SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ending December 31, 2001
-----------------------------------------------------
Commission File Number 1-16463
---------------------------------------------------------
Full title of the plan and the address of the plan, if different from that of
the issuer named below:
PEABODY HOLDING COMPANY, INC. EMPLOYEE RETIREMENT ACCOUNT
--------------------------------------------------------------------------------
Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
PEABODY ENERGY CORPORATION
--------------------------------------------------------------------------------
701 MARKET STREET, ST. LOUIS, MISSOURI 63101-1826
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
TABLE OF CONTENTS
Report of Independent Auditors...........................................................................1
Financial Statements
Statements of Net Assets Available for Benefits -
December 31, 2001 and December 31, 2000.............................................................2
Statements of Changes in Net Assets Available for Benefits -
Years Ended December 31, 2001 and 2000..............................................................3
Notes to Financial Statements.......................................................................4
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)..........................................10
Signatures..............................................................................................12
Exhibit Index...........................................................................................13
Exhibit 23 - Consent of Independent Auditors............................................................14
Report of Independent Auditors
The Employee Retirement Account Committee
Peabody Holding Company, Inc.
We have audited the accompanying statements of net assets available for benefits
of Peabody Holding Company, Inc. Employee Retirement Account as of December 31,
2001 and 2000, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2001 and 2000, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2001 is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ ERNST & YOUNG LLP
-----------------------------------
Ernst & Young LLP
St. Louis, Missouri
May 17, 2002
1
Peabody Holding Company, Inc.
Employee Retirement Account
Statements of Net Assets Available for Benefits
(In Thousands)
DECEMBER 31
2001 2000
---------- ----------
ASSETS
Investments, at fair value:
Investments in mutual funds $ 134,783 $ 149,400
Investment in common/collective trust 78,113 --
Investment in Company stock 243 --
Participant notes receivable 8,359 8,758
Investments at contract value -- 72,387
---------- ----------
Total investments 221,498 230,545
Receivables:
Employer contributions 2,232 --
---------- ----------
Net assets available for benefits $ 223,730 $ 230,545
========== ==========
See accompanying notes.
2
Peabody Holding Company, Inc.
Employee Retirement Account
Statements of Changes in Net Assets Available for Benefits
(In Thousands)
YEAR ENDED
DECEMBER 31
2001 2000
------------ ------------
ADDITIONS
Interest and dividends $ 7,240 $ 15,104
Net realized and unrealized depreciation of investments (20,881) (20,862)
------------ ------------
Net investment loss (13,641) (5,758)
Contributions:
Employee 12,638 12,372
Employer 10,645 6,426
Rollover 582 565
------------ ------------
Total contributions 23,865 19,363
------------ ------------
Total additions 10,224 13,605
DEDUCTIONS
Withdrawals by participants (17,026) (18,166)
Other expenses (13) (25)
------------ ------------
Total deductions (17,039) (18,191)
------------ ------------
Net decrease in net assets available for benefits (6,815) (4,586)
Net assets available for benefits at beginning of year 230,545 235,131
------------ ------------
Net assets available for benefits at end of year $ 223,730 $ 230,545
============ ============
See accompanying notes.
3
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements
Years Ended December 31, 2001 and 2000
1. DESCRIPTION OF THE PLAN
The following description of the Peabody Holding Company, Inc. (the Company)
Employee Retirement Account (the Plan) provides only general information.
Participants should refer to the plan documents for a more complete description
of the Plan's provisions. The Plan was amended and restated effective April 1,
1999.
GENERAL
The Plan is a defined contribution plan, and participation in the Plan is
voluntary. All salaried employees of the Company and certain of its
participating subsidiary companies as well as the salaried employees of
participating affiliated companies (collectively referred to as the "Employer")
are eligible for participation on the date of their employment or at any time
afterward. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
The Plan allows participants to invest among several mutual funds and
common/collective trusts. Effective October 2001, the Plan allows participants
to invest in the Peabody Energy Stock Fund, as a result of Peabody Energy
Corporation's initial public offering of common stock in May 2001. All
investments in the Plan are participant-directed.
