Edgar Filing: KNIGHT INC.

knight10q12008.htm

Table of Contents

Knight Inc. Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________to_____________

Commission file number 1-06446

Knight Inc.

(Exact name of registrant as specified in its charter)

Kansas		48-0290000
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 Dallas Street, Suite 1000, Houston, Texas 77002

(Address of principal executive offices, including zip code)

(713) 369-9000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act.):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer þ

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of May 14, 2008 was 100 shares.

Knight Inc. Form 10-Q

KNIGHT INC. AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED MARCH 31, 2008

Contents

		Page Number
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements. (Unaudited)

	Consolidated Balance Sheets	3-4
	Consolidated Statements of Operations	5
	Consolidated Statements of Cash Flows	6-7
	Notes to Consolidated Financial Statements	8-57

Item 2.	Management’s Discussion and Analysis of Financial
	Condition and Results of Operations.	58-81

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	81

Item 4.	Controls and Procedures.	81

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings.	82

Item 1A.	Risk Factors.	82-83

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	83

Item 3.	Defaults Upon Senior Securities.	83

Item 4.	Submission of Matters to a Vote of Security Holders.	83

Item 5.	Other Information.	84

Item 6.	Exhibits.	84

SIGNATURE		85

Knight Inc. Form 10-Q

PART I. - FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED BALANCE SHEETS (Unaudited)

Knight Inc. and Subsidiaries

(In millions)

	March 31, 2008			December 31, 2007
ASSETS:
Current Assets:
Cash and Cash Equivalents	$	173.0		$	148.6
Restricted Deposits		166.6			67.9
Accounts, Notes and Interest Receivable, Net:
Trade		1,082.3			970.0
Related Parties		24.2			5.2
Inventories:
Product		48.7			19.5
Materials and Supplies		18.8			18.3
Gas Imbalances:
Trade		19.5			30.4
Related Party		6.3			(3.5	)
Assets Held for Sale		-			3,353.3
Other		71.2			73.9
		1,610.6			4,683.6

Notes Receivable – Related Parties		87.3			87.9

Investments		2,197.8			1,996.2

Goodwill		8,592.3			8,174.0

Other Intangibles, Net		306.6			321.1

Property, Plant and Equipment, Net:
Property, Plant and Equipment		15,620.6			15,080.9
Accumulated Depreciation, Depletion and Amortization		(471.0	)		(277.0	)
		15,149.6			14,803.9

Assets Held for Sale, Non-current		-			5,634.6

Deferred Charges and Other Assets		496.0			399.7

Total Assets	$	28,440.2		$	36,101.0

The accompanying notes are an integral part of these statements.

Knight Inc. Form 10-Q

CONSOLIDATED BALANCE SHEETS (Unaudited)

Knight Inc. and Subsidiaries

(In millions except share and per share amounts)

	March 31, 2008			December 31, 2007
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current Liabilities:
Current Maturities of Long-term Debt	$	275.7		$	79.8
Notes Payable		366.7			888.1
Cash Book Overdrafts		65.6			30.7
Accounts Payable:
Trade		1,022.9			943.1
Related Parties		1.2			0.6
Accrued Interest		99.7			242.7
Accrued Taxes		747.4			728.2
Gas Imbalances		19.4			23.7
Liabilities Held for Sale		-			168.2
Deferred Revenue		18.2			-
Other		872.1			834.7
		3,488.9			3,939.8

Other Liabilities and Deferred Credits:
Deferred Income Taxes, Non-current		1,852.9			1,849.4
Liabilities Held for Sale, Non-current		-			2,424.1
Other		1,514.6			1,454.8
		3,367.5			5,728.3

Long-term Debt:
Outstanding Notes and Debentures		9,842.7			14,714.6
Deferrable Interest Debentures Issued to Subsidiary Trusts		35.7			283.1
Preferred Interest in General Partner of Kinder Morgan Energy Partners		100.0			100.0
Value of Interest Rate Swaps		294.1			199.7
		10,272.5			15,297.4

Minority Interests in Equity of Subsidiaries		3,524.9			3,314.0

Stockholders’ Equity:
Common Stock – Authorized and Outstanding – 100 Shares, Par Value $0.01 Per Share		-			-
Additional Paid-in Capital		7,808.1			7,822.2
Retained Earnings		352.7			247.0
Accumulated Other Comprehensive Loss		(374.4	)		(247.7	)
Total Stockholders’ Equity		7,786.4			7,821.5

Total Liabilities and Stockholders’ Equity	$	28,440.2		$	36,101.0

The accompanying notes are an integral part of these statements.

Knight Inc. Form 10-Q

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Knight Inc. and Subsidiaries

(In millions)

	Successor Company			Predecessor Company
	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
Operating Revenues:
Natural Gas Sales	$	1,721.8		$	1,417.9
Transportation and Storage		807.9			801.1
Product Sales and Other		365.3			225.4
Total Operating Revenues		2,895.0			2,444.4

Operating Costs and Expenses:
Gas Purchases and Other Costs of Sales		1,760.6			1,452.5
Operations and Maintenance		301.8			286.2
General and Administrative		86.3			110.4
Depreciation, Depletion and Amortization		218.1			153.0
Taxes, Other Than Income Taxes		52.5			43.5
Other Income, Net		(0.5	)		(2.2	)
Impairment of Assets		-			377.1
Total Operating Costs and Expenses		2,418.8			2,420.5

Operating Income		476.2			23.9

Other Income and (Expenses):
Earnings of Equity Investees		43.7			23.8
Interest Expense, Net		(210.7	)		(144.1	)
Interest Income (Expense) – Deferrable Interest Debentures		6.7			(5.5	)
Minority Interests		(126.2	)		(58.2	)
Other, Net		3.2			2.2
Total Other Income and (Expenses)		(283.3	)		(181.8	)

Income (Loss) from Continuing Operations Before Income Taxes		192.9			(157.9	)
Income Taxes		87.1			87.7
Income (Loss) from Continuing Operations		105.8			(245.6	)
(Loss) Income from Discontinued Operations, Net of Tax		(0.1	)		233.2

Net Income (Loss)	$	105.7		$	(12.4	)

The accompanying notes are an integral part of these statements.

Knight Inc. Form 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Knight Inc. and Subsidiaries

(In millions)

	Successor Company			Predecessor Company
	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows From Operating Activities:
Net Income (Loss)	$	105.7		$	(12.4	)
Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities:
Loss (Income) from Discontinued Operations, Net of Tax		0.1			(226.1	)
Loss from Impairment of Assets		-			377.1
Loss on Early Extinguishment of Debt		18.4			-
Depreciation, Depletion and Amortization		218.1			155.3
Deferred Income Taxes		15.9			7.5
Equity in Earnings of Equity Investees		(43.7	)		(24.4	)
Distributions from Equity Investees		24.1			46.2
Minority Interests in Income of Consolidated Subsidiaries		126.2			58.2
Gains from Property Casualty Indemnifications		-			(1.8	)
Net Gains on Sales of Assets		(0.5	)		(2.5	)
Mark-to-Market Interest Rate Swap Gain		(19.8	)		-
Changes in Gas in Underground Storage		(28.0	)		(52.3	)
Changes in Working Capital Items		(279.2	)		(51.2	)
(Payment for) Proceeds from Termination of Interest Rate Swaps		(2.5	)		56.6
Kinder Morgan Energy Partners’ Rate Reparations, Refunds and Reserve Adjustments		(23.3	)		-
Other, Net		(10.9	)		14.9
Net Cash Flows Provided by Continuing Operations		100.6			345.1
Net Cash Flows (Used in) Provided by Discontinued Operations		(0.1	)		121.3
Net Cash Flows Provided by Operating Activities		100.5			466.4

Cash Flows From Investing Activities:
Capital Expenditures		(638.3	)		(357.4	)
Proceeds from Sale of 80% Interest in NGPL PipeCo LLC, Net of $1.1 Million Cash Sold		2,899.3			-
Proceeds from NGPL PipeCo LLC Restricted Cash		3,106.4			-
Acquisitions		(0.3	)		(3.9	)
Net Investments in Margin Deposits		(98.8	)		(48.8	)
Distributions from Equity Investees		89.1			-
Other Investments		(336.5	)		(16.0	)
Change in Natural Gas Storage and NGL Line Fill Inventory		(2.7	)		5.2
Property Casualty Indemnifications		-			8.0
Net Proceeds from Sales of Other Assets		62.0			1.4
Net Cash Flows Provided by (Used in) Continuing Investing Activities		5,080.2			(411.5	)
Net Cash Flows Provided by Discontinued Investing Activities		-			587.1
Net Cash Flows Provided by Investing Activities	$	5,080.2		$	175.6

Knight Inc. Form 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)

Knight Inc. and Subsidiaries

(In millions)

	Successor Company			Predecessor Company
	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows From Financing Activities:
Short-term Debt, Net	$	(521.4	)	$	(833.9	)
Long-term Debt Issued		900.0			1,000.0
Long-term Debt Retired		(5,859.9	)		(1.4	)
Discount on Early Extinguishment of Debt		69.2			-
Increase (Decrease) in Cash Book Overdrafts		35.0			(25.2	)
Common Stock Issued		-			4.8
Excess Tax Benefits from Share-based Payment Arrangements		-			1.9
Short-term Advances From (To) Unconsolidated Affiliates		(14.7	)		3.2
Cash Dividends, Common Stock		-			(117.4	)
Minority Interests, Contributions		384.5			-
Minority Interests, Distributions		(143.5	)		(125.6	)
Debt Issuance Costs		(6.6	)		(7.9	)
Other, Net		1.8			-
Net Cash Flows Used in by Continuing Financing Activities		(5,155.6	)		(101.5	)
Net Cash Flows Provided by Discontinued Financing Activities		-			34.0
Net Cash Flows Used in Financing Activities		(5,155.6	)		(67.5	)

Effect of Exchange Rate Changes on Cash		(0.7	)		0.2

Cash Balance Included in Assets Held for Sale		-			(14.1	)

Net Increase in Cash and Cash Equivalents		24.4			560.6
Cash and Cash Equivalents at Beginning of Period		148.6			129.8
Cash and Cash Equivalents at End of Period	$	173.0		$	690.4

For supplemental cash flow information, see Note 1(H).

