Document is copied.
Filed Pursuant to Rule 424(b)(3)
File Nos. 333-59073
333-59073-01 to
333-59073-51
PEABODY ENERGY CORPORATION
SUPPLEMENT NO. 5 TO MARKET-MAKING PROSPECTUS DATED
AUGUST 11, 2000
THE DATE OF THIS SUPPLEMENT IS APRIL 27, 2001
ON FEBRUARY 12, 2001, P&L COAL HOLDINGS CORPORATION FILED THE
ATTACHED REPORT ON FORM 10-Q FOR THE QUARTER ENDED
DECEMBER 31, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2000
------------------------------------------------------
or
[ ] 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 333-59073
---------------------------------------------------------
PEABODY ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4004153
- ------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
701 Market Street, St. Louis, 63101-1826
Missouri
- --------------------------------------------------------------------------------
(Address of principal executive (Zip Code)
offices)
(314) 342-3400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(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.
[X] Yes [_] No
PART I - FINANCIAL INFORMATION
This Form 10-Q/A No. 1 is hereby filed with respect to the Quarterly Report
on Form 10-Q for the quarterly period ended December 31, 2000 of Peabody Energy
Corporation filed with the Securities and Exchange Commission on February 12,
2001, (the Form 10-Q). Part I, Item 1, "Financial Statements" and Item 2,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Form 10-Q are hereby amended and restated in their entirety
due to the change in compensation expense related to the granting of Class B
shares during the quarter and nine months ended December 31, 2000. On April 10,
2001, P&L Coal Holdings Corporation changed its name to Peabody Energy
Corporation.
Item 1. Financial Statements.
PEABODY ENERGY CORPORATION
UNAUDITED STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS
(In thousands)
Quarter Ended Nine Months Ended
December 31, December 31,
------------------ ----------------------
2000 2000
1999 Restated 1999 Restated
-------- -------- ---------- ----------
REVENUES
Sales............................ $677,582 $605,520 $1,979,583 $1,918,337
Other revenues................... 31,864 28,561 72,606 66,356
-------- -------- ---------- ----------
Total revenues................. 709,446 634,081 2,052,189 1,984,693
COSTS AND EXPENSES
Operating costs and expenses..... 571,647 500,700 1,657,832 1,609,663
Depreciation, depletion and
amortization.................... 63,363 58,863 191,030 180,139
Selling and administrative
expenses........................ 23,338 23,486 66,474 66,915
Net gain on property and
equipment disposals............. (1,307) (1,691) (4,222) (5,064)
-------- -------- ---------- ----------
OPERATING PROFIT................... 52,405 52,723 141,075 133,040
Interest expense................. 50,526 50,520 153,097 153,446
Interest income.................. (759) (1,239) (2,817) (6,993)
-------- -------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTERESTS............ 2,638 3,442 (9,205) (13,413)
Income tax provision............. 2,449 4,460 1,466 3,683
Minority interests............... 6,274 1,016 11,898 4,641
-------- -------- ---------- ----------
LOSS FROM CONTINUING OPERATIONS.... (6,085) (2,034) (22,569) (21,737)
Discontinued operations:
Loss from discontinued
operations, net of income tax
benefit of $1,207 and $2,704,
respectively.................... (3,620) -- (8,109) --
Gain from disposal of
discontinued operations, net of
income tax provision of $4,240.. -- -- -- 11,760
-------- -------- ---------- ----------
NET LOSS........................... $ (9,705) $ (2,034) $ (30,678) $ (9,977)
======== ======== ========== ==========
See accompanying notes to unaudited condensed consolidated financial
statements.
