Document and Entity Information
Document and Entity Information (USD $) | |||
In Billions, except Share data | 3 Months Ended
Mar. 31, 2010 | Apr. 30, 2010
| Jun. 30, 2009
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | PEABODY ENERGY CORP | ||
Entity Central Index Key | 0001064728 | ||
Document Type | 10-Q | ||
Document Period End Date | 2010-03-31 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2,010 | ||
Document Fiscal Period Focus | Q1 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | 8.1 | ||
Entity Common Stock, Shares Outstanding | 268,793,357 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Revenues | ||
Sales | 1385.1 | $1,280 |
Other revenues | 130.5 | 173 |
Total revenues | 1515.6 | 1,453 |
Costs and expenses | ||
Operating costs and expenses | 1108.7 | 1080.7 |
Depreciation, depletion and amortization | 105.5 | 96.3 |
Asset retirement obligation expense | 9.5 | 9.4 |
Selling and administrative expenses | 55.4 | 46.1 |
Other operating (income) loss: | ||
Net gain on disposal or exchange of assets | -7.3 | -3.3 |
Loss from equity affiliates | 1.6 | 4.1 |
Operating profit | 242.2 | 219.7 |
Interest expense | 50 | 51.1 |
Interest income | (1) | -2.8 |
Income from continuing operations before income taxes | 193.2 | 171.4 |
Income tax provision | 56.1 | 30.2 |
Income from continuing operations, net of income taxes | 137.1 | 141.2 |
Income (loss) from discontinued operations, net of income taxes | -0.4 | 34 |
Net income | 136.7 | 175.2 |
Less: Net income attributable to noncontrolling interests | 3 | 5.2 |
Net income attributable to common stockholders | 133.7 | $170 |
Income From Continuing Operations | ||
Basic earnings per share | 0.5 | 0.51 |
Diluted earnings per share | 0.5 | 0.5 |
Net Income Attributable to Common Stockholders | ||
Basic earnings per share | 0.5 | 0.64 |
Diluted earnings per share | 0.5 | 0.63 |
Dividends declared per share | 0.07 | 0.06 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (USD $) | ||
In Millions | Mar. 31, 2010
| Dec. 31, 2009
|
Current assets | ||
Cash and cash equivalents | 1025.4 | 988.8 |
Accounts receivable, net of allowance for doubtful accounts of $20.5 at March 31, 2010 and $18.3 at December 31, 2009 | 305.6 | 303 |
Inventories | 343.2 | 325.1 |
Assets from coal trading activities, net | 278.7 | 276.8 |
Deferred income taxes | 29.4 | 40 |
Other current assets | 266.3 | 255.3 |
Total current assets | 2248.6 | 2,189 |
Property, plant, equipment and mine development | ||
Land and coal interests | 7,576 | 7557.3 |
Buildings and improvements | 910.1 | 908 |
Machinery and equipment | 1456.6 | 1391.2 |
Less: accumulated depreciation, depletion and amortization | -2696.9 | (2,595) |
Property, plant, equipment and mine development, net | 7245.8 | 7261.5 |
Investments and other assets | 560.9 | 504.8 |
Total assets | 10055.3 | 9955.3 |
Current liabilities | ||
Current maturities of long-term debt | 14.3 | 14.1 |
Liabilities from coal trading activities, net | 76.6 | 110.6 |
Accounts payable and accrued expenses | 1076.1 | 1187.7 |
Total current liabilities | 1,167 | 1312.4 |
Long-term debt, less current maturities | 2734.7 | 2738.2 |
Deferred income taxes | 379.7 | 299.1 |
Asset retirement obligations | 458.4 | 452.1 |
Accrued postretirement benefit costs | 912.6 | 914.1 |
Other noncurrent liabilities | 459.2 | 483.5 |
Total liabilities | 6111.6 | 6199.4 |
Stockholders' equity | ||
Preferred Stock | 0 | 0 |
Common Stock | 2.8 | 2.8 |
Additional paid-in capital | 2083.8 | 2067.7 |
Retained earnings | 2298.7 | 2183.8 |
Accumulated other comprehensive loss | (121) | -183.5 |
Treasury shares, at cost: 8,818,431 shares as of March 31, 2010 and 8,644,464 shares as of December 31, 2009 | -328.9 | -321.1 |
Peabody Energy Corporation's stockholders' equity | 3935.4 | 3749.7 |
Noncontrolling interests | 8.3 | 6.2 |
Total stockholders' equity | 3943.7 | 3755.9 |
Total liabilities and stockholders' equity | 10055.3 | 9955.3 |
Series A Junior Participating Preferred Stock | ||
Stockholders' equity | ||
Preferred Stock | 0 | 0 |
Perpetual Preferred Stock | ||
Stockholders' equity | ||
Preferred Stock | 0 | 0 |
Series Common Stock | ||
Stockholders' equity | ||
Common Stock | $0 | $0 |
1_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | ||
In Millions, except Share data | Mar. 31, 2010
| Dec. 31, 2009
|
Current assets | ||
Allowance for doubtful accounts receivable, current | 20.5 | 18.3 |
Stockholders' equity | ||
Preferred stock, par value | 0.01 | 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 800,000,000 | 800,000,000 |
Common stock, shares issued | 277,597,943 | 276,848,279 |
Common stock, shares outstanding | 268,779,512 | 268,203,815 |
Treasury stock, shares | 8,818,431 | 8,644,464 |
Series A Junior Participating Preferred Stock | ||
Stockholders' equity | ||
Preferred stock, shares authorized | 1,500,000 | 1,500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Perpetual Preferred Stock | ||