The accompanying notes are an integral part of these statements.

Knight Inc. Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

General

We are a large energy transportation and storage company, operating or owning an interest in approximately 37,000 miles of pipelines and approximately 165 terminals. We have both regulated and nonregulated operations. We also own the general partner interest and a significant limited partner interest in Kinder Morgan Energy Partners, L.P., a publicly traded pipeline limited partnership. We began including Kinder Morgan Energy Partners and its consolidated subsidiaries in our consolidated financial statements effective January 1, 2006. This means that the accounts, balances and results of operations of Kinder Morgan Energy Partners and its consolidated subsidiaries are presented on a consolidated basis with ours and those of our other consolidated subsidiaries for financial reporting purposes; see the discussion under Note 1(A) “Basis of Presentation” following. Our executive offices are located at 500 Dallas Street, Suite 1000, Houston, Texas 77002 and our telephone number is (713) 369-9000. Unless the context requires otherwise, references to “we,” “us,” “our,” or the “Company” are intended to mean Knight Inc. (formerly Kinder Morgan, Inc.) and its consolidated subsidiaries both before and after the Going Private transaction discussed below. Unless the context requires otherwise, references to “Kinder Morgan Energy Partners” and “KMP” (its NYSE ticker symbol) are intended to mean Kinder Morgan Energy Partners, L.P. and its consolidated subsidiaries.

Kinder Morgan Management, LLC, referred to in this report as “Kinder Morgan Management” or “KMR,” is a publicly traded Delaware limited liability company that was formed on February 14, 2001. Kinder Morgan G.P., Inc., of which we indirectly own all of the outstanding common equity, owns all of Kinder Morgan Management’s voting shares. Kinder Morgan Management’s shares (other than the voting shares we hold) are traded on the New York Stock Exchange under the ticker symbol “KMR.” Kinder Morgan Management, pursuant to a delegation of control agreement, has been delegated, to the fullest extent permitted under Delaware law, all of Kinder Morgan G.P., Inc.’s power and authority to manage and control the business and affairs of Kinder Morgan Energy Partners, L.P., subject to Kinder Morgan G.P., Inc.’s right to approve certain transactions.

We have prepared the accompanying unaudited interim consolidated financial statements under the rules and regulations of the Securities and Exchange Commission. Under such rules and regulations, we have condensed or omitted certain information and notes normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America. Our management believes, however, that our disclosures are adequate to make the information presented not misleading. The consolidated financial statements reflect normal adjustments, and also recurring adjustments that are, in the opinion of management, necessary for a fair presentation of our financial results for the interim periods. You should read these interim consolidated financial statements in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2007 (“2007 Form 10-K”).

On May 30, 2007, we completed our Going Private transaction whereby Kinder Morgan, Inc. merged with a wholly owned subsidiary of Knight Holdco LLC, with Kinder Morgan, Inc. continuing as the surviving legal entity and subsequently renamed “Knight Inc.” Knight Holdco LLC is a private company owned by Richard D. Kinder, our Chairman and Chief Executive Officer; other senior members of our management, most of whom are also senior officers of Kinder Morgan G.P., Inc. and of Kinder Morgan Management; our co-founder William V. Morgan; Kinder Morgan, Inc. board members Fayez Sarofim and Michael C. Morgan; and affiliates of (i) Goldman Sachs Capital Partners; (ii) American International Group, Inc.; (iii) The Carlyle Group; and (iv) Riverstone Holdings LLC. This transaction is referred to in this report as “the Going Private transaction.” Upon closing of the Going Private transaction, our common stock is no longer listed on the New York Stock Exchange.

To convert March 31, 2008 balances denominated in Canadian dollars to U.S. dollars, we used the March 31, 2008 Bank of Canada exchange rate of 0.9729 U.S. dollars per Canadian dollar. All dollars are U.S. dollars, except where stated otherwise. Canadian dollars are designated as C$.

1. Nature of Operations and Summary of Significant Accounting Policies

For a complete discussion of our significant accounting policies, see Note 1 of Notes to Consolidated Financial Statements included in our 2007 Form 10-K.

(A) Basis of Presentation

Our consolidated financial statements include the accounts of Knight Inc. and our majority-owned subsidiaries, as well as those of (i) Kinder Morgan Energy Partners and (ii) Triton Power Company LLC, in which we have a preferred investment. Investments in jointly owned operations in which we hold a 50% or less interest (other than Kinder Morgan Energy Partners and Triton Power Company LLC) and have the ability to exercise significant influence over their operating and financial

Knight Inc. Form 10-Q

policies are accounted for under the equity method. All material intercompany transactions and balances have been eliminated. Certain prior period amounts have been reclassified to conform to the current presentation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.

As discussed preceding, on May 30, 2007, all of our outstanding common stock was acquired by a group of investors including Richard D. Kinder, our Chairman and Chief Executive Officer, in the Going Private transaction. This acquisition was a “business combination” for accounting purposes, requiring that these investors, pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, record the assets acquired and liabilities assumed at their fair market values as of the acquisition date, resulting in a new basis of accounting.

As a result of the application of the Securities and Exchange Commission rules and guidance regarding “push down” accounting, the investors’ new accounting basis in our assets and liabilities is reflected in our financial statements effective with the closing of the Going Private transaction. Therefore, in the accompanying consolidated financial statements, transactions and balances prior to the closing of the Going Private transaction (the amounts labeled “Predecessor Company”) reflect the historical accounting basis in our assets and liabilities, while the amounts subsequent to the closing (labeled “Successor Company”) reflect the push down of the investors’ new basis to our financial statements. Hence, there is a blackline division on the financial statements and relevant footnotes, which is intended to signify that the amounts shown for periods prior to and subsequent to the acquisition are not comparable.

As required by SFAS No. 141 (applied by the investors and pushed down to our financial statements), effective with the closing of the Going Private transaction, all of our assets and liabilities have been recorded at their estimated fair market values based on a preliminary allocation of the purchase price paid in the Going Private transaction. To the extent that we consolidate less than wholly owned subsidiaries (such as Kinder Morgan Energy Partners and Kinder Morgan Management), the reported assets and liabilities for these entities have been given a new accounting basis only to the extent of our economic ownership interest in those entities. Therefore, the assets and liabilities of these entities are included in our financial statements, in part, at a new accounting basis reflecting the investors’ purchase of our economic interest in these entities (approximately 50% in the case of KMP and 14% in the case of KMR). The remaining percentage of these assets and liabilities, reflecting the continuing minority ownership interest, is included at its historical accounting basis. The purchase price paid in the Going Private transaction and the preliminary allocation of that purchase price is as follows (in millions):

The Total Purchase Price Consisted of the Following:
Cash Paid	$	5,112.0
Kinder Morgan, Inc. Shares Contributed		2,719.2
Equity Contributed		7,831.2
Cash from Issuances of Long-term Debt		4,696.2
Total Purchase Price	$	12,527.4

The Preliminary Allocation of the Purchase Price is as Follows:
Current Assets	$	1,551.2
Goodwill		13,458.9
Investments		1,067.0
Property, Plant and Equipment, Net		15,593.0
Deferred Charges and Other Assets		1,681.5
Current Liabilities		(3,279.5	)
Deferred Income Taxes		(2,596.7	)
Other Deferred Credits		(1,777.5	)
Long-term Debt		(9,855.9	)
Minority Interests		(3,314.6	)
	$	12,527.4

As with all purchase accounting transactions, the preliminary allocation of purchase price resulting from the Going Private transaction as shown preceding and as reflected in the accompanying consolidated financial statements will be adjusted during an allocation period as better or more complete information becomes available. Some of these adjustments may be significant. Generally, this allocation period will not exceed one year, and will end when we are no longer waiting for information that is known to be available or obtainable.

Knight Inc. Form 10-Q

Due to our implementation of Emerging Issues Task Force (“EITF”) No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, we are including Kinder Morgan Energy Partners and its consolidated subsidiaries as consolidated subsidiaries in our consolidated financial statements effective January 1, 2006. Notwithstanding the consolidation of Kinder Morgan Energy Partners and its subsidiaries into our financial statements pursuant to EITF 04-5, except as explicitly disclosed, we are not liable for, and our assets are not available to satisfy, the obligations of Kinder Morgan Energy Partners and/or its subsidiaries and vice versa. Responsibility for settlements of obligations reflected in our or Kinder Morgan Energy Partners’ financial statements is a legal determination based on the entity that incurs the liability. The determination of responsibility for payment among entities in our consolidated group of subsidiaries was not impacted by the adoption of EITF 04-5.