1
PEABODY ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)
(Unaudited)
December 31,
March 31, 2000
2000 Restated
---------- ------------
ASSETS
Current assets
Cash and cash equivalents........................... $ 65,618 $ 33,094
Accounts receivable, less allowance for doubtful
accounts of $1,233 and $1,213, respectively........ 153,021 115,225
Materials and supplies.............................. 48,809 41,484
Coal inventory...................................... 193,341 154,327
Assets from coal and emission allowance trading
activities......................................... 78,695 204,518
Deferred income taxes............................... 49,869 49,869
Other current assets................................ 43,192 22,999
---------- ----------
Total current assets.............................. 632,545 621,516
Property, plant, equipment and mine development, net
of accumulated depreciation, depletion and
amortization of $411,270 and $487,881, respectively.. 4,815,510 4,321,234
Net assets of discontinued operations................. 90,000 16,157
Assets held for sale--Australian operations........... -- 237,872
Investments and other assets.......................... 288,794 275,623
---------- ----------
Total assets...................................... $5,826,849 $5,472,402
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current maturities of
long-term debt..................................... $ 57,977 $ 44,740
Income taxes payable................................ 13,594 436
Liabilities from coal and emission allowance trading
activities......................................... 75,883 200,819
Accounts payable and accrued expenses............... 573,137 496,182
---------- ----------
Total current liabilities......................... 720,591 742,177
Long-term debt, less current maturities............... 2,018,189 1,821,796
Deferred income taxes................................. 625,124 558,622
Accrued reclamation and other environmental
liabilities.......................................... 502,092 452,021
Workers' compensation obligations..................... 212,260 212,856
Accrued postretirement benefit costs.................. 971,186 971,748
Obligation to industry fund........................... 64,737 55,699
Other noncurrent liabilities.......................... 162,979 142,726
---------- ----------
Total liabilities................................. 5,277,158 4,957,645
Minority interests.................................... 41,265 41,701
Stockholders' equity:
Preferred Stock--$0.01 per share par value;
10,000,000 shares authorized, 5,000,000 shares
issued and outstanding............................. 50 50
Common Stock--Class A, $0.01 per share par value;
30,000,000 shares authorized, 19,000,000 shares
issued and outstanding............................. 190 190
Common Stock--Class B, $0.01 per share par value;
3,000,000 shares authorized, 742,268 shares issued
and 684,473 outstanding as of March 31, 2000;
3,000,000 shares authorized, 742,268 shares issued
and 581,801 shares outstanding as of December 31,
2000............................................... 7 7
Additional paid-in capital.......................... 494,237 495,737
Employee stock loans................................ (2,391) (2,051)
Accumulated other comprehensive loss................ (12,667) (38,811)
Retained earnings................................... 29,219 19,242
Treasury shares, at cost: 57,795 Class B shares as
of March 31, 2000; 160,467 Class B shares as of
December 31, 2000.................................. (219) (1,308)
---------- ----------
Total stockholders' equity......................... 508,426 473,056
---------- ----------
Total liabilities and stockholders' equity...... $5,826,849 $5,472,402
========== ==========
See accompanying notes to unaudited condensed consolidated financial
statements.
2
PEABODY ENERGY CORPORATION
UNAUDITED STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(In thousands)
Nine Months Ended
December 31,
-------------------
2000
1999 Restated
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(30,678) $ (9,977)
Loss from discontinued operations....................... 8,109 --
Gain from disposal of discontinued operations........... -- (11,760)
-------- --------
Loss from continuing operations........................ (22,569) (21,737)
Adjustments to reconcile loss from continuing operations
to net cash provided by continuing operations:
Depreciation, depletion and amortization................ 191,030 156,885
Deferred income taxes................................... (16,290) (9,381)
Amortization of debt discount and debt issuance costs... 13,637 12,445
Net gain on property and equipment disposals............ (4,222) (4,604)
Minority interests...................................... 11,898 4,641
Stock compensation...................................... -- 1,100
Changes in current assets and liabilities:
Sale of accounts receivable............................ -- 25,000
Accounts receivable, net of sale....................... (29,027) (2,629)
Materials and supplies................................. 2,873 2,926
Coal inventory......................................... 18,191 1,403
Net assets from coal and emission allowance trading
activities............................................ 2,066 (887)
Other current assets................................... (8,087) (1,499)
Accounts payable and accrued expenses.................. (48,399) (6,915)
Income taxes payable................................... 4,818 7
Accrued reclamation and related liabilities............. (10,960) (28,652)
Workers' compensation obligations....................... 2,305 596
Accrued postretirement benefit costs.................... 12,197 562
Obligation to industry fund............................. (403) (9,038)