Stockholders' equity | ||
Preferred stock, shares authorized | 750,000 | 750,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series Common Stock | ||
Stockholders' equity | ||
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 0 | 0 |
Common stock, shares outstanding | 0 | 0 |
2_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Cash Flows From Operating Activities | ||
Net income | 136.7 | 175.2 |
(Income) loss from discontinued operations, net of income taxes | 0.4 | (34) |
Income from continuing operations, net of income taxes | 137.1 | 141.2 |
Adjustments to reconcile income from continuing operations, net of income taxes to net cash provided by operating activities: | ||
Depreciation, depletion and amortization | 105.5 | 96.3 |
Deferred income taxes | 49.8 | 10.2 |
Share-based compensation | 11.4 | 8.6 |
Amortization of debt discount and debt issuance costs | 2 | 1.9 |
Net gain on disposal or exchange of assets | -7.3 | -3.3 |
Loss from equity affiliates | 1.6 | 4.1 |
Changes in current assets and liabilities: | ||
Accounts receivable, including securitization | (2) | 92.7 |
Inventories | -18.1 | -49.7 |
Net assets from coal trading activities | -6.2 | 20.9 |
Other current assets | 3.7 | 11.9 |
Accounts payable and accrued expenses | -92.1 | -124.4 |
Asset retirement obligations | 6.7 | 8.5 |
Workers' compensation obligations | 2.5 | 0.5 |
Accrued postretirement benefit costs | 5.4 | 5.1 |
Contributions to pension plans | -16.5 | (1) |
Other, net | -12.9 | -3.3 |
Net cash provided by continuing operations | 170.6 | 220.2 |
Net cash used in discontinued operations | -6.6 | -28.7 |
Net cash provided by operating activities | 164 | 191.5 |
Cash Flows From Investing Activities | ||
Additions to property, plant, equipment and mine development | -88.4 | -35.7 |
Investment in Prairie State Energy Campus | -12.2 | -12.6 |
Federal coal lease expenditures | -59.8 | |
Proceeds from disposal of assets, net of notes receivable | 4.4 | 4.5 |
Additions to advance mining royalties | -0.8 | -2.4 |
Investments in equity affiliates and joint ventures | -15.7 | |
Net cash used in investing activities | -112.7 | (106) |
Cash Flows From Financing Activities | ||
Payments of long-term debt | -2.6 | (3) |
Dividends paid | -18.8 | (16) |
Proceeds from stock options exercised | 2 | |
Other, net | 4.7 | 10.5 |
Net cash used in financing activities | -14.7 | -8.5 |
Net change in cash and cash equivalents | 36.6 | 77 |
Cash and cash equivalents at beginning of period | 988.8 | 449.7 |
Cash and cash equivalents at end of period | 1025.4 | 526.7 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders Equity (Unaudited) (USD $) | |||||||
In Millions | Common Stock
| Additional Paid-in Capital
| Treasury Stock
| Retained Earnings
| Accumulated Other Comprehensive Loss
| Noncontrolling Interests
| Total
|
Beginning balance at Dec. 31, 2009 | 2.8 | 2067.7 | -321.1 | 2183.8 | -183.5 | 6.2 | 3755.9 |
Comprehensive income: | |||||||
Net income | 133.7 | 3 | 136.7 | ||||
Increase in fair value of cash flow hedges (net of $33.4 tax provision) | 55 | 55 | |||||
Postretirement plans and workers' compensation obligations (net of $6.3 tax provision) | 7.5 | 7.5 | |||||
Comprehensive income | 133.7 | 62.5 | 3 | 199.2 | |||
Dividends paid | -18.8 | -18.8 | |||||
Share-based compensation | 11.4 | 11.4 | |||||
Stock options exercised | 2 | 2 | |||||
Employee stock purchases | 2.7 | 2.7 | |||||
Shares relinquished | -7.8 | -7.8 | |||||
Distributions to noncontrolling interests | -0.9 | -0.9 | |||||
Ending balance at Mar. 31, 2010 | 2.8 | 2083.8 | -328.9 | 2298.7 | ($121) | 8.3 | 3943.7 |
3_Consolidated Statements of Ch
Consolidated Statements of Changes in Stockholders Equity (Unaudited) (Parenthetical) (USD $) | |
In Millions | 3 Months Ended
Mar. 31, 2010 |
Comprehensive income: | |
Cash flow hedges, taxes | 33.4 |
Postretirement plans and workers' compensation obligations, taxes | 6.3 |
Accumulated Other Comprehensive Loss | |
Comprehensive income: | |
Cash flow hedges, taxes | 33.4 |
Postretirement plans and workers' compensation obligations, taxes | 6.3 |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | (1)Basis of Presentation The condensed consolidated financial statements include the accounts of Peabody Energy Corporation (the Company) and its affiliates. All intercompany transactions, profits and balances have been eliminated in consolidation. The accompanying condensed consolidated financial statements as of March31, 2010 and for the three months ended March31, 2010 and 2009, and the notes thereto, are unaudited. However, in the opinion of management, these financial statements reflect all normal, recurring adjustments necessary for a fair presentation of the results of the periods presented. The balance sheet information as of December31, 2009 has been derived from the Companys audited