(B) Inventories

Our Inventories consist of the following:

	March 31, 2008			December 31, 2007
	(In millions)
Gas in Underground Storage (Current)		$	28.4		$	-
Product Inventories			20.3			19.5
Materials and Supplies			18.8			18.3
		$	67.5		$	37.8

Changes in the carrying amount of our goodwill for the three months ended March 31, 2008 are summarized as follows:

	December 31, 2007		Acquisitions and Purchase Price Adjustments			Other1			March 31, 2008
	(In millions)
KMP – Products Pipelines Segment	$	2,179.4	$	70.0		$	(6.9	)	$	2,242.5
KMP – Natural Gas Pipelines Segment		3,201.0		308.6			(10.6	)		3,499.0
KMP – CO2 Segment		1,077.6		192.2			(3.7	)		1,266.1
KMP – Terminals Segment		1,465.9		(118.0	)		(4.5	)		1,343.4
KMP – Trans Mountain Segment		250.1		-			(8.8	)		241.3

Consolidated Total	$	8,174.0	$	452.8		$	(34.5	)	$	8,592.3

_______________

1	Adjustments include (i) the translation of goodwill denominated in foreign currencies and (ii) reductions in the allocation of equity method goodwill due to reductions in our ownership percentage of Kinder Morgan Energy Partners.

We evaluate for the impairment of goodwill in accordance with the provisions of SFAS No. 142, Goodwill and Other Intangible Assets. For the investments we continue to account for under the equity method of accounting, the premium or excess cost over underlying fair value of net assets is referred to as equity method goodwill and is not subject to amortization but rather to impairment testing in accordance with APB No. 18, The Equity Method of Accounting for Investments in Common Stock. As of both March 31, 2008 and December 31, 2007, we have reported $138.2 million of equity method goodwill within the caption “Investments” in the accompanying interim Consolidated Balance Sheets. This amount is based on the best information available to management at this time. In conjunction with the Going Private transaction, we are currently evaluating the recorded amount of equity method goodwill.

On April 18, 2007, we announced that Kinder Morgan Energy Partners would acquire the Trans Mountain pipeline system from us. This transaction was completed April 30, 2007. This transaction caused us to evaluate the fair value of the Trans Mountain pipeline system, in determining whether goodwill related to these assets was impaired. Accordingly, based on our consideration of supporting information obtained regarding the fair values of the Trans Mountain pipeline system assets, a goodwill impairment charge of $377.1 million was recorded in the first quarter of 2007.

(D) Other Intangibles, Net

Our intangible assets other than goodwill include customer relationships, contracts and agreements, technology-based assets, and lease value. These intangible assets have definite lives, are being amortized on a straight-line basis over their estimated

Knight Inc. Form 10-Q

useful lives, and are reported separately as “Other Intangibles, Net” in the accompanying interim Consolidated Balance Sheets. Following is information related to our intangible assets:

	March 31, 2008				December 31, 2007
	(In millions)
Customer Relationships, Contracts and Agreements:
Gross Carrying Amount1		$	312.0			$	321.3
Accumulated Amortization			(16.7	)			(11.6	)
Net Carrying Amount			295.3				309.7

Technology-based Assets, Lease Value and Other:
Gross Carrying Amount			11.7				11.7
Accumulated Amortization			(0.4	)			(0.3	)
Net Carrying Amount			11.3				11.4

Total Other Intangibles, Net		$	306.6			$	321.1

_______________

The change in the Gross Carrying Amount is due primarily to an approximately $18 million adjustment for Kinder Morgan Energy Partners’ allocated purchase price of Marine Terminals, Inc.’s bulk terminal assets, partially offset by adjustments in purchase price allocations related to the Going Private transaction. This adjustment had the effect of increasing “Goodwill” and decreasing “Other Intangibles, Net” by that amount. As of March 31, 2008, Kinder Morgan Energy Partners’ allocation of the purchase price of Marine Terminals, Inc.’s bulk terminal assets was preliminary and is expected to be final by the third quarter of 2008.

Amortization expense on our intangibles consisted of the following:

	Successor Company		Predecessor Company
	Three Months Ended March 31, 2008		Three Months Ended March 31, 2007
	(In millions)		(In millions)
Customer Relationships, Contracts and Agreements	$	5.1	$	3.8
Technology-based Assets, Lease Value and Other1		0.1		-
Total Amortization	$	5.2	$	3.8

_______________

Expense for the three months ended March 31, 2007 was less than $0.1 million.

As of March 31, 2008, the weighted-average amortization period for our intangible assets was approximately 16.8 years.

(E) Accounting for Minority Interests

The caption “Minority Interests in Equity of Subsidiaries” in the accompanying interim Consolidated Balance Sheets consists of the following:

	March 31, 2008		December 31, 2007
	(In millions)
Kinder Morgan Energy Partners	$	1,829.8	$	1,616.0
Kinder Morgan Management, LLC		1,658.0		1,657.7
Triton Power Company LLC		27.9		29.2
Other		9.2		11.1
	$	3,524.9	$	3,314.0

(F) Asset Retirement Obligations (“ARO”)

We have recorded an obligation associated with the future retirement of tangible long-lived assets and the associated estimated retirement costs.

Knight Inc. Form 10-Q

We have included $1.4 million of our total asset retirement obligations as of March 31, 2008 in the caption “Current Liabilities: Other” and the remaining $51.4 million in the caption “Other Liabilities and Deferred Credits: Other” in the accompanying interim Consolidated Balance Sheet. A reconciliation of the changes in our accumulated asset retirement obligations for the three months ended March 31, 2008 is as follows, and additional information regarding our asset retirement obligations is included in our 2007 Form 10-K:

	Three Months Ended March 31, 2008
	(In millions)
Beginning of Period		$	55.0
Additions			0.9
Liabilities Settled			(0.9	)
Liabilities Sold1			(2.8	)
Accretion Expense			0.6
End of Period		$	52.8

_______________

ARO liabilities associated with the NGPL business segment, 80% of which was sold in February 2008 (see Note 5).

(G) Related Party Transactions

Significant Investors

As discussed under “General” preceding Note 1, as a result of the Going Private transaction, a number of individuals and entities became significant investors in us. By virtue of the size of their ownership interest, two of those investors became “related parties” to us as that term is defined in the authoritative accounting literature: (i) American International Group, Inc. and certain of its affiliates (“AIG”) and (ii) Goldman Sachs Capital Partners and certain of its affiliates (“Goldman Sachs”). We enter into transactions with certain AIG affiliates in the ordinary course of their conducting insurance and insurance-related activities, although no individual transaction is, and all such transactions collectively are not, material to our consolidated financial statements. We conduct commodity risk management activities in the ordinary course of implementing our risk management strategies in which the counterparty to certain of our derivative transactions is an affiliate of Goldman Sachs. In conjunction with these activities, we are a party (through one of our subsidiaries engaged in the production of crude oil) to a hedging facility with J. Aron & Company/Goldman Sachs, which requires us to provide certain periodic information but does not require the posting of margin. As a result of changes in the market value of our derivative positions, we have recorded both amounts receivable from and payable to Goldman Sachs affiliates. At March 31, 2008 and December 31, 2007, the fair values of these derivative contracts are included in the accompanying interim Consolidated Balance Sheets within the captions indicated in the following table:

	March 31, 2008			December 31, 2007
	(In millions)			(In millions)
Derivative Liability:
Current Liabilities: Other	$	(282.9	)	$	(239.8	)
Other Liabilities and Deferred Credits: Other	$	(509.9	)	$	(386.5	)

Plantation Pipe Line Company Note Receivable

Kinder Morgan Energy Partners has a seven-year note receivable bearing interest at the rate of 4.72% per annum from Plantation Pipe Line Company, its 51.17%-owned equity investee. The outstanding note receivable balance was $89.7 million as of March 31, 2008 and December 31, 2007. Of this amount, $2.4 million was included within “Accounts, Notes and Interest Receivable, Net: Related Parties” in our accompanying interim Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007 and the remainder was included within “Notes Receivable – Related Parties” in our accompanying interim Consolidated Balance Sheets at each reporting date.