Other, net.............................................. (19,444) (3,786)
Net cash used by assets held for sale--Australian
operations............................................. -- (15,873)
-------- --------
Net cash provided by continuing operations............. 99,614 100,564
Net cash used in discontinued operations............... (1,005) --
-------- --------
Net cash provided by operating activities.............. 98,609 100,564
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, equipment and mine
development.............................................. (137,501) (109,286)
Acquisition, net.......................................... (44,203) --
Additions to advance mining royalties..................... (16,275) (16,919)
Investment in joint venture............................... -- (3,052)
Proceeds from property and equipment disposals............ 7,186 11,517
Proceeds from sale-leaseback transactions................. 34,234 35,089
Net cash used by assets held for sale--Australian
operations............................................... -- (34,684)
-------- --------
Net cash used in continuing operations................. (156,559) (117,335)
Net cash provided by discontinued operations........... 578 85,603
-------- --------
Net cash used in investing activities.................. (155,981) (31,732)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt.............................. 20,121 26,920
Payments of long-term debt................................ (48,103) (132,285)
Repurchase of treasury stock.............................. -- (1,089)
Distributions to minority interests....................... (3,471) (4,205)
Net cash provided by assets held for sale--Australian
operations............................................... -- 10,591
-------- --------
Net cash used in continuing operations................. (31,453) (100,068)
Net cash used in discontinued operations............... (10,991) --
-------- --------
Net cash used in financing activities.................. (42,444) (100,068)
Effect of exchange rate changes on cash and cash
equivalents.............................................. 280 (1,288)
-------- --------
Net decrease in cash and cash equivalents................. (99,536) (32,524)
Cash and cash equivalents at beginning of period.......... 194,078 65,618
-------- --------
Cash and cash equivalents at end of period................ $ 94,542 $ 33,094
======== ========
See accompanying notes to unaudited condensed consolidated financial
statements.
3
PEABODY ENERGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying condensed consolidated financial statements include the
consolidated operations and balance sheets of Peabody Energy Corporation (the
"Company"), also known as Peabody Group. These financial statements include the
subsidiaries of Peabody Holding Company, Inc. ("Peabody Holding Company"), Gold
Fields Mining Corporation ("Gold Fields") which owns Lee Ranch Coal Company
("Lee Ranch") and Peabody Australia Limited and Darex Capital, Inc., which
collectively own Peabody Resources Holdings Pty Ltd. ("Peabody Resources"), an
Australian company.
On December 26, 2000, the Company signed a share purchase agreement for the
transfer of the stock in Peabody Australia Limited and Darex Capital, Inc.
which, in turn, own the Company's Australian operations, to Coal & Allied
Industries Limited ("Coal & Allied"), a 71%-owned subsidiary of Rio Tinto
Limited. The net assets of the entities sold are reflected as "Assets held for
sale--Australian Operations" in the consolidated balance sheet as of December
31, 2000.
The accompanying condensed consolidated financial statements as of and for
the quarter and nine months ended December 31, 1999 and 2000, and the notes
thereto, are unaudited. However, in the opinion of management, these financial
statements reflect all adjustments necessary for a fair presentation of the
results of the periods presented. The results of operations for the quarter and
nine months ended December 31, 2000 are not necessarily indicative of the
results to be expected for the full year.
Restatement
During the quarter ended December 31, 2000, the Company granted 89,530
shares to members of management. The Company recorded compensation expense of
$0.6 million related to the grant of the shares. The balance sheet and
statements of operations and cash flows have been restated for the quarter and
nine months ended December 31, 2000 to record additional compensation expense
of $1.1 million for the difference between the value of Class B common stock as
determined by an independent valuation and the value determined in conjunction
with the anticipated initial public offering. Net loss for the quarter and nine
months ended December 31, 2000 of $.9 million and $8.9 million, respectively,
were restated to $2.0 million and $10.0 million, respectively.
(2) Assets Held for Sale
On December 26, 2000, the Company signed a share purchase agreement for the
transfer of the stock in Peabody Australia Limited and Darex Capital, Inc.
which, in turn, own the Company's Australian operations to Coal & Allied, a
71%-owned subsidiary of Rio Tinto Limited. The Company's Australian
subsidiaries are comprised of interests in six coal mines, as well as Mining
Services in Brisbane, Australia. The coal mines are Bengalla, Warkworth,
Ravensworth, Ravensworth East and Narama in New South Wales, and Moura in
Queensland, Australia.
The sale price was $455 million in cash, subject to post-closing
adjustments. The sale closed on January 29, 2001. Under the terms of the
agreement, Coal & Allied obtained ownership of all assets and assumed all
liabilities of the Company's Australian operations. The Company intends to use
proceeds from the sale to repay a portion of long-term debt.
