis can be conducted for this metric.

Average Inventory Processing Period

The average time inventory remained before being sold generally fluctuated between 32 and 42 days. A notable reduction to 32 days was observed at the end of 2018, suggesting improved inventory management. However, the period lengthened again through 2019, reaching up to 42 days, implying slower inventory turnover toward 2019's end.

Average Receivable Collection Period

The average period to collect receivables varied mostly between 31 and 39 days. The longest collection periods appeared around the fourth quarters of 2016, 2017, and 2018, suggesting some operational challenges in those intervals. In contrast, mid-year data in 2017 and 2019 showed shorter collection periods, indicating better receivables management during those times.

Operating Cycle

The operating cycle consistently ranged from approximately 66 to 80 days. Some lengthening is observed toward the end of 2019, implying that the entire process from inventory purchase through collection of receivables took longer. This could raise concerns related to the efficiency of asset utilization during this period.

Average Payables Payment Period

The average payables payment period showed a notable trend of initially increasing from 99 days in early 2016 to over 130 days by late 2016. Thereafter, a steady decline occurred until mid-2019, reaching a low near 81 days, indicating quicker payments to suppliers. Following this, some elongation is evident at the end of 2019 and early 2020.

Cash Conversion Cycle

The cash conversion cycle remained negative throughout the timeline, ranging from approximately -9 to -61 days. The most substantial negative values appeared in the periods of late 2016 and late 2018, representing efficient cash flow management where payables payment periods extended beyond the combined duration of inventory and receivables cycles. There is a trend toward less negative values after 2018, which may signify a slight reduction in cash flow efficiency but still indicates a favorable position overall.

The analysis of the quarterly financial data reveals distinct trends in costs of sales, inventories, and inventory turnover ratios over the observed periods.

Costs of Sales

The costs of sales exhibit noticeable fluctuations over the quarters. Beginning at 731 million US dollars in the first quarter of 2016, there is a general increasing trend through 2016 and 2017, reaching a peak of 1,199 million US dollars at the end of 2018. Following this peak, costs of sales decline markedly throughout 2019 and early 2020, reaching 663 million US dollars by the first quarter of 2020. This pattern suggests a period of rising operational costs or increased sales activities up to late 2018, succeeded by a reduction possibly reflective of cost control measures or decreased sales volume.

Inventories

Inventories demonstrate moderate variability across the timeline. Starting at 364 million US dollars in early 2016, inventory levels generally increase over the next several quarters, attaining a maximum of 450 million US dollars in mid-2019. Thereafter, inventories begin to decrease, falling to 307 million US dollars by the first quarter of 2020. The upward trend in inventories might indicate stock accumulation in anticipation of demand or supply chain considerations, while the subsequent decline could suggest inventory liquidation or improved turnover efficiency.

Inventory Turnover Ratio

The inventory turnover ratio remains relatively stable with minor fluctuations throughout the periods scrutinized. Starting at 10.32 in early 2016, the ratio oscillates mostly between 9 and 11.5, with a notable increase to approximately 11.48 near the end of 2018. This increase corresponds with the period when costs of sales peaked, potentially indicating more efficient inventory utilization. However, after this peak, the ratio demonstrates a declining trend, reaching a low of 8.8 in late 2019 before slightly rebounding to 9.7 in early 2020. This decline may imply a reduction in sales or slower inventory movement during this later phase.

In summary, the financial data suggest periods of increasing costs and inventory buildup through 2018, followed by reductions in both costs and inventory levels in 2019 and early 2020. The inventory turnover ratio's fluctuation mainly tracks these movements, with a peak in efficiency during late 2018 and a subsequent decline, consistent with shifting operational dynamics during the period.

Revenue Trends

The company's revenues exhibit fluctuations over the analyzed periods. Initial revenues hovered around the range of 3,100 to 3,300 million US dollars in early 2016, with a general upward movement reaching a peak of approximately 3,781 million US dollars in December 2018. However, following this peak, revenues declined gradually, ending at roughly 3,106 million US dollars by the first quarter of 2020. This indicates a period of growth followed by a downturn towards the latter part of the timeline.

Accounts Receivable

The net accounts receivable showed variability that does not strictly parallel the revenue trends. Starting at around 1,203 million US dollars in the first quarter of 2016, the values rose at various points, peaking intermittently near 1,498 million US dollars at the end of 2018. Subsequently, accounts receivable declined, ending near 1,186 million US dollars in the first quarter of 2020. These fluctuations suggest management of credit sales and collections might have varied across quarters, impacting the outstanding receivables.