Natural Gas Pipelines – KMP Business Segment

Prior to the sale of an 80% ownership interest to Myria Acquisition Inc. (See Note 5), our NGPL business segment entered into derivative contracts on the behalf of certain associated companies in our Natural Gas Pipelines – KMP business segment. At March 31, 2008, the fair values of these derivative contracts associated with our Natural Gas Pipelines – KMP business segment are included in the accompanying interim Consolidated Balance Sheet within the captions indicated in the following table (in millions):

Knight Inc. Form 10-Q

	March 31, 2008
Derivative Asset (Liability):
Current Assets: Other	$	0.6
Current Liabilities: Other	$	(2.9	)

(H) Cash Flow Information

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Changes in Working Capital Items:

(Net of Effects of Acquisitions and Sales)

	Successor Company			Predecessor Company
	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
	(In millions)			(In millions)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Accounts Receivable	$	(122.8	)	$	2.0
Materials and Supplies Inventory		(2.1	)		0.1
Other Current Assets		(10.9	)		12.5
Accounts Payable		32.4			(32.6	)
Other Current Liabilities		(175.8	)		(33.2	)
	$	(279.2	)	$	(51.2	)

Supplemental Disclosures of Cash Flow Information:

	Successor Company		Predecessor Company
	Three Months Ended March 31, 2008		Three Months Ended March 31, 2007
	(In millions)		(In millions)
Interest, Net of Amount Capitalized	$	341.6	$	294.6
Income Taxes Paid, Including Amounts Related to Prior Periods	$	1.1	$	15.9

During the three months ended March 31, 2008 and 2007, we acquired $0.3 million and $0.2 million, respectively, of assets by the assumption of liabilities.

During the three months ended March 31, 2008, we recognized non-cash activity of $45.8 million for unamortized fair value adjustments recorded in purchase accounting related to the Going Private transaction and $41.7 million for unamortized debt issuance costs associated with the early extinguishment of debt.

(I) Interest Expense

“Interest Expense, Net” as presented in the accompanying interim Consolidated Statements of Operations is interest expense net of the debt component of the allowance for funds used during construction, which was $10.1 million and $5.9 million for the three months ended March 31, 2008 and 2007, respectively. We also record as interest expense gains and losses from (i) the reacquisition of debt, (ii) the termination of interest rate swaps designated as fair value hedges for which the hedged liability has been extinguished and (iii) the termination of interest rate swaps designated as cash flow hedges for which the forecasted interest payments will no longer occur. During the three months ended March 31, 2008, we recorded $(29.2) million and $10.8 million of (losses) gains from the early extinguishment of debt in the captions “Interest Expense, Net” and “Interest Expense – Deferred Interest Debentures,” respectively, and $19.8 million of gains from the termination of interest rate swaps designated as fair value hedges, for which the hedged liability was extinguished, in the caption “Interest Expense, Net” in the accompanying interim Consolidated Statement of Operations.

Knight Inc. Form 10-Q

(J) Income Taxes

The effective tax rate (calculated by dividing the amount in the caption “Income Taxes” as shown in the accompanying interim Consolidated Statements of Operations by the amount in the caption “Income (Loss) from Continuing Operations Before Income Taxes”) was 45.2% for the three months ended March 31, 2008, and, excluding the $377.1 million pre-tax impairment charge related to nondeductible goodwill of Trans Mountain, 40.0% for the three months ended March 31, 2007. These effective tax rates reflect, among other factors, differences from the federal statutory tax rate of 35% due to increases attributable to (i) state income taxes, (ii) the impact of consolidating the Kinder Morgan Management income tax provision, (iii) foreign earnings subject to different tax rates, and (iv) the impact of consolidating Kinder Morgan Energy Partners’ income tax provision.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based not only on the technical merits of the tax position based on tax law, but also the past administrative practices and precedents of the taxing authority. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2007 and March 31, 2008 (i) we had approximately $8.1 million of accrued interest and no accrued penalties; (ii) we believe it is reasonably possible that our liability for unrecognized tax benefits will decrease by $4.3 million during the next twelve months; and (iii) in the event the total $41.5 million of unrecognized tax benefits on our consolidated balance sheet were recognized in future periods we believe approximately $6.4 million would affect our effective tax rate and $45.5 million that is carried forward from the Predecessor Company would result in an adjustment to goodwill and not impact our effective tax rate.

We are subject to taxation, and have tax years open to examination for the periods 1999 – 2007, in the United States, various states, Mexico and Canada.

(K) Transfer of Net Assets Between Entities Under Common Control

We account for the transfer of net assets between entities under common control by carrying forward the net assets recognized in the balance sheets of each combining entity to the balance sheet of the combined entity, and no other assets or liabilities are recognized as a result of the combination. Transfers of net assets between entities under common control do not impact the income statement of the combined entity.

2. Comprehensive Loss

Our comprehensive loss is as follows:

	Successor Company			Predecessor Company
	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
	(In millions)			(In millions)
Net Income (Loss)	$	105.7		$	(12.4	)
Other Comprehensive Loss, Net of Tax:
Change in Fair Value of Derivatives Utilized for Hedging Purposes		(219.8	)		(21.8	)
Reclassification of Change in Fair Value of Derivatives to Net Income		115.5			10.6
Employee Benefit Plans:
Prior Service Cost Arising During Period		0.4			-
Net Gain Arising During Period		1.5			-
Amortization of Prior Service Cost Included in Net Periodic Benefit Costs		0.1			0.9
Amortization of Net Loss Included in Net Periodic Benefit Costs		(0.2	)		(0.2	)
Change in Foreign Currency Translation Adjustment		(24.3	)		9.3
Other Comprehensive Loss		(126.8	)		(1.2	)

Comprehensive Loss	$	(21.1	)	$	(13.6	)

Knight Inc. Form 10-Q

The Accumulated Other Comprehensive Loss balance of $374.4 million at March 31, 2008 consisted of (i) $361.7 million representing unrecognized net losses on hedging activities, (ii) $15.8 million representing foreign currency translation gain adjustments and (iii) $0.2 million and $28.3 million representing unrecognized prior service costs and net losses relating to the employee benefit plans, respectively.

3. Kinder Morgan Management, LLC

On February 14, 2008, Kinder Morgan Management made a distribution of 0.017312 of its shares per outstanding share (1,253,951 total shares) to shareholders of record as of January 31, 2008, based on the $0.92 per common unit distribution declared by Kinder Morgan Energy Partners. On May 15, 2008, Kinder Morgan Management will make a distribution of 0.017716 of its shares per outstanding share (1,305,429 total shares) to shareholders of record as of April 30, 2008, based on the $0.96 per common unit distribution declared by Kinder Morgan Energy Partners. Kinder Morgan Management’s distributions are paid in the form of additional shares or fractions thereof calculated by dividing the Kinder Morgan Energy Partners cash distribution per common unit by the average market price of a Kinder Morgan Management share determined for a ten-trading day period ending on the trading day immediately prior to the ex-dividend date for the shares.

4. Business Combinations and Joint Ventures

The following acquisition was accounted for as a business combination and the assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The preliminary allocation of assets (and any liabilities assumed) may be adjusted to reflect the final determined amounts during a period of time following the acquisition. Although the time that is required to identify and measure the fair value of the assets acquired and the liabilities assumed in a business combination will vary with circumstances, generally our allocation period ends when we no longer are waiting for information that is known to be available or obtainable. The results of operations from this acquisition is included in our consolidated financial statements from the acquisition date.

Interest in Cochin Pipeline

Effective January 1, 2007, Kinder Morgan Energy Partners acquired the remaining approximate 50.2% interest in the Cochin pipeline system that it did not already own for aggregate consideration of approximately $47.8 million, consisting of $5.5 million in cash and a note payable having a fair value of $42.3 million. As part of the transaction, the seller also agreed to reimburse Kinder Morgan Energy Partners for certain pipeline integrity management costs over a five-year period in an aggregate amount not to exceed $50 million. Upon closing, Kinder Morgan Energy Partners became the operator of the pipeline.

The Cochin Pipeline is a multi-product liquids pipeline consisting of approximately 1,900 miles of 12-inch diameter pipe operating between Fort Saskatchewan, Alberta, and Windsor, Ontario, Canada. The entire Cochin pipeline system traverses three provinces in Canada and seven states in the United States, serving the Midwestern United States and eastern Canadian petrochemical and fuel markets. Its operations are included as part of the Products Pipelines - KMP business segment.

The entire purchase price has been allocated to property, plant and equipment.

5. Investment and Sales

On February 15, 2008, we sold an 80% ownership interest in our NGPL business segment to Myria Acquisition Inc. for approximately $2.9 billion, subject to certain adjustments. We also received $3.0 billion of cash previously held in escrow related to a notes offering in December 2007, the net proceeds of which were distributed to us as repayment of intercompany indebtedness and as a dividend, immediately prior to the closing of the sale to Myria. Pursuant to the purchase agreement, Myria acquired all 800 Class B shares and we retained all 200 Class A shares of NGPL PipeCo LLC (formerly MidCon Corp.), which is the parent of NGPL. We will continue to operate NGPL’s assets pursuant to a 15-year operating agreement. Myria is owned by a syndicate of investors led by Babcock & Brown, an international investment and specialized fund and asset management group. The total proceeds from this sale of $5.9 billion were used to pay off the entire outstanding balances of our senior secured credit facility’s Tranche A and Tranche B term loans, to repurchase $1.67 billion of our outstanding debt securities and to reduce balances outstanding under our $1.0 billion revolving credit facility (see Note 7).

In the first quarter of 2008, Kinder Morgan Energy Partners made capital contributions of $306.0 million to West2East Pipeline LLC (the sole owner of Rockies Express Pipeline LLC) to partially fund its Rockies Express Pipeline construction costs. This cash contribution was recorded to “Investments” in the accompanying interim Consolidated Balance Sheet as of March 31, 2008, and it was included within “Other Investments” in the accompanying interim Consolidated Statement of Cash Flows for the three months ended March 31, 2008. Kinder Morgan Energy Partners owns a 51% equity interest in the Rockies Express joint venture pipeline.