4
PEABODY ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In connection with the disposition, the net assets of the Company's
Australian operations have been classified as "Assets held for sale--Australian
operations" in the December 31, 2000 consolidated balance sheet and include the
following (in thousands):
Cash......................................................... $ 18,089
Accounts receivable.......................................... 26,908
Materials and supplies....................................... 5,259
Coal inventory............................................... 29,115
Other current assets......................................... 22,946
Property, plant, equipment and mine development, net......... 403,028
Investments and other assets................................. 10,657
Short-term borrowing and current maturities of long-term
debt........................................................ (20,834)
Income taxes payable......................................... (14,546)
Accounts payable and accrued expenses........................ (59,749)
Long-term debt, less current maturities...................... (98,608)
Deferred income taxes........................................ (51,253)
Accrued reclamation liabilities.............................. (25,454)
Other noncurrent liabilities................................. (7,686)
--------
$237,872
========
(3) Comprehensive Income
The following table sets forth the components of comprehensive income (loss)
for the quarter and nine months ended December 31, 1999 and 2000 (in
thousands):
Quarter Ended Nine Months Ended
December 31, December 31,
---------------- ------------------
1999 2000 1999 2000
------- ------- -------- --------
Net loss................................ $(9,705) $(2,034) $(30,678) $ (9,977)
Foreign currency translation
adjustment............................. 2,795 8,032 9,545 (26,144)
------- ------- -------- --------
Comprehensive income (loss)............. $(6,910) $ 5,998 $(21,133) $(36,121)
======= ======= ======== ========
5
PEABODY ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(4) Business Segments
The Company's industry and geographic data for continuing operations were as
follows (in thousands):
Quarter Ended Nine Months Ended
December 31, December 31,
---------------------- ---------------------
1999 2000 1999 2000
---- ---- ---- ----
Revenues:
U.S. Mining.................... $ 637,557 $ 558,139 $1,881,965 $1,766,518
Non U.S. Mining................ 71,660 75,942 169,931 217,969
Other.......................... 229 -- 293 206
----------- ---------- ---------- ----------
$ 709,446 $ 634,081 $2,052,189 $1,984,693
=========== ========== ========== ==========
Operating profit (loss):
U.S. Mining.................... $ 36,806 $ 29,161 $ 103,919 $ 75,848
Non U.S. Mining................ 14,951 23,575 37,135 49,051
Other.......................... 648 (13) 21 8,141
----------- ---------- ---------- ----------
$ 52,405 $ 52,723 $ 141,075 $ 133,040
=========== ========== ========== ==========
Depreciation, depletion, and
amortization:
U.S. Mining.................... $ 54,392 $ 51,579 $ 167,084 $ 156,885
Non U.S. Mining................ 8,971 7,284 23,946 23,254
----------- ---------- ---------- ----------
$ 63,363 $ 58,863 $ 191,030 $ 180,139
=========== ========== ========== ==========
Total Assets
U.S. Mining.................... $ 5,105,025 $4,836,828 $5,105,025 $4,836,828
Non U.S. Mining................ 567,912 514,369 567,912 514,369
Other.......................... 1,094,206 121,205 1,094,206 121,205
----------- ---------- ---------- ----------
$ 6,767,143 $5,472,402 $6,767,143 $5,472,402
=========== ========== ========== ==========
Revenues:
United States.................. $ 637,786 $ 558,139 $1,882,258 $1,766,724
Non U.S........................ 71,660 75,942 169,931 217,969
----------- ---------- ---------- ----------
$ 709,446 $ 634,081 $2,052,189 $1,984,693
=========== ========== ========== ==========
Operating profit:
United States.................. $ 37,454 $ 29,148 $ 103,940 $ 83,989
Non U.S........................ 14,951 23,575 37,135 49,051
----------- ---------- ---------- ----------
$ 52,405 $ 52,723 $ 141,075 $ 133,040
=========== ========== ========== ==========
Depreciation, depletion, and
amortization:
United States.................. $ 54,392 $ 51,579 $ 167,084 $ 156,885
Non U.S........................ 8,971 7,284 23,946 23,254
----------- ---------- ---------- ----------
$ 63,363 $ 58,863 $ 191,030 $ 180,139
=========== ========== ========== ==========
Total Assets
United States.................. $ 6,199,231 $4,958,033 $6,199,231 $4,958,033
Non U.S........................ 567,912 514,369 567,912 514,369
----------- ---------- ---------- ----------
$ 6,767,143 $5,472,402 $6,767,143 $5,472,402
=========== ========== ========== ==========
6
PEABODY ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(5) Commitments and Contingencies
Environmental Claims
Environmental claims have been asserted against a subsidiary of the Company
at 19 sites in the United States. Some of these claims are based on the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, and on similar state statutes. The majority of these sites are related
to activities of former subsidiaries of the Company.