Receivables Turnover Ratio

The receivables turnover ratio, reflecting the efficiency of collecting receivables, ranged between approximately 9.44 and 11.64 during the examined periods. The ratio started at a high of 11.64 in the first quarter of 2016 and showed decline during mid to late 2016, reaching a low around 9.44 by the end of 2018. This was followed by some recovery towards values above 10 in the subsequent periods, ending at about 10.87 in the first quarter of 2020. The fluctuations indicate varying effectiveness in receivables collection, with periods of slower collections coinciding with lower turnover ratios.

Overall Insights

The data presents a cycle where revenue growth peaked in late 2018, followed by a decline into early 2020. Meanwhile, accounts receivable followed a similar but less consistent pattern, potentially indicating challenges in managing credit during revenue peak and subsequent slowdown periods. The receivables turnover ratio's variations underline fluctuating collection efficiency, which may impact cash flows relative to revenue generation. Collectively, this implies the company experienced differing operational and credit management dynamics over the assessed quarters, with a need to address collection efficiency to support revenue sustainability.

Costs of Sales

The cost of sales exhibited a general upward trend from the first quarter of 2016 through the end of 2018, beginning at 731 million USD and peaking near 1199 million USD in the final quarter of 2018. This indicates an increasing expense level related to production or procurement activities during this period. Starting in 2019, there was a pronounced decline in costs, reaching 663 million USD by the first quarter of 2020. This reduction could suggest improved cost control, reduced production, or other operational efficiencies.

Accounts Payable

Accounts payable followed a pattern that somewhat mirrors the cost of sales but with some lag and variability. Beginning at 1017 million USD in the first quarter of 2016, payables increased to a high of approximately 1358 million USD in the third quarter of 2017. Thereafter, accounts payable decreased steadily, with a sharper decline observed during 2019 and into early 2020, ending at 752 million USD. This reduction may reflect a decrease in purchases, faster payment cycles, or changes in vendor credit terms.

Payables Turnover Ratio

The payables turnover ratio showed notable fluctuations over the examined quarters. It started at 3.69 in early 2016 and trended downward to a low around 2.76 to 2.78 during late 2016. Subsequently, it recovered to values above 3.0 through 2017 and 2018, indicating a faster rate of payables clearance relative to costs. During 2019, the ratio increased significantly, peaking at 4.51 in the second quarter, suggesting an acceleration in the payment of liabilities or reduced reliance on payables. In the last observed period, there was a slight decrease to 3.96, which may indicate some return to longer payment terms or increased payables relative to cost of sales.

Overall Analysis

The data suggests that costs and accounts payable grew steadily through the earlier years but declined notably starting in 2019. The improvements in payables turnover during 2019 imply a strategic shift towards quicker payments or reduced dependency on trade credit. These trends could be reflective of operational efficiency measures, changes in procurement strategy, or broader market conditions affecting purchasing behavior and cash management.

Working Capital

The working capital displayed a predominantly negative trend throughout the observed periods, indicating that current liabilities consistently exceeded current assets. Initially, the deficit increased significantly from -1,915 million USD at the end of Q1 2016 to -4,096 million USD in Q2 2016. Subsequently, fluctuations occurred, with the deficit narrowing slightly by Q3 2018 to a positive turning point of 277 million USD, which represents a temporary improvement. However, this was short-lived as working capital reverted to negative values thereafter, reaching -2,512 million USD by Q1 2020. This pattern suggests ongoing challenges in managing short-term liquidity and operational funding requirements.

Revenues

Revenues exhibited a generally stable pattern with modest fluctuations over the quarters. Starting at 3,195 million USD in Q1 2016, the revenue figures showed slight growth and variability, peaking at 3,781 million USD in Q4 2018. Post this peak, revenues experienced a decline and stabilized around 3,200 to 3,300 million USD through 2019 and into early 2020, ending at 3,106 million USD in Q1 2020. The data indicates relative resilience in revenue generation with no dramatic decreases, yet no substantial growth momentum is evident.

Working Capital Turnover

The working capital turnover ratio is reported only once, indicating a high value of 50.52 at an unspecified period. Due to the lack of additional data points, no trend or further analysis can be deduced from this metric. The singular value potentially reflects a specific accounting or operational scenario rather than a consistent ratio.

Overall Insights

The persistent negative working capital aligns with the company's operating model, possibly reflecting reliance on short-term liabilities or the nature of capital-intensive infrastructure activities. Despite fluctuating working capital, revenue streams have remained comparatively stable, suggesting steady demand for the company’s services or products. The short-term liquidity position appears strained at times, necessitating cautious working capital management to maintain financial flexibility. No clear signs of operational growth or contraction are evident solely from the revenue and working capital data provided.