Knight Inc. Form 10-Q

On November 20, 2007, we entered into a definitive agreement to sell our interests in three natural gas-fired power plants in Colorado to Bear Stearns. The closing of the sale occurred on January 25, 2008, and we received net proceeds of $63.1 million.

On March 14, 2008, Kinder Morgan Energy Partners entered into a purchase and sale agreement to sell its 25% interest in Thunder Creek Gas Services, LLC. The transaction closed effective April 1, 2008. Kinder Morgan Energy Partners received cash proceeds of approximately $51.6 million for its investment.

6. Discontinued Operations

On October 5, 2007, Kinder Morgan Energy Partners announced that it had completed the previously announced sale of its North System and its 50% ownership interest in the Heartland Pipeline Company to ONEOK Partners, L.P. for approximately $298.6 million in cash. Due to the fair market valuation resulting from the Going Private transaction (see Note 1(A)), the consideration Kinder Morgan Energy Partners received from the sale of its North System was equal to our carrying value; therefore no gain or loss was recorded on this disposal transaction. The North System consists of an approximately 1,600-mile interstate common carrier pipeline system that delivers natural gas liquids and refined petroleum products from south central Kansas to the Chicago area. Also included in the sale are eight propane truck-loading terminals located at various points in three states along the pipeline system, and one multi-product terminal complex located in Morris, Illinois. All of the assets were included in our Products Pipelines – KMP business segment. In the first quarter of 2008, Kinder Morgan Energy Partners paid $2.4 million to ONEOK Partners, L.P. to fully settle both the sale of working capital items and the allocation of pre-acquisition investee distributions, and to partially settle the sale of liquids inventory balances. Final settlement of all outstanding issues with the buyer and book balances are expected to occur in the second quarter of 2008.

On March 5, 2007, we entered into a definitive agreement to sell Terasen Pipelines (Corridor) Inc. to Inter Pipeline Fund, a Canada-based company. Terasen Pipelines (Corridor) Inc. transports diluted bitumen from the Athabasca Oil Sands Project near Fort McMurray, Alberta, to the Scotford Upgrader near Fort Saskatchewan, Alberta. The sale did not include any other assets of Kinder Morgan Canada (formerly Terasen Pipelines). This transaction closed on June 15, 2007, for approximately $711 million (C$760 million) plus assumption of all construction debt. The consideration was equal to Terasen Pipelines (Corridor) Inc.’s carrying value, therefore no gain or loss was recorded on this disposal transaction.

We closed the sale of Terasen Inc. to Fortis Inc. on May 17, 2007, for sales proceeds of approximately $3.4 billion (C$3.7 billion) including cash and assumed debt. The sale did not include the assets of Kinder Morgan Canada (formerly Terasen Pipelines). We recorded a book gain on this disposition of $55.7 million in the second quarter of 2007. The sale resulted in a capital loss of $998.6 million for tax purposes. Approximately $223.3 million of this loss will be utilized to reduce capital gains principally associated with the sale of our U.S.-based retail gas operations (see below) resulting in a tax benefit of approximately $82.2 million. The remaining capital loss carryforward of $775.3 million, which expires in 2012, will be utilized to reduce the capital gain associated with our sale of an 80% ownership interest in our NGPL business segment (see Note 5).

In March 2007, we completed the sale of our U.S.-based retail natural gas distribution and related operations to GE Energy Financial Services, a subsidiary of General Electric Company, and Alinda Investments LLC for $710 million and an adjustment for working capital. In conjunction with this sale, we recorded a pre-tax gain of $251.8 million (net of $3.9 million of transaction costs) in the first quarter of 2007. Our Natural Gas Pipelines – KMP business segment (i) provides natural gas transportation and storage services and sells natural gas to and (ii) receives natural gas transportation and storage services, natural gas and natural gas liquids and other gas supply services from the discontinued U.S.-based retail natural gas distribution business. These transactions are continuing after the sale of this business and are expected to continue to a similar extent into the future. For the three months ended March 31, 2007, revenues and expenses of our continuing operations totaling $3.1 million and $1.2 million, respectively for products and services sold to and purchased from our discontinued U.S.-based retail natural gas distribution operations prior to its sale in March 2007, have been eliminated in our accompanying interim Consolidated Statement of Operations. We are currently receiving fees from SourceGas, a subsidiary of General Electric Company, to provide certain administrative functions for a limited period of time and for the lease of office space. We will not have any significant continuing involvement in or retain any ownership interest in these operations and, therefore, the continuing cash flows discussed above are not considered direct cash flows of the disposal group.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the financial results of these operations have been reclassified to discontinued operations for all periods presented and reported in the caption, “(Loss) Income from Discontinued Operations, Net of Tax” in our accompanying interim Consolidated Statements of Operations. Summarized financial results of these operations are as follows:

Knight Inc. Form 10-Q

	Successor Company			Predecessor Company
	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
	(In millions)			(In millions)
Operating Revenues	$	-		$	698.6

(Loss) Earnings from Discontinued Operations Before Income Taxes		(0.1	)		340.8
Income Taxes		-			(107.6	)
(Loss) Gain from Discontinued Operations	$	(0.1	)	$	233.2

The cash flows attributable to discontinued operations are included in our accompanying interim Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 in the captions “Net Cash Flows (Used in) Provided by Discontinued Operations,” “Net Cash Flows Provided by Discontinued Investing Activities” and “Net Cash Flows Provided by Discontinued Financing Activities.”

7. Financing

The $5.9 billion in total proceeds related to the sale of an 80% ownership interest in our NGPL business segment were used to pay off the entire outstanding balances of our senior secured credit facility’s Tranche A and Tranche B term loans, to repurchase $1.6 billion of our outstanding debt securities and to reduce balances outstanding under our $1.0 billion revolving credit facility (see Note 5).

Notes Payable

We and our consolidated subsidiaries had the following credit facilities outstanding at March 31, 2008.

Credit Facilities

Knight Inc.1

$1.0 billion, six-year secured revolver, due May 2013

Kinder Morgan Energy Partners2

$1.85 billion, five-year unsecured revolver, due August 2010

____________

On January 5, 2007, after shareholder approval of the Going Private transaction was announced, Kinder Morgan, Inc.’s secured senior debt rating was downgraded by Standard & Poor’s Rating Services to BB- due to the anticipated increase in debt related to the proposed transaction. On April 11, 2007 and May 30, 2007, Fitch and Moody’s Investor Services lowered their ratings to BB and Ba2, respectively, also related to the transaction. Following the sale of an 80% ownership interest in our NGPL business segment on February 15, 2008 (see Note 5), Standard & Poor’s Rating Services upgraded Knight Inc.’s secured senior debt to BB, Fitch upgraded its rating to BB+, and Moody’s Investor Services to Ba1. Because we have a non-investment grade credit rating, we no longer have access to the commercial paper market. As a result, we are currently utilizing our $1.0 billion revolving credit facility for Knight Inc.’s short-term borrowing needs.

As discussed following, the loan agreements we had in place prior to the Going Private transaction were cancelled and replaced with a new loan agreement. Our indentures related to publicly issued notes do not contain covenants related to maintenance of credit ratings. Accordingly, no such covenants were impacted by the downgrade in our credit ratings occasioned by the Going Private transaction.

On January 5, 2007, in anticipation of the Going Private transaction closing, Standard & Poor’s Rating Services downgraded Kinder Morgan Energy Partners one level to BBB and removed its rating from credit watch with negative implications. As projected by Moody’s Investor Services in its credit opinion dated November 15, 2006, it downgraded Kinder Morgan Energy Partners’ credit rating from Baa1 to Baa2 on May 30, 2007, following the closing of the Going Private transaction. Additionally, Kinder Morgan Energy Partners’ rating was downgraded by Fitch Ratings from BBB+ to BBB on April 11, 2007. Currently, Kinder Morgan Energy Partners’ corporate debt credit rating is BBB, Baa2 and BBB, respectively, at S&P, Moody’s Investor Services and Fitch.

These facilities can be used by the respective borrowers for each entity’s general corporate or partnership purposes and include financial covenants and events of default that are common in such arrangements. Kinder Morgan Energy Partners’ facility can be used as backup for its commercial paper program. The margin paid with respect to borrowings and the facility fees paid on the total commitment varies based on the senior debt investment rating of the respective borrowers. Amounts

Knight Inc. Form 10-Q

outstanding under the revolving credit facilities or an associated commercial paper program have maturities not to exceed twelve months from the date of issue and accordingly are classified as short-term debt. See Note 10 of Notes to Consolidated Financial Statements included in our 2007 Form 10-K for additional information regarding our credit facilities.

In the following table of short-term borrowings, Kinder Morgan Energy Partners’ commercial paper is supported by its respective credit facility, and is comprised of unsecured short-term notes with maturities not to exceed 270 days from the date of issue. The short-term borrowings, including commercial paper, shown in the table below, totaling $366.7 million, are reported under the caption “Notes Payable” in the accompanying interim Consolidated Balance Sheet at March 31, 2008.