The Company's policy is to accrue environmental cleanup-related costs of a
noncapital nature when those costs are believed to be probable and can be
reasonably estimated. The quantification of environmental exposures requires an
assessment of many factors, including changing laws and regulations,
advancements in environmental technologies, the quality of information
available related to specific sites, the assessment stage of each site
investigation, preliminary findings and the length of time involved in
remediation or settlement. For certain sites, the Company also assesses the
financial capability of other potentially responsible parties and, where
allegations are based on tentative findings, the reasonableness of the
Company's apportionment. The Company has not anticipated any recoveries from
insurance carriers or other potentially responsible third parties in its
Consolidated Balance Sheets. The undiscounted liabilities for environmental
cleanup-related costs recorded in "Accrued reclamation and other environmental
liabilities" were $57.7 million and $48.5 million at March 31, 2000 and
December 31, 2000, respectively. This amount represents those costs that the
Company believes are probable and reasonably estimable. In the event that
future remediation expenditures are in excess of amounts accrued, management
does not anticipate that they will have a material adverse effect on the
financial position, results of operations or liquidity of the Company.
Other
In addition, the Company at times becomes a party to claims, lawsuits,
arbitration proceedings and administrative procedures in the ordinary course of
business. Management believes that the ultimate resolution of pending or
threatened proceedings will not have a material effect on the financial
position, results of operations or liquidity of the Company.
(6) Discontinued Operations
In August 2000, the Company completed the sale of Citizens Power to Edison
Mission Energy, along with the monetization of a portion of Citizens' interests
in certain power contract assets. Net proceeds of $90.1 million received from
the sale in August 2000 were used to repay long-term debt. As of December 31,
2000 the Company's investment in discontinued operations was $16.2 million,
which represents the estimated net proceeds from the monetization of the
Company's remaining interest in power contracts to be sold as part of the final
wind-down of the subsidiary's operations.
7
PEABODY ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7) Supplemental Guarantor/Non-Guarantor Financial Information
In accordance with the indentures governing the Senior Notes and Senior
Subordinated Notes, certain wholly owned U.S. subsidiaries of the Company have
fully and unconditionally guaranteed the Senior Notes and Senior Subordinated
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 investors. The
following condensed historical financial statement information is provided for
such Guarantor/Non-Guarantor Subsidiaries.
Peabody Energy Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Quarter Ended December 31, 1999
(In thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
Total revenues.......... $ -- $489,438 $222,026 $(2,018) $709,446
Costs and expenses:
Operating costs and
expenses.............. -- 425,391 148,274 (2,018) 571,647
Depreciation, depletion
and amortization...... -- 45,153 18,210 -- 63,363
Selling and
administrative
expenses.............. -- 17,332 6,006 -- 23,338
Net gain on property
and equipment
disposals............. -- (1,374) 67 -- (1,307)
Interest expense....... 43,203 1,722 5,601 -- 50,526
Interest income........ -- (558) (201) -- (759)
-------- -------- -------- ------- --------
Income (loss) before
income taxes and
minority interests..... (43,203) 1,772 44,069 -- 2,638
Income tax provision
(benefit)............. (11,682) 2,174 11,957 -- 2,449
Minority interests..... -- -- 6,274 -- 6,274
-------- -------- -------- ------- --------
Income (loss) from
continuing operations.. (31,521) (402) 25,838 -- (6,085)
Discontinued operations:
Loss from discontinued
operations, net of
income taxes.......... -- -- (3,620) -- (3,620)
-------- -------- -------- ------- --------
Net income (loss)....... $(31,521) $ (402) $ 22,218 $ -- $ (9,705)