Inventory Turnover Ratio

The inventory turnover ratio exhibits moderate fluctuations over the observed periods. Initially, the ratio was 10.32 in the first quarter of 2016, with values oscillating between approximately 9.48 and 10.25 throughout 2016 and 2017. A notable increase is observed in late 2018, peaking at 11.48 in the fourth quarter of 2018. However, after this peak, the ratio declines steadily, reaching a low of 8.8 towards the end of 2019 before showing a slight recovery to 9.7 in the first quarter of 2020. This pattern indicates variability in how frequently inventory is sold and replaced, with a period of higher efficiency near the end of 2018, followed by less frequent inventory turns in late 2019.

Average Inventory Processing Period (Days)

The average inventory processing period generally inversely mirrors changes in the turnover ratio, as expected. The days ranged from a low of 32 days in the third and fourth quarters of 2018 to a high of 42 days in the fourth quarter of 2019. The processing period remained fairly consistent between 35 and 38 days from 2016 through early 2018. A contraction to 32 days aligns with the peak turnover seen in late 2018, indicating more rapid inventory processing during that period. Following this, there is a clear trend toward lengthening inventory processing times, reaching the highest observed period in late 2019. The first quarter of 2020 shows a slight reduction again to 38 days.

Overall Analysis

The data suggests that the company experienced variable inventory management efficiency over the examined timeframe. The peak efficiency in late 2018, as evidenced by the highest turnover and shortest processing period, indicates a period of rapid inventory movement. Conversely, late 2019 shows a deterioration in inventory turnover alongside an increase in processing days, suggesting slower inventory movement and possibly increased holding costs or lower sales velocity during that time. The slight improvement in early 2020 may indicate the beginning of a recovery in inventory management performance.

Receivables Turnover Ratio

The receivables turnover ratio exhibits moderate fluctuations over the analyzed period. Starting at 11.64 in March 2016, the ratio showed a declining trend through the end of 2016, reaching a low of 9.46 in December 2017. This dip indicates a slower pace in collecting receivables during that timeframe. Subsequently, the ratio recovered, peaking at 11.36 in June 2019, before declining again toward March 2020, with a final value of 10.87. Overall, the ratio oscillates roughly between 9.4 and 11.6, without a clear upward or downward long-term trend, suggesting periodic changes in collection efficiency or sales composition.

Average Receivable Collection Period (Days)

The average collection period in days reflects an inverse relationship to the receivables turnover ratio, as expected. It starts at 31 days in March 2016 and rises steadily to 38 days by December 2016. The metric shows variability thereafter, fluctuating between 32 and 39 days across subsequent quarters. The highest values appear near the end of calendar years, such as December 2016, December 2017, and December 2018, where days outstanding peaked at 38 to 39 days. The most recent value, 34 days as of March 2020, indicates slight improvement compared to the higher collection periods observed in prior years. This pattern suggests some seasonality affecting receivables collection or potentially different credit terms offered through the years.

Overall Analysis

The data portrays a company experiencing some variability in its receivables management efficiency over the examined quarters. Periods of reduced turnover and increased days outstanding often coincide, signaling slower cash conversion cycles at certain points, possibly influenced by seasonal factors or shifts in credit policies. However, no significant long-term deterioration is evident, and the company appears capable of recovering collection performance after downturns. Monitoring these metrics may remain important to ensure timely cash inflows and maintain liquidity health.

The analysis of the financial turnover indicators over the observed periods reveals noteworthy trends and fluctuations in operational efficiency.

Average Inventory Processing Period

This metric shows a general stability in inventory handling time, typically hovering between 35 and 42 days across the examined quarters. Notable deviations include a reduction to 32 days in two quarters during 2018, indicating periods of increased inventory turnover speed. Conversely, peaks around 40 to 42 days in late 2019 suggest slower inventory movement during those intervals.

Average Receivable Collection Period

The receivable collection period exhibits moderate variability, fluctuating roughly between 31 and 39 days. Early data points indicate a rising trend toward the end of 2016, reaching 38 days, followed by alternating increases and decreases. The spikes at 39 days in late 2016 and late 2018 might imply slower collections during these periods, whereas the lower values around 32 days suggest improved collection efficiency at various points, particularly in mid-2017 and mid-2019.