consolidated balance sheet. The results of operations for the three months ended March31, 2010 are not necessarily indicative of the results to be expected for future quarters or for the year ending December31, 2010. The Company classifies items within discontinued operations in the unaudited condensed consolidated statements of operations when the operations and cash flows of a particular component (defined as operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity) of the Company have been (or will be) eliminated from the ongoing operations of the Company as a result of a disposal transaction, and the Company will no longer have any significant continuing involvement in the operations of that component. See Note 3 for additional details related to discontinued operations. Certain amounts in prior periods have been reclassified to conform with the current year presentations with no effect on previously reported net income or stockholders equity. |
Newly Adopted Accounting Standa
Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented | |
3 Months Ended
Mar. 31, 2010 | |
Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented [Abstract] | |
Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented | (2)Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented In January2010, the Financial Accounting Standards Board (FASB)issued accounting guidance that requires new fair value disclosures, including significant transfers in and out of Level 1 and Level 2 fair-value measurements and a description of the reasons for the transfers. In addition, the guidance requires new disclosures regarding activity in Level 3 fair value measurements, including a gross basis reconciliation. The new disclosure requirements became effective for interim and annual periods beginning January1, 2010, except for the disclosure of activity within Level 3 fair value measurements, which is effective for fiscal years beginning after December15, 2010 (January1, 2011 for the Company). While the adoption of the guidance had an impact on the Companys disclosures, it did not affect the Companys results of operations, financial condition or cash flows. Further, the adoption of the gross presentation of Level 3 activity will also impact the Companys disclosures, but will not affect its results of operations, financial condition or cash flows. In June2009, the FASB issued accounting guidance on consolidations which clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entitys purpose and design and a companys ability to direct the activities of the entity that most significantly impact the entitys economic performance. The guidance also requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity, and additional disclosures about a companys involvement in variable interest entities and any associated changes in risk exposure. The guidance became effective January1, 2010, at which time there was no impact to the Companys results of operations, financial condition or cash flows. The Company will continue monitoring and assessing its business ventures in accordance with the guidance. In June2009, the FASB issued accounting guidance that seeks to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a transferors continuing involvement, if any, in transferred financial assets. The guidance, which became January1, 2010, had an impact on the Companys disclosures, but did not affect the Companys results of operations, financial condition or cash flows. In May2009, the FASB issued guidance which established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The guidance was subsequently amended in February2010. The new guidance no longer requires Securities and Exchange Commission (SEC)filers to disclose the date through which subsequent events have been evaluated. The adoption of the guidance, which was effective upon issuance, did not have a material impact on the Companys results of operations, finan |
Discontinued Operations
Discontinued Operations | |
3 Months Ended
Mar. 31, 2010 | |
Discontinued Operations [Abstract] | |
Discontinued Operations | (3)Discontinued Operations Revenues resulting from discontinued operations (including assets held for sale) were $27.6 million and $80.6million for the three months ended March31, 2010 and 2009, respectively. Income (loss)before income taxes reflects a loss of $0.7million for the three months ended March31, 2010 and income of $54.1million for the three months ended March31, 2009. The income for the three months ended March31, 2009 relates primarily to a coal excise tax refund. Total assets related to discontinued operations were $32.0million and $40.6million as of March31, 2010 and December31, 2009, respectively. Total liabilities associated with discontinued operations were $33.8million and $47.1million as of March31, 2010 and December31, 2009, respectively. See Note 2 to the Consolidated Financial Statements of the Companys Annual Report on Form 10-K for the year ended December31, 2009 for additional information regarding the Companys discontinued operations. |