	March 31, 2008
	Short-term Borrowings Outstanding Under Revolving Credit Facility			Commercial Paper Outstanding		Weighted Average Interest Rate of Short-term Debt Outstanding
	(In millions)
Knight Inc.
$1.0 billion		$	70.0	$	-		3.94	%
Kinder Morgan Energy Partners
$1.85 billion		$	-	$	296.7		3.26	%

The following represents average short-term borrowings outstanding and the weighted-average interest rates during the periods shown, for the below listed borrowers. The commercial paper and bankers’ acceptances are supported by their respective credit facilities. The commercial paper and bankers’ acceptances borrowings are comprised of unsecured short-term notes with maturities not to exceed 364 days from the date of issue.

	Successor Company					Predecessor Company
	Three Months Ended March 31, 2008					Three Months Ended March 31, 2007
	Average Short-term Debt Outstanding		Weighted- Average Interest Rate of Short-term Debt Outstanding			Average Short-term Debt Outstanding		Weighted- Average Interest Rate of Short-term Debt Outstanding
	(In millions of U.S. dollars)					(In millions of U.S. dollars)
Credit Facilities:
Knight Inc.1
$1.0 billion	$	191.6		5.56	%	$	-		-	%
Kinder Morgan, Inc.2
$800 million	$	-		-	%	$	-		-	%

Commercial Paper and Bankers’ Acceptances:
Kinder Morgan Energy Partners
$1.85 billion	$	446.9		4.06	%	$	564.8		5.41	%
Terasen Inc.3
C$450 million	$	-		-	%	$	80.1		4.34	%
Terasen Gas Inc.3
C$500 million	$	-		-	%	$	153.0		4.23	%
Terasen Pipelines (Corridor) Inc.3
C$375 million	$	-		-	%	$	240.9		4.23	%

____________

1	In conjunction with the Going Private transaction, Knight Inc. entered into a $5.755 billion credit agreement dated May 30, 2007, which included three term credit facilities, which were subsequently retired, and one revolving credit facility. Knight Inc. does not have a commercial paper program.

2	Our $800 million credit facility was terminated on May 30, 2007.

3	On February 26, 2007 and March 5, 2007, we entered into definitive agreements to sell Terasen Inc., including Terasen Gas Inc., and Terasen Pipelines (Corridor) Inc., respectively. These transactions closed on May 17, 2007 and June 15, 2007, respectively (see Note 6).

Knight Inc. Form 10-Q

On May 30, 2007, we terminated our $800 million five-year credit facility dated August 5, 2005 and entered into a $5.755 billion credit agreement with a syndicate of financial institutions and Citibank, N.A., as administrative agent. The senior secured credit facilities consist of the following: (i) a $1.0 billion senior secured Tranche A term loan facility with a term of six years and six months, (ii) a $3.3 billion senior secured Tranche B term loan facility, with a term of seven years, (iii) a $455 million senior secured Tranche C term loan facility with a term of three years, and (iv) a $1.0 billion senior secured revolving credit facility with a term of six years. The revolving credit facility includes a sublimit of $350 million for the issuance of letters of credit and swingline loans.

Kinder Morgan Energy Partners’ $1.85 billion five-year unsecured bank credit facility matures August 18, 2010 and can be amended to allow for borrowings up to $2.1 billion. This five-year credit facility is with a syndicate of financial institutions and Wachovia Bank, National Association is the administrative agent. Borrowings under its credit facility can be used for partnership purposes and as a backup for their commercial paper program. There were no borrowings under the credit facility as of March 31, 2008 or as of December 31, 2007.

Significant Financing Transactions

In February 2008, approximately $4.6 billion of the proceeds from the completed sale of an 80% ownership interest in our NGPL business segment were used to pay off and retire our senior secured credit facility’s Tranche A and Tranche B term loans and to pay down amounts outstanding at that time under our $1.0 billion revolving credit facility as follows:

	Debt Paid Down and/or Retired
	(In millions)
Knight Inc.
Senior Secured Credit Term Loan Facilities:
Tranche A Term Loan, Due 2013		$	995.0
Tranche B Term Loan, Due 2014			3,183.5
Credit Facility:
$1.0 billion Secured Revolver, Due May 2013			375.0
Total Paid Off and/or Retired		$	4,553.5

In March 2008, using primarily proceeds from the completed sale of an 80% ownership interest in our NGPL business segment, along with cash on hand and borrowings under our $1.0 billion revolving credit facility, we repurchased approximately $1.67 billion par value of our outstanding debt securities as follows:

	Par Value of Debt Repurchased
	(In millions)
Knight Inc.
Debentures:
6.50% Series, Due 2013		$	18.9
6.67% Series, Due 2027			143.0
7.25% Series, Due 2028			461.0
7.45% Series, Due 2098			124.1
Senior Notes:
6.50% Series, Due 2012			160.7
Kinder Morgan Finance Company, ULC
6.40% Series, Due 2036			513.6
Deferrable Interest Debentures Issued to Subsidiary Trusts
8.56% Junior Subordinated Deferrable Interest Debentures Due 2027			87.3
7.63% Junior Subordinated Deferrable Interest Debentures Due 2028			160.6
Repurchase of Outstanding Debt Securities		$	1,669.2

On February 12, 2008, Kinder Morgan Energy Partners completed a public offering of senior notes. Kinder Morgan Energy Partners issued a total of $900 million in principal amount of senior notes, consisting of $600 million of 5.95% notes due February 15, 2018, and $300 million of 6.95% notes due January 15, 2038. Kinder Morgan Energy Partners received proceeds from the issuance of the notes, after underwriting discounts and commissions, of approximately $894.1 million, and used the proceeds to reduce the borrowings under its commercial paper program. The issuance of the $900 million senior notes due in 2038 constitute a further issuance of the $550 million aggregate principal amount of 6.95% notes Kinder Morgan Energy Partners issued on June 21, 2007 and form a single series with those notes.

Knight Inc. Form 10-Q

On January 30, 2007, Kinder Morgan Energy Partners completed a public offering of senior notes, issuing a total of $1.0 billion in principal amount of senior notes, consisting of $600 million of 6.00% notes due February 1, 2017 and $400 million of 6.50% notes due February 1, 2037. Kinder Morgan Energy Partners received proceeds from the issuance of the notes, after underwriting discounts and commissions, of approximately $992.8 million, and used the proceeds to reduce the borrowings under its commercial paper program.

Effective January 1, 2007, Kinder Morgan Energy Partners acquired the remaining approximate 50.2% interest in the Cochin pipeline system that it did not already own (see Note 4). As part of the purchase price, two of its subsidiaries issued a long-term note payable to the seller having a fair value of $42.3 million. Kinder Morgan Energy Partners valued the debt equal to the present value of amounts to be paid, determined using an annual interest rate of 5.40%. The principal amount of the note, together with interest, is due in five annual installments of $10.0 million beginning March 31, 2008. The final payment is due March 31, 2012. Kinder Morgan Energy Partners’ subsidiaries Kinder Morgan Operating L.P. “A” and Kinder Morgan Canada Company are the obligors on the note, and as of March 31, 2008, the outstanding balance under the note was $35.1 million.

Since we are accounting for the Going Private transaction in accordance with SFAS No. 141, Business Combinations, we have adjusted our basis in our long-term debt to reflect its fair value and the adjustments are being amortized until the debt securities mature. The unamortized fair value adjustment balances reflected within the caption “Long-term Debt” of the accompanying interim Consolidated Balance Sheet at March 31, 2008 were $49.0 million and $1.0 million representing a decrease to the carrying value of our long-term debt and an increase in the balance of our value of interest rate swaps, respectively.

Rockies Express Pipeline LLC

Pursuant to certain guaranty agreements, all three member owners of West2East Pipeline LLC (which owns all of the member interests in Rockies Express Pipeline LLC) have agreed to guarantee, severally in the same proportion as their percentage ownership of the member interests in West2East Pipeline LLC, borrowings under Rockies Express’ (i) $2.0 billion five-year, unsecured revolving credit facility due April 28, 2011; (ii) $2.0 billion commercial paper program; and (iii) $600 million in principal amount of floating rate senior notes due August 20, 2009. The three member owners and their respective ownership interests consist of the following: Kinder Morgan Energy Partners’ subsidiary Kinder Morgan W2E Pipeline LLC – 51%, a subsidiary of Sempra Energy – 25%, and a subsidiary of ConocoPhillips – 24%.

Borrowings under the Rockies Express commercial paper program are primarily used to finance the construction of the Rockies Express interstate natural gas pipeline and to pay related expenses. The credit facility, which can be amended to allow for borrowings up to $2.5 billion, supports borrowings under the commercial paper program, and borrowings under the commercial paper program reduce the borrowings allowed under the credit facility.

As of March 31, 2008, in addition to the $600 million in senior notes, Rockies Express Pipeline LLC had $1,522.5 million of commercial paper outstanding with a weighted-average interest rate of approximately 3.32%, and there were no borrowings under its five-year credit facility. Accordingly, as of March 31, 2008, Kinder Morgan Energy Partners’ contingent share of Rockies Express’ debt was $1,082.5 million (51% of total borrowings).

In addition, there is a $31.4 million letter of credit outstanding to support the construction of the Rockies Express Pipeline. Kinder Morgan Energy Partners’ contingent responsibility with regard to this letter of credit is $16.0 million (51% of the total letter of credit).