======== ======== ======== ======= ========
8
Peabody Energy Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Quarter Ended December 31, 2000
(In thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
Total revenues.......... $ -- $451,039 $198,613 $(15,571) $634,081
Costs and expenses:
Operating costs and
expenses............. -- 369,399 146,872 (15,571) 500,700
Depreciation,
depletion and
amortization......... -- 42,769 16,094 -- 58,863
Selling and
administrative
expenses............. 1,129 18,902 3,455 -- 23,486
Net gain on property
and equipment
disposals............ -- (1,663) (28) -- (1,691)
Interest expense...... 39,908 37,671 5,350 (32,409) 50,520
Interest income....... (17,099) (15,972) (577) 32,409 (1,239)
-------- -------- -------- -------- --------
Income (loss) before
income taxes and
minority interests..... (23,938) (67) 27,447 -- 3,442
Income tax provision
(benefit)............ (5,334) 48 9,746 -- 4,460
Minority interests.... -- -- 1,016 -- 1,016
-------- -------- -------- -------- --------
Net income (loss)....... $(18,604) $ (115) $ 16,685 $ -- $ (2,034)
======== ======== ======== ======== ========
9
Peabody Energy Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Nine Months Ended December 31, 1999
(In thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------ ------------
Total revenues.......... $ -- $1,494,084 $563,420 $(5,315) $2,052,189
Costs and expenses:
Operating costs and
expenses............. -- 1,266,821 396,326 (5,315) 1,657,832
Depreciation,
depletion and
amortization......... -- 139,997 51,033 -- 191,030
Selling and
administrative
expenses............. -- 51,165 15,309 -- 66,474
Net gain on property
and equipment
disposals............ -- (4,265) 43 -- (4,222)
Interest expense...... 130,949 6,545 15,603 -- 153,097
Interest income....... -- (2,426) (391) -- (2,817)
--------- ---------- -------- ------- ----------
Income (loss) before
income taxes and
minority interests..... (130,949) 36,247 85,497 -- (9,205)
Income tax provision
(benefit)............ (32,918) 8,605 25,779 -- 1,466
Minority interests.... -- -- 11,898 -- 11,898
--------- ---------- -------- ------- ----------
Income (loss) from
continuing operations.. (98,031) 27,642 47,820 -- (22,569)
Discontinued operations:
Loss from discontinued
operations, net of
income taxes......... -- -- (8,109) -- (8,109)
--------- ---------- -------- ------- ----------
Net income (loss)....... $ (98,031) $ 27,642 $ 39,711 $ -- $ (30,678)
========= ========== ======== ======= ==========
10
Peabody Energy Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Nine Months Ended December 31, 2000
(In thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
Total revenues.......... $ -- $1,413,376 $603,961 $(32,644) $1,984,693
Costs and expenses:
Operating costs and
expenses............. -- 1,182,199 460,108 (32,644) 1,609,663
Depreciation,
depletion and
amortization......... -- 129,206 50,933 -- 180,139
Selling and
administrative
expenses............. 1,385 52,645 12,885 -- 66,915
Net gain on property
and equipment
disposals............ -- (4,504) (560) -- (5,064)
Interest expense...... 122,576 82,533 14,946 (66,609) 153,446
Interest income....... (51,310) (21,368) (924) 66,609 (6,993)
-------- ---------- -------- -------- ----------
Income (loss) before
income taxes and
minority interests..... (72,651) (7,335) 66,573 -- (13,413)
Income tax provision
(benefit)............ (17,888) (1,547) 23,118 -- 3,683
Minority interests.... -- -- 4,641 -- 4,641
-------- ---------- -------- -------- ----------
Income (loss) from
continuing operations.. (54,763) (5,788) 38,814 -- (21,737)
Discontinued operations:
Gain from disposal of
discontinued
operations, net of
income taxes......... 88 11,672 -- -- 11,760
-------- ---------- -------- -------- ----------
Net income (loss)....... $(54,675) $ 5,884 $ 38,814 $ -- $ (9,977)
======== ========== ======== ======== ==========
11
Peabody Energy Corporation
Unaudited Supplemental Condensed Consolidated Balance Sheets
As of March 31, 2000
(In thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------ ------------ ------------ ------------
ASSETS
Current assets
Cash and cash
equivalents........... $ 347 $ 45,931 $ 19,340 $ -- $ 65,618