Assets and Liabilities from Coa
Assets and Liabilities from Coal Trading Activities | |
3 Months Ended
Mar. 31, 2010 | |
Assets and Liabilities from Coal Trading Activities [Abstract] | |
Assets and Liabilities from Coal Trading Activities | (4)Assets and Liabilities from Coal Trading Activities The fair value of assets and liabilities from coal trading activities is set forth below: March 31, 2010 December 31, 2009 (Dollars in millions) Gross Basis Net Basis Gross Basis Net Basis Assets from coal trading activities $ 928.3 $ 278.7 $ 949.8 $ 276.8 Liabilities from coal trading activities (711.5 ) (76.6 ) (779.3 ) (110.6 ) Subtotal 216.8 202.1 170.5 166.2 Net margin held (1) (14.7 ) (4.3 ) Net fair value of coal trading positions $ 202.1 $ 202.1 $ 166.2 $ 166.2 (1) Represents margin held from counterparties of $29.3million and margin posted with counterparties of $14.6million at March31, 2010 and margin held from counterparties of $22.4million and margin posted with counterparties of $18.1million at December31, 2009. As of March31, 2010, forward contracts made up 41% and 62% of the Companys trading assets and liabilities, respectively; financial swaps represent most of the remaining balances. The net fair value of coal trading positions designated as cash flow hedges of anticipated future sales was an asset of $93.4million as of March31, 2010 and an asset of $93.0million as of December31, 2009. The net fair value of trading positions, including those designated as hedges of future cash flows, represents the net fair value of the trading portfolio. As of March31, 2010, the estimated future realization of the value of the Companys trading portfolio was as follows: Year of Expiration Portfolio Total 2010 34 % 2011 59 % 2012 7 % 100 % At March31, 2010, 56% of the Companys credit exposure related to coal trading activities with investment grade counterparties and 44% with non-investment grade counterparties. |
Inventories
Inventories | |
3 Months Ended
Mar. 31, 2010 | |
Inventories [Abstract] | |
Inventories | (5)Inventories Inventories consisted of the following: March 31, 2010 December 31, 2009 (Dollars in millions) Materials and supplies $ 101.8 $ 106.5 Raw coal 69.3 80.5 Saleable coal 172.1 138.1 Total $ 343.2 $ 325.1 |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes [Abstract] | |
Income Taxes | (6)Income Taxes The income tax rate differed from the United States (U.S.) federal statutory rate as follows: Three Months Ended March 31, 2010 2009 (Dollars in millions) Federal statutory rate $ 67.6 $ 60.0 Excess depletion (9.7 ) (16.7 ) Foreign earnings rate differential (14.0 ) (15.5 ) Remeasurement of foreign income tax accounts 5.4 (0.9 ) State income taxes, net of U.S. federal tax benefit 2.4 (1.2 ) Tax credits (3.6 ) (4.3 ) Changes in valuation allowance 4.4 0.8 Changes in tax reserves 1.8 6.6 Other, net 1.8 1.4 Total provision $ 56.1 $ 30.2 The change in the deferred tax balances during the three months ended March31, 2010 was driven by utilization of net operating loss carryforwards and changes in the value of the Companys cash flow hedges. The Company and the Internal Revenue Service (IRS)recently completed an alternative dispute resolution program (Fast Track Settlement) for two notices of proposed adjustments to decrease the Companys net operating losses. A settlement agreement for the adjustment related to the liquidation of an insolvent subsidiary was reached, but no agreement was reached for the adjustment of interest income accrued by a foreign subsidiary. The Company will now begin the formal IRS appeals process to resolve the remaining issue. The Company expects to reduce its net unrecognized tax benefits by approximately $21million within 12months of this reporting date, subject to the applicable IRS approval process. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | |
3 Months Ended
Mar. 31, 2010 | |
Accumulated Other Comprehensive Income (Loss) [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | (7)Accumulated Other Comprehensive Income (Loss) The following table sets forth the after-tax components of comprehensive income (loss): Net Actuarial Loss Associated with Prior Service Postretirement Cost Total Foreign Plans and Associated Accumulated Currency Workers with Other Translation Compensation Postretirement Cash Flow Comprehensive Adjustment Obligations Plans Hedges Loss (Dollars in millions) December31, 2009 $ 3.1 $ (343.5 ) $ (10.4 ) $ 167.3 $ (183.5 ) Net increase in value of cash flow hedges 70.4 70.4 Reclassification from other comprehensive income to earnings 8.0 0.5 (15.4 ) (6.9 ) Current period change (1.0 ) (1.0 ) March31, 2010 $ 3.1 $ (336.5 ) $ (9.9 ) $ 222.3 $ (121.0 ) Comprehensive income (loss)differs from net income by the amount of unrealized gain or loss resulting from valuation changes of the Companys cash flow hedges (which include fuel and explosives hedges, currency forwards, traded coal index contracts and interest rate swaps) and the change in actuarial loss and prior service cost during the periods. The values of the Companys cash flow hedging instruments are affected by changes in interest rates, crude oil, diesel fuel, natural gas and coal prices and the U.S. dollar/Australian dollar exchange rate. The change in the value of the cash flow hedges during 2010 was primarily due to the strengthening of the Australian dollar against the U.S. dollar and higher commodity prices. |