Midcontinent Express Pipeline LLC

Pursuant to certain guaranty agreements, each of the two member owners of Midcontinent Express Pipeline LLC have agreed to guarantee, severally in the same proportion as their percentage ownership of the member interests in Midcontinent Express Pipeline LLC, borrowings under Midcontinent Express Pipeline LLC’s $1.4 billion three-year, unsecured revolving credit facility, entered into on February 29, 2008 and due February 28, 2011. The facility is with a syndicate of financial institutions with The Royal Bank of Scotland plc as the administrative agent. Borrowings under the credit agreement will be used to finance the construction of the Midcontinent Express Pipeline system and to pay related expenses.

Midcontinent Express Pipeline LLC is an equity method investee of Kinder Morgan Energy Partners, and the two member owners and their respective ownership interests consist of the following: Kinder Morgan Energy Partners’ subsidiary Kinder Morgan Operating L.P. “A” – 50%, and Energy Transfer Partners, L.P. – 50%. As of March 31, 2008, Midcontinent Express Pipeline LLC had $210.0 million borrowed under its three-year credit facility. Accordingly, as of March 31, 2008, Kinder Morgan Energy Partners’ contingent share of Midcontinent Express Pipeline LLC’s debt was $105.0 million (50% of total borrowings).

Knight Inc. Form 10-Q

In addition, Midcontinent Express Pipeline LLC has a $197 million reimbursement agreement dated September 4, 2007, with JPMorgan Chase as the administrative agent. The reimbursement agreement can be used for the issuance of letters of credit to support the construction of the Midcontinent Express Pipeline and includes covenants and requires payments of fees that are common in such arrangements. Both Kinder Morgan Energy Partners and Energy Transfer Partners, L.P. have agreed to guarantee borrowings under the reimbursement agreement in the same proportion as the associated percentage ownership of each member’s interest. As of March 31, 2008, there were two letters of credit issued under this reimbursement agreement to support the construction of the Midcontinent Express Pipeline. The combined face amount for the letters of credit totaled $178.2 million; accordingly, as of March 31, 2008, Kinder Morgan Energy Partners’ contingent responsibility with regard to these outstanding letters of credit was $89.1 million (50% of total face amount).

Kinder Morgan Energy Partners’ Common Units

On February 14, 2008, Kinder Morgan Energy Partners paid a quarterly distribution of $0.92 per common unit for the quarterly period ended December 31, 2007, of which $143.4 million was paid to the public holders (included in minority interests) of Kinder Morgan Energy Partners’ common units. On May 15, 2008, Kinder Morgan Energy Partners paid a quarterly distribution of $0.96 per common unit for the quarterly period ended March 31, 2008, of which $156.2 million was paid to the public holders (included in minority interests) of Kinder Morgan Energy Partners’ common units.

In March 2008, Kinder Morgan Energy Partners completed a public offering of 5,750,000 of its common units at a price of $57.70 per unit, including common units sold pursuant to the underwriters’ over-allotment option, less commissions and underwriting expenses. Kinder Morgan Energy Partners received net proceeds of $324.2 million for the issuance of these common units, and used the proceeds to reduce the borrowings under its commercial paper program.

On February 12, 2008, Kinder Morgan Energy Partners completed an offering of 1,080,000 of its common units at a price of $55.65 per unit in a privately negotiated transaction. Kinder Morgan Energy Partners received net proceeds of $60.1 million for the issuance of these 1,080,000 common units, and used the proceeds to reduce the borrowings under its commercial paper program.

The combined effect of these two above transactions had the associated effects of increasing our (i) minority interests associated with Kinder Morgan Energy Partners by $368.9 million and (ii) associated accumulated deferred income taxes by $5.6 million and reducing our (i) goodwill by $25.8 million and (ii) paid-in capital by $16.0 million.

Kinder Morgan G.P., Inc. Preferred Shares

On April 16, 2008, Kinder Morgan G.P., Inc.’s board of directors declared a quarterly cash dividend on its Series A Fixed-to-Floating Rate Term Cumulative Preferred Stock of $20.825 per share payable on May 19, 2008 to shareholders of record as of April 30, 2008. On February 18, 2008, Kinder Morgan G.P., Inc. paid a quarterly cash dividend on its Series A Fixed-to-Floating Rate Term Cumulative Preferred Stock of $20.825. The dividend was declared on January 16, 2008, payable to shareholders of record as of January 31, 2008.

8. Business Segments

In accordance with the manner in which we manage our businesses, including the allocation of capital and evaluation of business segment performance, we report our operations in the following segments: (1) Natural Gas Pipeline Company of America LLC and certain affiliates, referred to as Natural Gas Pipeline Company of America or NGPL, a major interstate natural gas pipeline and storage system (effective February 15, 2008, we sold an 80% ownership interest in our NGPL business segment to Myria. As a result of the sale, beginning February 15, 2008, we account for our 20% ownership interest of the NGPL business segment as an equity method investment. Please see discussion of the sale further below); (2) Power, the ownership and operation of natural gas-fired electric generation facilities (Our principal remaining power assets were sold in January 2008. Please see discussion of the sale further below); (3) Express Pipeline System, the ownership of a one-third interest in a crude pipeline system accounted for under the equity method; (4) Products Pipelines – KMP, the ownership and operation of refined petroleum products pipelines that deliver gasoline, diesel fuel, jet fuel and natural gas liquids to various markets plus the ownership and/or operation of associated product terminals and petroleum pipeline transmix facilities; (5) Natural Gas Pipelines – KMP, the ownership and operation of major interstate and intrastate natural gas pipeline and storage systems; (6) CO2 – KMP, the production, transportation and marketing of carbon dioxide (“CO2”) to oil fields that use CO2 to increase production of oil plus ownership interests in and/or operation of oil fields in West Texas and the ownership and operation of a crude oil pipeline system in West Texas; (7) Terminals – KMP, the ownership and/or operation of liquids and bulk terminal facilities and rail transloading and materials handling facilities located throughout the United States and Canada; and (8) Trans Mountain – KMP, the ownership and operation of a pipeline system that transports crude oil and refined products from Edmonton, Alberta, Canada to marketing terminals and refineries in British Columbia, Canada and the State of Washington, U.S.A.

Knight Inc. Form 10-Q

On December 10, 2007, we entered into a definitive agreement to sell an 80% ownership interest in our NGPL business segment to Myria, at a price equivalent to a total enterprise value of approximately $5.9 billion, subject to certain adjustments. Pursuant to the purchase agreement, Myria acquired all 800 Class B shares and we retained all 200 Class A shares of NGPL PipeCo LLC, formerly MidCon Corp., which is the parent of NGPL. The closing of the sale occurred on February 15, 2008. We will continue to operate NGPL’s assets pursuant to a 15-year operating agreement. Myria is comprised of a syndicate of investors led by Babcock & Brown, an international investment and specialized fund and asset management group.

On April 30, 2007, Kinder Morgan, Inc. sold the Trans Mountain pipeline system to Kinder Morgan Energy Partners for approximately $550 million. The transaction was approved by the independent members of our board of directors and those of Kinder Morgan Management following the receipt, by each board, of separate fairness opinions from different investment banks. In prior periods, the Trans Mountain pipeline system was reported in the Kinder Morgan Canada business segment. Due to the inclusion of Kinder Morgan Energy Partners and its subsidiaries in our consolidated financial statements (resulting from the implementation of EITF 04-5), we accounted for this transaction as a transfer of net assets between entities under common control. Therefore, following Kinder Morgan Energy Partners’ acquisition of Trans Mountain from us, Kinder Morgan Energy Partners recognized the Trans Mountain assets and liabilities acquired at our carrying amounts (historical cost) at the date of transfer. As discussed in Note 6, based on an evaluation of the fair value of the Trans Mountain pipeline system, we recorded an estimated goodwill impairment charge of approximately $377.1 million in the first quarter of 2007. In April 2008, as a result of finalizing certain “true-up” provisions in Kinder Morgan Energy Partners’ acquisition agreement related to Trans Mountain pipeline expansion commitments, Kinder Morgan Energy Partners received a cash contribution of $23.4 million from us. Pursuant to the accounting provisions concerning transfers of net assets between entities under common control, and consistent with Kinder Morgan Energy Partners’ treatment of cash payments made to us for Trans Mountain net assets in 2007, Kinder Morgan Energy Partners accounted for this cash contribution as an adjustment to equity—primarily as an increase in “Partners’ Capital.”

In March 2007, we completed the sale of our U.S. retail natural gas distribution and related operations to GE Energy Financial Services, a subsidiary of General Electric Company, and Alinda Investments LLC. In prior periods, we referred to these operations as the Kinder Morgan Retail business segment.

On March 5, 2007, we entered into a definitive agreement to sell Terasen Pipelines (Corridor) Inc. to Inter Pipeline Fund, a Canada-based company. This transaction closed on June 15, 2007 (see Note 6). As a result of the sale of Corridor and the transfer of Trans Mountain to Kinder Morgan Energy Partners, the business segment referred to in prior filings as Kinder Morgan Canada is no longer reported. The results of Trans Mountain are now reported in the business segment referred to herein as Trans Mountain – KMP. The results of the Express Pipeline system, which also were reported in the Kinder Morgan Canada business segment in previous periods, are now reported in the segment referred to as “Express.”