Operating Cycle

The operating cycle, being the aggregate of inventory processing and receivable collection periods, fluctuates between 66 and 80 days. There is a general consistency with some upward movements, particularly evident in late 2016 and late 2019, where the cycle reaches peak durations of 75 and 80 days respectively, implying more extended operational cycles during these times. Lower values around the upper 60s and low 70s suggest more efficient overall operations in quarters such as the third and fourth quarters of 2018.

Overall, the financial turnover metrics suggest varying degrees of operational efficiency over the timeline, with intermittent periods of acceleration and deceleration in inventory turnover and receivables collection, thereby influencing the total duration of the operating cycle.

The payables turnover ratio demonstrates variability over the analyzed periods, with values fluctuating between a low of 2.76 and a high of 4.51. Initially, there is a decline from 3.69 in the first quarter of 2016 down to 2.76 by the third quarter of the same year, indicating a slower turnover of payables during that timeframe. This is followed by a recovery phase with the ratio increasing and stabilizing around the 3.1 to 3.3 range throughout 2017 and 2018. Notably, a significant increase occurs in the first half of 2019, peaking at 4.51, which may reflect more efficient management of payables or expedited payment cycles. However, this is succeeded by a decline towards the end of 2019 and into the first quarter of 2020, reaching 3.96, which still remains higher than most prior periods except the peak.

Concurrently, the average payables payment period, expressed in days, shows an inverse relationship with the payables turnover ratio, consistent with expectations. The number of days payable outstanding increased from 99 days at the beginning of 2016 to a peak of 132 days by the third quarter of 2016, suggesting lengthening payment terms or slower payments to suppliers during that period. From there, there is a general downward trend observed through 2017 and 2018, with the payment period contracting steadily to around 109-110 days, evidencing more prompt settlement of payables.

Remarkable improvement is seen in 2019 with the payment period falling significantly to a low of 81 days in the second quarter, aligning with the observed surge in the payables turnover ratio. This shortening of the payment cycle could indicate operational focus on improving liquidity or supplier relationships. However, this trend reverses slightly towards the end of 2019 and into early 2020, with days payable increasing back to 92 days, signaling a moderate extension in payment practices.

Overall, the data reveals cycles of slower and faster payables management across the years, with a general tendency in recent periods towards enhanced turnover efficiency and reduced payment periods. These movements suggest responsive adjustments in working capital management and supplier payment strategies over time.

Inventory Processing Period

The average inventory processing period displayed a relatively stable pattern around the mid-30s in days from early 2016 through 2018, fluctuating mainly between 32 and 38 days. Notably, starting from mid-2019, there was a gradual increase reaching up to 42 days by the end of 2019, followed by a slight decline to 38 days in the first quarter of 2020. This suggests a recent trend towards longer inventory holding periods.

Receivable Collection Period

The receivable collection period generally hovered between 31 and 39 days over the reported periods. Early quarters of 2016 showed a slight upward trend reaching 38 days by the end of the same year. Subsequently, the metric oscillated without a clear directional trend, though a mild decline was observed in mid-2019 before rising again towards the end of 2019 and early 2020. Overall, the collection period remained relatively stable with minor variations.

Payables Payment Period

The payables payment period exhibited a decreasing trend from the first quarter of 2016, starting at 99 days and peaking at 132 days in the third quarter of 2016. From that peak, there was a steady decline until mid-2019, dropping to as low as 81 days. Afterward, the period saw an increasing trend towards the end of 2019 and into early 2020, moving back up to 92 days. This indicates a tightening in payment terms during mid-2019, with a later relaxation.

Cash Conversion Cycle

The cash conversion cycle was negative throughout the analyzed quarters, demonstrating an efficient working capital cycle. It reached its lowest point at -61 days in the third quarter of 2016, indicating the company was able to collect cash and manage inventory/payables effectively. Post-2016, the cycle generally trended upwards, reaching -9 days in mid-2019 which represents a reduction in efficiency. However, towards the end of 2019 and into the first quarter of 2020, the cycle improved slightly, settling around -20 days. The negative values affirm that payables periods exceed inventory and receivable cycles, helping to optimize cash flow.

Summary

Overall, the company maintained effective working capital management with a consistently negative cash conversion cycle, reflecting strong liquidity practices. The increasing inventory processing periods in the later quarters suggest a modest slowing in inventory turnover. While receivable collection remained relatively steady, a significant shortening of payables payment periods in mid-2019 indicates changes in supplier payment strategy. The slight recovery in cash conversion cycle efficiency towards the beginning of 2020 can be interpreted as a strategic adjustment to restore balanced capital turnover.