CONTRIBUTIONS
Each year, participants may contribute up to 16 percent of pretax or after-tax
annual compensation, as defined in the Plan. Those participants who are
employees of Powder River Coal Company may contribute up to 19 percent of pretax
or after-tax annual compensation. Prior to January 1, 2001, participants who
were employees of Powder River Coal Company could contribute up to 16 percent of
pretax or after-tax annual compensation. Participants may also contribute
amounts representing distributions from other qualified defined benefit or
defined contribution plans. Participants direct the investment of their
contributions into various investment options offered by the Plan.
The Company makes matching contributions of an amount equal to 100 percent on
the first 3 percent of base pay and 75 percent on the next 4 percent of base pay
that a participant contributes to the Plan. For participants who are employed
either by Patriot Coal Company, L.P. or Powder River Coal Company, the Company
makes matching contributions of an amount equal to 50 percent of the first 4
percent and 6 percent, respectively, of compensation that a participant
contributes to the Plan.
4
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
Prior to January 1, 2001, the Company made matching contributions of an amount
equal to 50 percent of the first 6 percent of compensation that a participant
contributed to the Plan, except for those participants who were employees of the
Patriot Coal Company, L.P., for whom the Company made matching contributions of
an amount equal to 50 percent of the first 4 percent of compensation that a
participant contributed to the Plan.
Employees direct the investment of Company contributions. All contributions are
subject to certain limitations.
Effective April 1, 1999, the Company's Board of Directors set desired minimum
and maximum performance targets that will require the Company to pay into the
account of each active employee of the Company and its participating
subsidiaries and affiliates an amount between 0 percent and 4 percent of the
employee's base salary as of the end of the fiscal year.
In July 2001, the Company changed its fiscal year-end from March 31 to December
31. This change was first effective with respect to the nine months ended
December 31, 2001.
During the 2001 plan year, a performance contribution of approximately $2.8
million was made, which represented 4 percent of eligible employees' salary for
the fiscal year ended March 31, 2001, and a receivable of approximately $2.2
million was recorded, which represented 3 percent of eligible employees' salary
for the nine months ended December 31, 2001. During the 2000 plan year, a
performance contribution of approximately $2.9 million was made, which
represented 4 percent of eligible employees' salary for the fiscal year ended
March 31, 2000.
FORFEITED ACCOUNTS
Employer contributions are reduced by forfeitures of non-vested amounts. The
forfeiture credits amounted to $26,689 and $83,467 for the years ended December
31, 2001 and 2000, respectively.
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50 percent of their vested account
balance. The loans are secured by the balance in the participant's account and
bear interest at rates
5
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
commensurate with the prime interest rate as published in the Wall Street
Journal on the first business day of the month in which the loan was made.
Principal and interest is paid ratably through payroll deductions.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contribution and
allocations of (a) the Company's contribution and (b) plan earnings. Allocations
are based on participant eligible compensation or account balances, as defined.
The benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
PAYMENT OF BENEFITS
On termination of service due to death, disability, or retirement, a participant
may elect to receive either a lump-sum amount equal to the value of the
participant's vested interest in his or her account, annual installments, or a
combination of the two. For termination of service for other reasons, a
participant may receive the value of the vested interest in his or her account
as a lump-sum distribution. Participants may also elect to receive a lump-sum
distribution from their after-tax account.
Participants who have attained the age of 59 1/2 have the right to receive part
or all of their vested account balance upon request. Withdrawals in cases of
hardship, as defined in the Plan, are also permitted.
VESTING
Participants are vested immediately in their contributions plus actual earnings
thereon. Vesting in the Company matching contribution portion of their accounts
is based on years of continuous service or when the participant attains the age
of 62, whichever occurs first. Employer matching contributions and earnings
thereon become vested based upon years of service (25 percent per year after two
years of service with 100 percent vesting after five years) with the Company.
Employer performance contributions, if any, are 100 percent vested immediately.