In February 2007, we entered into a definitive agreement, which closed on May 17, 2007 (see Note 6), to sell Terasen Inc. to Fortis, Inc., a Canada-based company with investments in regulated distribution utilities. Execution of this sale agreement constituted a subsequent event of the type that, under accounting principles generally accepted in the United States of America, required us to consider the market value indicated by the definitive sales agreement in our 2006 goodwill impairment evaluation. Accordingly, based on the fair values of these reporting units derived principally from this definitive sales agreement, an estimated goodwill impairment charge of approximately $650.5 million was recorded in 2006.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, 80% of the assets and liabilities associated with the NGPL business segment included in our interim Consolidated Balance Sheet at December 31, 2007 in the captions “Current Assets: Assets Held for Sale,” “Assets Held for Sale, Non-current,” “Current Liabilities: Liabilities Held for Sale” and “Other Liabilities and Deferred Credits: Liabilities Held for Sale, Non-current” with the remaining 20% included in the caption “Investments.” The financial results of Terasen Gas, Corridor, Kinder Morgan Retail, the North System and the equity investment in the Heartland Pipeline Company have been reclassified to discontinued operations for all periods presented. See Note 6 for additional information regarding discontinued operations.

The accounting policies we apply in the generation of business segment earnings are generally the same as those applied to our consolidated operations and described in Note 1, except that (i) certain items below the “Operating Income” line (such as

Knight Inc. Form 10-Q

interest expense) are either not allocated to business segments or are not considered by management in its evaluation of business segment performance, (ii) equity in earnings of equity method investees are included in segment earnings (these equity method earnings are included in “Other Income and (Expenses)” in the accompanying interim Consolidated Statements of Operations), (iii) certain items included in operating income (such as general and administrative expenses and depreciation, depletion and amortization (“DD&A”)) are not considered by management in its evaluation of business segment performance and, thus, are not included in reported performance measures, (iv) gains and losses from incidental sales of assets are included in segment earnings and (v) our business segments that are also segments of Kinder Morgan Energy Partners include certain other income and expenses and income taxes in their segment earnings. With adjustment for these items, we currently evaluate business segment performance primarily based on segment earnings before DD&A (sometimes referred to in this report as EBDA) in relation to the level of capital employed. Beginning in 2007, the segment earnings measure was changed from segment earnings to segment earnings before DD&A for segments not also segments of Kinder Morgan Energy Partners. This change was made to conform our disclosure to the internal reporting we adopted as a result of the Going Private transaction.

This segment measure change has been reflected in the prior periods shown in this document in order to improve comparability. Because Kinder Morgan Energy Partners’ partnership agreement requires it to distribute 100% of its available cash to its partners on a quarterly basis (Kinder Morgan Energy Partners’ available cash consists primarily of all of its cash receipts, less cash disbursements and changes in reserves), we consider each period’s earnings before all non-cash depreciation, depletion and amortization expenses to be an important measure of business segment performance for our segments that are also segments of Kinder Morgan Energy Partners. We account for intersegment sales at market prices, while we account for asset transfers at either market value or, in some instances, book value.

Knight Inc. Form 10-Q

BUSINESS SEGMENT INFORMATION

	Successor Company			Predecessor Company
	Three Months Ended March 31, 2008			Three Months Ended March 31, 2007
	(In millions)			(In millions)
Segment Earnings before Depreciation, Depletion, Amortization and Amortization of Excess Cost of Equity Investments:
NGPL1	$	96.0		$	160.3
Power		2.1			5.7
Express		4.0			3.6
Products Pipelines – KMP2		140.3			133.7
Natural Gas Pipelines – KMP2		188.4			134.7
CO2 – KMP2		233.3			125.4
Terminals – KMP2		125.8			100.5
Trans Mountain – KMP2		30.2			(358.2	)
Total Segment Earnings Before DD&A		820.1			305.7
Depreciation, Depletion and Amortization		(218.1	)		(153.0	)
Amortization of Excess Cost of Equity Investments		(1.4	)		(1.4	)
Interest and Corporate Expenses, Net3		(416.7	)		(318.2	)
Add Back: Income Taxes Included in Segments Above2		9.0			9.0
Income (Loss) from Continuing Operations Before Income Taxes	$	192.9		$	(157.9	)

Revenues from External Customers:
NGPL1	$	132.1		$	263.0
Power		7.5			11.6
Products Pipelines – KMP		198.3			197.1
Natural Gas Pipelines – KMP		1,912.5			1,532.4
CO2 – KMP		319.9			191.6
Terminals – KMP		280.0			214.9
Trans Mountain – KMP		43.1			32.8
Other		1.6			1.0
Total Revenues	$	2,895.0		$	2,444.4

Intersegment Revenues:
NGPL1	$	0.9		$	0.6
Natural Gas Pipelines – KMP		-			3.0
Terminals – KMP		0.2			0.2
Other		(0.8	)		-
Total Intersegment Revenues	$	0.3		$	3.8

Depreciation, Depletion and Amortization:
NGPL1	$	9.3		$	27.0
Power		-			(4.5	)
Products Pipelines – KMP		27.9			20.3
Natural Gas Pipelines – KMP		25.5			16.0
CO2 – KMP		108.4			68.9
Terminals – KMP		39.3			20.5
Trans Mountain – KMP		7.6			4.7
Other		0.1			0.1
Total Consolidated Depreciation, Depletion and Amortization	$	218.1		$	153.0

Capital Expenditures – Continuing Operations:
NGPL1	$	10.2		$	49.0
Products Pipelines – KMP		57.3			36.3
Natural Gas Pipelines – KMP		187.7			26.9
CO2 – KMP		95.0			89.6
Terminals – KMP		146.0			92.6
Trans Mountain – KMP		142.1			50.3
Other		-			12.7
Total Capital Expenditures – Continuing Operations	$	638.3		$	357.4

Knight Inc. Form 10-Q

____________

1	Effective February 15, 2008, we sold an 80% ownership interest in our NGPL business segment to Myria. As a result of the sale, beginning February 15, 2008, we account for our 20% ownership interest of the NGPL business segment as an equity method investment.

2	Income taxes of Kinder Morgan Energy Partners of $9.0 million for each of the three-month periods ended March 31, 2008 and 2007, are included in Segment Earnings Before Depreciation, Depletion, Amortization and Amortization of Excess Cost of Equity Investments.

3	Includes (i) general and administrative expense, (ii) interest expense, (iii) minority interests and (iv) miscellaneous other income and expenses not allocated to business segments.

	March 31, 2008
	(In millions)
Assets:
NGPL1	$	720.4
Power		49.4
Express		416.0
Products Pipelines – KMP		7,002.1
Natural Gas Pipelines – KMP		9,202.0
CO2 – KMP		4,028.3
Terminals – KMP		4,811.5
Trans Mountain – KMP		1,542.5
Total segment assets		27,772.2
Other2		668.0
Total Consolidated Assets	$	28,440.2

____________

1	Effective February 15, 2008, we sold an 80% ownership interest in our NGPL business segment to Myria. As a result of the sale, beginning February 15, 2008, we account for our 20% ownership interest of the NGPL business segment as an equity method investment.

2	Includes assets of cash, restricted deposits, market value of derivative instruments (including interest rate swaps) and miscellaneous corporate assets (such as information technology and telecommunications equipment) not allocated to individual segments.

GEOGRAPHIC INFORMATION

Following is geographic information regarding the revenues and long-lived assets of our business segments.

	Successor Company
	Three Months Ended March 31, 2008
	United States		Canada		Mexico and Other2		Total
	(In millions)
Revenues from External Customers:
NGPL1	$	132.1	$	-	$	-	$	132.1
Power		7.5		-		-		7.5
Products Pipelines – KMP		191.4		6.9		-		198.3
Natural Gas Pipelines – KMP		1,909.0		-		3.5		1,912.5
CO2 – KMP		319.9		-		-		319.9
Terminals – KMP		268.1		10.1		1.8		280.0
Trans Mountain		3.0		40.1		-		43.1
Other		0.8		0.8		-		1.6
	$	2,831.8	$	57.9	$	5.3	$	2,895.0

Knight Inc. Form 10-Q

	Predecessor Company
	Three Months Ended March 31, 2007
	United States		Canada		Mexico and Other2		Total
	(In millions)
Revenues from External Customers:
NGPL	$	263.0	$	-	$	-	$	263.0
Power		11.6		-		-		11.6
Products Pipelines – KMP		190.7		6.4		-		197.1
Natural Gas Pipelines – KMP		1,529.0		-		3.4		1,532.4
CO2 – KMP		191.6		-		-		191.6
Terminals – KMP		213.5		-		1.4		214.9
Trans Mountain		2.5		30.3		-		32.8
Other		-		1.0		-		1.0
	$	2,401.9	$	37.7	$	4.8	$	2,444.4

	At March 31, 2008
	United States		Canada		Mexico and Other2		Total
	(In millions)
Long-lived Assets3:
NGPL1	$	720.4	$	-	$	-	$	720.4
Power		32.9		-		-		32.9