Earnings per Share
Earnings per Share (EPS) | |
3 Months Ended
Mar. 31, 2010 | |
Earnings per Share (EPS) [Abstract] | |
Earnings per Share (EPS) | (8)Earnings per Share (EPS) The Company uses the two-class method to compute basic and diluted EPS for all periods presented. The following illustrates the earnings allocation method utilized in the calculation of basic and diluted EPS. Three Months Ended March 31, 2010 2009 (In millions, except per share amounts) EPS numerator: Income from continuing operations, net of income taxes $ 137.1 $ 141.2 Less: Net income (loss)attributable to noncontrolling interests 3.0 5.2 Income from continuing operations attributable to common stockholders before allocation of earnings to participating securities 134.1 136.0 Less: Earnings allocated to participating securities (0.9 ) (1.2 ) Income from continuing operations attributable to common stockholders (1) 133.2 134.8 Income (loss)from discontinued operations, net of income taxes (0.4 ) 34.0 Net income attributable to common stockholders (1) $ 132.8 $ 168.8 Weighted average shares outstanding basic 266.5 265.3 Dilutive impact of share-based compensation 1.7 2.0 Weighted average shares outstanding diluted (2) 268.2 267.3 Basic EPS attributable to common stockholders: Income from continuing operations $ 0.50 $ 0.51 Income (loss)from discontinued operations 0.13 Net income $ 0.50 $ 0.64 Diluted EPS attributable to common stockholders: Income from continuing operations $ 0.50 $ 0.50 Income (loss)from discontinued operations 0.13 Net income $ 0.50 $ 0.63 (1) The adjustment for participating securities to arrive at the numerator used to calculate diluted EPS was less than $0.1million for the periods presented. (2) Weighted average shares outstanding excludes anti-dilutive shares that were less than 0.1million for the three months ended March31, 2010 and 0.2million for the three months ended March31, 2009. |
Pension and Postretirement Bene
Pension and Postretirement Benefit Costs | |
3 Months Ended
Mar. 31, 2010 | |
Pension and Postretirement Benefit Costs [Abstract] | |
Pension and Postretirement Benefit Costs | (9)Pension and Postretirement Benefit Costs Net periodic pension costs included the following components: Three Months Ended March 31, 2010 2009 (Dollars in millions) Service cost for benefits earned $ 0.4 $ 0.4 Interest cost on projected benefit obligation 12.6 12.8 Expected return on plan assets (14.2 ) (15.2 ) Amortization of prior service cost and actuarial loss 5.8 0.8 Net periodic pension (benefit)costs $ 4.6 $ (1.2 ) Net periodic postretirement benefit costs included the following components: Three Months Ended March 31, 2010 2009 (Dollars in millions) Service cost for benefits earned $ 3.1 $ 2.7 Interest cost on accumulated postretirement benefit obligation 14.5 14.0 Amortization of prior service cost and actuarial loss 6.9 4.3 Net periodic postretirement benefit costs $ 24.5 $ 21.0 During the three months ended March31, 2010, the Company made discretionary contributions of approximately $16million to its defined benefit pension plans. The Company expects to make additional discretionary contributions to such plans of approximately $12million during the remainder of 2010, for a total of approximately $28million. In March2010, President Obama signed into law comprehensive health care reform legislation under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (the Acts). Based on the Companys analyses to date, it does not currently believe the Acts will result in a remeasurement of the Companys postretirement health care liabilities, but will continue to assess the accounting implications of the Acts as related regulations and interpretations of the Acts become available. The extent of the impact cannot be actuarially determined until related regulations are promulgated and additional interpretations of the Acts become available. Provisions within the Acts for which financial impacts to the Companys postretirement health care liabilities are possible, but not currently determinable, include application of the excise tax on high-cost employer coverage. The Company does not expect the other provisions of the Acts to materially impact its postretirement health care liabilities or results of operations. The Acts also impact active employees through various changes and/or expansions of healthcare benefits and coverage. While the Company will continue to monitor and assess the effect of the Acts on its active employee population, the Company cannot reasonably predict at this time what the amount of any additional cost may be. |