6
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PLAN TERMINATION
The Plan is voluntary on the part of the Employer. The Employer may terminate
the Plan in whole or in part subject to the provisions of ERISA. Upon
termination or complete discontinuance of all contributions to the Plan,
participants' accounts become fully vested. Currently, the Employer has no
intention to terminate the Plan.
ADMINISTRATIVE EXPENSES
All significant administrative expenses of the Plan, including recordkeeping and
trustee fees, are paid by the Employer.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Plan are prepared under the accrual method of
accounting.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent liabilities at the date of the
financial statements, and reported amounts of additions and deductions during
the reporting period. Actual results could differ from these estimates.
VALUATION OF INVESTMENTS AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Shares of mutual funds are
valued at quoted market prices, which represent the net asset value of shares
held by the Plan at year-end. Units in common/collective trust are valued at net
asset value at year-end. The stock fund is valued at year-end unit closing price
(comprised of the year-end market price plus any uninvested cash position).
Participant loans are valued at cost, which approximates market value.
7
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Prior to October 2001, plan participants could invest in a stable value fund,
which, among other investments, invested in a combination of guaranteed
investment contracts with insurance companies. Plan assets invested in these
contracts were guaranteed by the insurance companies and, as a result, were
presented in the financial statements at contract value, which approximated
market value. Contract value represented contributions made under the contract,
plus interest at the contract rate, less withdrawals by participants. There were
no reserves against contract values for credit risk of contract issues or
otherwise. The fair value of the investment contracts at December 31, 2001 and
2000, was $0 and $72.4 million, respectively. The crediting interest rate for
these investment contracts was reset annually by the issuer but could not be
less than zero and was 5.81 percent at December 31, 2000. The average yield
approximated these rates.
3. INVESTMENTS
The Plan's investments (including investments purchased or sold, as well as held
during the year) appreciated (depreciated) in fair value as determined by quoted
market prices as follows:
2001 2000
---------- ----------
(In Thousands)
Mutual funds $ (20,927) $ (20,862)
Company stock 46 --
---------- ----------
$ (20,881) $ (20,862)
========== ==========
Investments that represent 5 percent or more of fair value of the Plan's net
assets at December 31 are as follows:
2001 2000
---------- ----------
(In Thousands)
Mutual funds:
Vanguard 500 Index Fund $ 47,842 $ 53,990
Vanguard PRIMECAP Fund 20,163 23,752
Common/collective trust:
Vanguard Retirement Savings Trust 78,113 Less Than 5%
Contract value:
Stable Value Fund LESS THAN 5% 72,387
8
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
4. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
(IRS) dated September 29, 1995 stating that the Plan is qualified under Section
401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust
is exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan was amended
subsequent to the IRS determination letter. The Plan's administrator believes
the Plan is being operated in compliance with the applicable requirements of the
Code and, therefore, believes the Plan is qualified and the related trust is
tax-exempt. The Plan has applied for a new determination letter.
5. SUBSEQUENT EVENTS
Effective April 1, 2002, participants may contribute, subject to limitations of
applicable law, up to 50 percent of pretax or after-tax annual compensation, as
defined in the Plan.
Also effective April 1, 2002, in the calendar year that a participant is age 50
or older and each year thereafter, certain participants meeting additional
specific criteria will be permitted to make catch-up contributions to the Plan.
Participants will be able to contribute amounts over and above the maximum
otherwise permitted by the Plan, subject to certain limitations.
9
SUPPLEMENTAL SCHEDULE
PEABODY HOLDING COMPANY, INC.