Accounts receivable.... 1,605 95,055 92,083 (35,722) 153,021
Inventories............ -- 187,965 54,185 -- 242,150
Assets from coal and
emission allowance
trading activities.... -- 78,695 -- -- 78,695
Deferred income taxes.. -- 49,869 -- -- 49,869
Other current assets... 1,282 14,351 27,559 -- 43,192
---------- ---------- ---------- ----------- ----------
Total current
assets.............. 3,234 471,866 193,167 (35,722) 632,545
Property, plant,
equipment and mine
development--at cost... -- 4,360,648 866,132 -- 5,226,780
Less accumulated
depreciation, depletion
and amortization....... -- (323,870) (87,400) -- (411,270)
---------- ---------- ---------- ----------- ----------
-- 4,036,778 778,732 -- 4,815,510
Net assets of
discontinued
operations............. 900 89,100 -- -- 90,000
Investments and other
assets................. 1,883,781 1,444,307 208,095 (3,247,389) 288,794
---------- ---------- ---------- ----------- ----------
Total assets......... $1,887,915 $6,042,051 $1,179,994 $(3,283,111) $5,826,849
========== ========== ========== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
and current maturities
of long-term debt..... $ -- $ 21,122 $ 36,855 $ -- $ 57,977
Payable to affiliates,
net................... (284,294) 319,473 (35,179) -- --
Income taxes payable... -- 521 13,073 -- 13,594
Liabilities from coal
and emission allowance
trading activities.... -- 75,883 -- -- 75,883
Accounts payable and
accrued expenses...... 76,066 416,505 116,288 (35,722) 573,137
---------- ---------- ---------- ----------- ----------
Total current
liabilities......... (208,228) 833,504 131,037 (35,722) 720,591
Long-term debt, less
current maturities..... 1,587,717 162,116 268,356 -- 2,018,189
Deferred income taxes... -- 567,918 57,206 -- 625,124
Other noncurrent
liabilities............ -- 1,873,508 39,746 -- 1,913,254
---------- ---------- ---------- ----------- ----------
Total liabilities.... 1,379,489 3,437,046 496,345 (35,722) 5,277,158
Minority interests...... -- -- 41,265 -- 41,265
Stockholders' equity.... 508,426 2,605,005 642,384 (3,247,389) 508,426
---------- ---------- ---------- ----------- ----------
Total liabilities and
stockholders'
equity.............. $1,887,915 $6,042,051 $1,179,994 $(3,283,111) $5,826,849
========== ========== ========== =========== ==========
12
Peabody Energy Corporation
Unaudited Supplemental Condensed Consolidated Balance Sheets
As of December 31, 2000
(In thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------ ------------ ------------ ------------
ASSETS
Current assets
Cash and cash
equivalents........... $ 5 $ 27,440 $ 5,649 $ -- $ 33,094
Accounts receivable.... 940 85,872 94,767 (66,354) 115,225
Inventories............ -- 182,586 13,225 -- 195,811
Assets from coal and
emission allowance
trading activities.... -- 204,518 -- -- 204,518
Deferred income taxes.. -- 49,869 -- -- 49,869
Other current assets... 1,899 10,284 10,816 -- 22,999
---------- ---------- -------- ----------- ----------
Total current
assets.............. 2,844 560,569 124,457 (66,354) 621,516
Property, plant,
equipment and mine
development--at cost... -- 4,397,064 412,051 -- 4,809,115
Less accumulated
depreciation, depletion
and amortization....... -- (438,451) (49,430) -- (487,881)
---------- ---------- -------- ----------- ----------
-- 3,958,613 362,621 -- 4,321,234
Net assets of
discontinued
operations............. -- 16,157 -- -- 16,157
Assets held for sale--
Australian operations.. -- -- 237,872 237,872
Investments and other
assets................. 1,982,209 1,337,776 208,914 (3,253,276) 275,623
---------- ---------- -------- ----------- ----------
Total assets......... $1,985,053 $5,873,115 $933,864 $(3,319,630) $5,472,402
========== ========== ======== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
and current maturities
of long-term debt..... $ -- $ 20,401 $ 24,339 $ -- $ 44,740
Payable to affiliates,
net................... (39,940) 45,127 (5,187) --
Income taxes payable... -- 480 (44) -- 436
Liabilities from coal
and emission allowance
trading activities.... -- 200,819 -- -- 200,819
Accounts payable and
accrued expenses...... 74,049 440,814 47,673 (66,354) 496,182
---------- ---------- -------- ----------- ----------
Total current
liabilities......... 34,109 707,641 66,781 (66,354) 742,177