Segment Information
Segment Information | |
3 Months Ended
Mar. 31, 2010 | |
Segment Information [Abstract] | |
Segment Information | (10)Segment Information The Company reports its operations primarily through the following reportable operating segments: Western U.S. Mining, Midwestern U.S. Mining, Australian Mining, Trading and Brokerage and Corporate and Other. The Companys chief operating decision maker uses Adjusted EBITDA as the primary measure of segment profit and loss. The Company defines Adjusted EBITDA as income from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expense and depreciation, depletion and amortization. Operating segment results for the three months ended March31, 2010 and 2009 were as follows: Three Months Ended March 31, 2010 2009 (Dollars in millions) Revenues: Western U.S. Mining $ 662.1 $ 653.8 Midwestern U.S. Mining 309.4 310.7 Australian Mining 446.5 360.3 Trading and Brokerage 90.1 123.5 Corporate and Other 7.5 4.7 Total $ 1,515.6 $ 1,453.0 Adjusted EBITDA: Western U.S. Mining $ 207.9 $ 183.2 Midwestern U.S. Mining 74.1 67.1 Australian Mining 123.3 83.2 Trading and Brokerage 32.4 65.5 Corporate and Other (80.5 ) (73.6 ) Total $ 357.2 $ 325.4 A reconciliation of adjusted EBITDA to consolidated income from continuing operations follows: Three Months Ended March 31, 2010 2009 (Dollars in millions) Total Adjusted EBITDA $ 357.2 $ 325.4 Depreciation, depletion and amortization 105.5 96.3 Asset retirement obligation expense 9.5 9.4 Interest expense 50.0 51.1 Interest income (1.0 ) (2.8 ) Income tax provision 56.1 30.2 Income from continuing operations, net of income taxes $ 137.1 $ 141.2 |
Risk Management and Fair Value
Risk Management and Fair Value Measurements | |
3 Months Ended
Mar. 31, 2010 | |
Risk Management and Fair Value Measurements [Abstract] | |
Risk Management and Fair Value Measurements | (11)Risk Management and Fair Value Measurements Risk Management Non Coal Trading The Company is exposed to various types of risk in the normal course of business, including fluctuations in commodity prices, interest rates and foreign currency exchange rates. These risks are actively monitored in an effort to ensure compliance with the risk management policies of the Company. In most cases, commodity price risk (excluding coal trading activities) related to the sale of coal is mitigated through the use of long-term, fixed-price contracts rather than financial instruments. Interest Rate Swaps. The Company is exposed to interest rate risk on its fixed rate and variable rate long-term debt. From time to time, the Company manages the interest rate risk associated with the fair value of its fixed rate borrowings using fixed-to-floating interest rate swaps to effectively convert a portion of the underlying cash flows on the debt into variable rate cash flows. The Company designates these swaps as fair value hedges, with the objective of hedging against changes in the fair value of the fixed rate debt that result from market interest rate changes. The interest rate risk associated with the Companys variable rate borrowings is managed using floating-to-fixed interest rate swaps. The Company designates these swaps as cash flow hedges, with the objective of reducing the variability of cash flows associated with market interest rate changes. As of March31, 2010, the Company had only one cash flow hedge in place. Foreign Currency Hedges. The Company is exposed to foreign currency exchange rate risk on Australian dollar expenditures made in its Australian Mining segment. This risk is managed by entering into forward contracts and options that the Company designates as cash flow hedges, with the objective of reducing the variability of cash flows associated with forecasted Australian dollar expenditures. As of March31, 2010, the Company had only forward contracts in place. Diesel Fuel and Explosives Hedges. The Company is exposed to commodity price risk associated with diesel fuel in the U.S. and Australia and explosives in the U.S. Explosives costs and a portion of the diesel fuel costs in Australia are included in the fees paid to the Companys contract miners. This risk is managed through the use of fixed price contracts, cost plus contracts and derivatives, primarily swaps. The Company has generally designated the swap contracts as cash flow hedges, with the objective of reducing the variability of cash flows associated with the forecasted purchase of diesel fuel and explosives. Notional Amounts and Fair Value. The following summarizes the Companys interest rate, foreign currency and commodity positions at March31, 2010: Notional Amount by Year of Maturity 2015 and Total 2010 2011 2012 2013 2014 thereafter Interest Rate Swaps Floating-to-fixed (dollars in millions) $ 120.0 $ $ 120.0 $ $ $ $ |