EMPLOYEE RETIREMENT ACCOUNT
EMPLOYER ID #13-2871045
PLAN #002
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2001
DESCRIPTION OF
IDENTITY OF ISSUE INVESTMENT TYPE CURRENT VALUE
----------------- --------------- -------------
AIM Value* 65,488 shares of mutual fund $ 711,857
Ariel Growth Fund* 11,024 shares of mutual fund 415,838
Baron Asset Fund* 1,207 shares of mutual fund 53,645
Deutsche International Equity Fund* 79 shares of mutual fund 1,484
Fidelity Equity Income II Fund* 5,317 shares of mutual fund 111,806
Fidelity Blue Chip Growth Fund* 23,101 shares of mutual fund 991,947
Gabelli Growth Fund* 37,615 shares of mutual fund 1,078,798
Harbor Capital Appreciation* 30,903 shares of mutual fund 903,287
Janus Fund* 127,028 shares of mutual fund 3,124,895
Janus Worldwide Fund* 49,086 shares of mutual fund 2,151,933
Lazard Small Cap Portfolio* 7,529 shares of mutual fund 133,272
Managers Special Equity Fund* 2,845 shares of mutual fund 200,834
Oppenheimer Quest Value* 4,292 shares of mutual fund 80,005
Putnam Int'l Growth A* 21,322 shares of mutual fund 422,600
Sound Shore Fund* 480 shares of mutual fund 14,687
T. Rowe Price Mid-Cap Growth* 11,736 shares of mutual fund 462,391
T. Rowe Science & Technology Fund* 231,309 shares of mutual fund 4,838,990
T. Rowe Price Small-Cap Stock* 11,096 shares of mutual fund 281,181
Vanguard 500 Index Fund* 451,809 shares of mutual fund 47,842,094
Vanguard Explorer Fund* 179,061 shares of mutual fund 10,799,146
Vanguard Extend Mkt Index Fund* 28,189 shares of mutual fund 650,884
Vanguard GNMA Fund* 30,794 shares of mutual fund 319,645
Vanguard High-Yield Corp.* 27,803 shares of mutual fund 174,881
Vanguard Int'l Growth Fund* 295,214 shares of mutual fund 4,431,161
Vanguard LifeSt Conserv Growth* 596,705 shares of mutual fund 8,389,677
Vanguard LifeSt Growth Fund* 345,880 shares of mutual fund 6,028,683
Vanguard LifeSt Income Fund* 35,811 shares of mutual fund 460,529
Vanguard LifeSt Moderate Growth* 287,320 shares of mutual fund 4,577,005
Vanguard LT Bond Index* 24,895 shares of mutual fund 269,610
Vanguard LT Treasury Fund* 13,729 shares of mutual fund 147,722
Vanguard PRIMECAP Fund* 391,355 shares of mutual fund 20,162,614
10
Peabody Holding Company, Inc.
Employee Retirement Account
Employer ID #13-2871045
Plan #002
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) (continued)
DESCRIPTION OF
IDENTITY OF ISSUE INVESTMENT TYPE CURRENT VALUE
----------------- --------------- -------------
Vanguard REIT Index Fund* 37,837 shares of mutual fund 458,967
Vanguard Sm-Cap Index Fund* 13,672 shares of mutual fund 270,984
Vanguard Total Bond Mkt Index* 289,238 shares of mutual fund 2,932,878
Vanguard Total Stock Mkt Index* 10,391 shares of mutual fund 267,456
Vanguard U.S. Growth* 110,021 shares of mutual fund 2,073,898
Vanguard Windsor Fund* 447,608 shares of mutual fund 7,000,592
Vanguard Windsor II Fund* 60,382 shares of mutual fund 1,545,187
Vanguard Retirement Savings Trust* 78,112,642 shares of common/ 78,112,642
collective trust
Peabody Energy Stock Fund* 8,606 shares of common stock 242,601
Various participants Participant loans, interest rates from 8,359,230
4.65% to 10.5%, maturities through
11/25/2011
----------------
$ 221,497,536
================
*Parties-in-interest.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the plan
administrator of the Peabody Holding Company, Inc. Employee Retirement Account
has duly caused this annual report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Peabody Holding Company, Inc.
Employee Retirement Account
Date: June 28, 2002 By: /s/ SHARON D. FIEHLER
--------------------------------
Sharon D. Fiehler
Peabody Energy Corporation
Executive Vice President,
Human Resources & Administration
12
EXHIBIT INDEX
The exhibits below are numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23 Consent of Ernst & Young LLP, Independent Auditors
13