Commitments and Contingencies
Commitments and Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | (12)Commitments and Contingencies Commitments As of March31, 2010, purchase commitments for capital expenditures were $68.2million. The Company controls a 17.7% interest in the Newcastle Coal Infrastructure Group (NCIG), which is currently completing construction of a coal transloading facility in Newcastle, Australia. The facility, which is expected to be completed in 2010, is backed by take or pay agreements. Financing for the next stage of construction is currently being sought by NCIG. In the event there is a financing shortfall, the Company has committed to fund a pro-rata share of the financing along with the other NCIG shareholders. The Companys share could be as much as $85million Australian dollars (approximately $78million U.S. dollars). From time to time, the Company or its subsidiaries are involved in legal proceedings arising in the ordinary course of business or related to indemnities or historical operations. The Company believes it has recorded adequate reserves for these liabilities and that there is no individual case pending that is likely to have a material adverse effect on the Companys financial condition, results of operations or cash flows. The Company discusses its significant legal proceedings below. Litigation Relating to Continuing Operations Navajo Nation Litigation. On June18, 1999, the Navajo Nation served three of the Companys subsidiaries, including Peabody Western Coal Company (Peabody Western), with a complaint that had been filed in the U.S. District Court for the District of Columbia. The Navajo Nation alleged 16 claims, including Civil Racketeer Influenced and Corrupt Organizations Act (RICO)violations and fraud. On April12, 2010, the Navajo Nation filed an amended complaint to substantially narrow the scope of the Navajo Nations claims by removing the RICO allegations but leaving the other 12 common law tort and contractual claims. The complaint alleges that the defendants jointly participated in unlawful activity to obtain favorable coal lease amendments. The plaintiff is seeking various remedies including actual damages of at least $600million, punitive damages of at least $1billion, a determination that Peabody Westerns two coal leases have terminated due to Peabody Westerns breach of these leases and a reformation of these leases to adjust the royalty rate to 20%. The court has allowed the Hopi Tribe to intervene in this lawsuit and the Hopi Tribe is also seeking unspecified actual damages, punitive damages and reformation of its coal lease. One of the Companys subsidiaries named as a defendant is now a subsidiary of Patriot Coal Corporation (Patriot). However, the Company is responsible for this litigation under the Separation Agreement entered into with Patriot in connection with the spin-off. The U.S. Supreme Court has ruled against the Navajo Nation in a related case against the U.S. government, and remanded that case to the lower court to dismiss the complaint. The U.S. Supreme Court said that none of the sources relied on by the Navajo Nation provided a basis for its breach-of-trust lawsuit against the U.S. government, which undermines some of the claims the Navajo Na |
Guarantees and Financial Instru
Guarantees and Financial Instruments With Off-Balance-Sheet Risk | |
3 Months Ended
Mar. 31, 2010 | |
Guarantees and Financial Instruments With Off-Balance-Sheet Risk [Abstract] | |
Guarantees and Financial Instruments With Off-Balance-Sheet Risk | (13)Guarantees and Financial Instruments with Off-Balance-Sheet Risk In the normal course of business, the Company is a party to guarantees and financial instruments with off-balance-sheet risk, such as bank letters of credit, performance or surety bonds and other guarantees and indemnities, which are not reflected in the accompanying condensed consolidated balance sheets. Such financial instruments are valued based on the amount of exposure under the instrument and the likelihood of required performance. In the Companys past experience, virtually no claims have been made against these financial instruments. Management does not expect any material losses to result from these guarantees or off-balance-sheet instruments. Letters of Credit and Bonding The Company has letters of credit, surety bonds and corporate guarantees (such as self bonds) in support of the Companys reclamation, coal lease obligations, and workers compensation as follows as of March31, 2010: Workers Reclamation Lease Compensation Obligations Obligations Obligations Other (1) Total (Dollars in millions) Self bonding $ 823.4 $ $ $ $ 823.4 Surety bonds 748.7 116.4 8.1 58.2 931.4 Letters of credit 34.9 47.8 211.5 294.2 $ 1,607.0 $ 116.4 $ 55.9 $ 269.7 $ 2,049.0 (1) Other includes the six letter of credit obligations described below and an additional $61.0million in letters of credit and surety bonds related to collateral for surety companies, road maintenance, performance guarantees and other operations. The Company owns a 37.5% interest in Dominion Terminal Associates, a partnership that operates a coal export terminal in Newport News, Virginia under a 30-year lease that permits the partnership to purchase the terminal at the end of the lease term for a nominal amount. The partners have severally (but not jointly) agreed to make payments under various agreements which in the aggregate provide the partnership with sufficient funds to pay rents and to cover the principal and interest payments on the floating-rate industrial revenue bonds issued by the Peninsula Ports Authority, and which are supported by letters of credit from a commercial bank. As of March31, 2010, the Companys maximum reimbursement obligation to the commercial bank was in turn supported by four letters of credit totaling $42.7million. The Company is party to an agreement with the Pension Benefit Guaranty Corporation (PBGC) and TXU Europe Limited, an affiliate of the Companys former parent corporation, under which the Company is required to make special contributions to two of the Companys defined benefit pension plans and to maintain a $37.0million letter of credit in favor of the PBGC. If the Company or the PBGC gives notice of an intent to terminate one or more of the covered pension plans in which liabilities are not fully funded, or if the Company fails t |
Supplemental Guarantor Non-Guar
Supplemental Guarantor Non-Guarantor Financial Information | |
3 Months Ended
Mar. 31, 2010 | |
Supplemental Guarantor Non-Guarantor Financial Information [Abstract] | |
Supplemental Guarantor/Non-Guarantor Financial Information | (14)Supplemental Guarantor/Non-Guarantor Financial Information In accordance with the indentures governing the 6.875% Senior Notes due March2013, the 5.875% Senior Notes due March2016, the 7.375% Senior Notes due November2016 and the 7.875% Senior Notes due November2026, certain wholly-owned U.S. subsidiaries of the Company have fully and unconditionally guaranteed these Senior Notes, on a joint and several basis. Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented because management believes that such information is not material to the Senior Note holders. The following historical financial statement information is provided for the Guarantor/Non-Guarantor Subsidiaries. Unaudited Supplemental Condensed Consolidated Statements of Operations Three Months Ended March 31, 2010 Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated (Dollars in millions) Total revenues $ $ 985.9 $ 597.9 $ (68.2 ) $ 1,515.6 Costs and expenses Operating costs and expenses (28.3 ) 711.2 494.0 (68.2 ) 1,108.7 Depreciation, depletion and amortization 72.4 33.1 105.5 Asset retirement obligation expense 7.0 2.5 9.5 Selling and administrative expenses 9.1 44.6 1.7 55.4 Other operating (income)loss: Net gain on disposal or exchange of assets (7.3 ) (7.3 ) (Income) loss from equity affiliates (150.6 ) 1.8 1.2 149.2 1.6 Interest expense 49.5 12.8 3.7 (16.0 ) 50.0 Interest income (3.8 ) (5.4 ) (7.8 ) 16.0 (1.0 ) Income from continuing operations before income taxes 124.1 148.8 69.5 (149.2 ) 193.2 Income tax provision (benefit) (9.6 ) 48.9 16.8 56.1 Income from continuing operations, net of income taxes 133.7 99.9 52.7 (149.2 ) 137.1 Loss from discontinued operations, net of income taxes (0.4 ) (0.4 ) Net income 133.7 99.5 52.7 (149.2 ) 136.7 Less: Net income attributable to noncontrolling interests 3.0 3.0 Net income attributable to common stockholders $ 133.7 $ 99.5 $ 49.7 $ (149.2 ) $ 133.7 Unaudited Supplemental Condensed Consolidated Statements of Operations Three Months Ended March 31, 2009 Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated (Dollars in millions) Total revenues $ $ 1,187.3 $ 398.7 $ (133.0 ) $ 1,453.0 Costs and expenses |
Subsequent Event
Subsequent Event | |
3 Months Ended
Mar. 31, 2010 | |
Subsequent Event [Abstract] | |
Subsequent Event | (15)Subsequent Event On April15, 2010, the Company submitted a definitive proposal to acquire a controlling interest in Macarthur Coal Limited (Macarthur). The proposal has the approval of the Companys Board of Directors and would be implemented by way of a court-ordered scheme of arrangement on customary terms, including receipt of the Australian Foreign Investment Review Board and other regulatory approvals. The proposal was also subject to a limited, confirmatory due diligence period of up to five days, which has been completed. The Company is currently in discussions with Macarthur regarding the proposal. |