Long-term debt, less
current maturities..... 1,477,865 169,008 174,923 -- 1,821,796
Deferred income taxes... -- 558,566 56 -- 558,622
Other noncurrent
liabilities............ 23 1,827,011 8,016 -- 1,835,050
---------- ---------- -------- ----------- ----------
Total liabilities.... 1,511,997 3,262,226 249,776 (66,354) 4,957,645
Minority interests...... -- -- 41,701 -- 41,701
Stockholders' equity.... 473,056 2,610,889 642,387 (3,253,276) 473,056
---------- ---------- -------- ----------- ----------
Total liabilities and
stockholders'
equity.............. $1,985,053 $5,873,115 $933,864 $(3,319,630) $5,472,402
========== ========== ======== =========== ==========
13
Peabody Energy Corporation
Unaudited Supplemental Condensed Statements of Consolidated Cash Flows
For the Nine Months Ended December 31, 1999
(In thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Consolidated
--------- ------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net cash provided by (used
in) continuing operations... $(100,192) $ 88,998 $ 110,808 $ 99,614
Net cash used in discontinued
operations.................. -- -- (1,005) (1,005)
--------- --------- --------- ---------
Net cash provided by (used
in) operating activities.... (100,192) 88,998 109,803 98,609
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property,
plant, equipment and mine
development............... -- (88,498) (49,003) (137,501)
Acquisition, net........... -- -- (44,203) (44,203)
Additions to advance mining
royalties................. -- (7,843) (8,432) (16,275)
Proceeds from property and
equipment disposals....... -- 6,144 1,042 7,186
Proceeds from sale-
leaseback transactions.... -- 34,234 -- 34,234
--------- --------- --------- ---------
Net cash used in continuing
operations.................. -- (55,963) (100,596) (156,559)
Net cash provided by
discontinued operations..... -- -- 578 578
--------- --------- --------- ---------
Net cash used in investing
activities.................. -- (55,963) (100,018) (155,981)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
debt...................... -- -- 20,121 20,121
Payments of long-term
debt...................... (30,000) (1,380) (16,723) (48,103)
Distributions to minority
interests................. -- -- (3,471) (3,471)
Net change in due to/from
affiliates................ 130,268 (129,954) (314) --
--------- --------- --------- ---------
Net cash provided by (used
in) continuing operations... 100,268 (131,334) (387) (31,453)
Net cash used in discontinued
operations.................. -- -- (10,991) (10,991)
--------- --------- --------- ---------
Net cash provided by (used
in) financing activities.... 100,268 (131,334) (11,378) (42,444)
Effect of exchange rate
changes on cash and
equivalents................. -- -- 280 280
--------- --------- --------- ---------
Net increase (decrease) in
cash and cash equivalents... 76 (98,299) (1,313) (99,536)
Cash and cash equivalents at
beginning of period......... -- 130,861 63,217 194,078
--------- --------- --------- ---------
Cash and cash equivalents at
end of period............... $ 76 $ 32,562 $ 61,904 $ 94,542
========= ========= ========= =========
14
Peabody Energy Corporation
Unaudited Supplemental Condensed Statements of Consolidated Cash Flows
For the Nine Months Ended December 31, 2000
(In thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Consolidated
-------- ------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net cash provided by (used in)
operating activities......... $(22,926) $ 10,016 $113,474 $ 100,564
-------- -------- -------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property,
plant, equipment and mine
development................ -- (67,878) (41,408) (109,286)
Additions to advance mining
royalties.................. -- (4,866) (12,053) (16,919)
Investment in joint
ventures................... -- (3,052) -- (3,052)
Proceeds from property and
equipment disposals........ -- 6,767 4,750 11,517
Proceeds from sale-leaseback
transactions............... -- 28,800 6,289 35,089
Net cash used in assets held
for sale--Australian
operations................. -- -- (34,684) (34,684)
-------- -------- -------- ---------
Net cash used in continuing
operations................... -- (40,229) (77,106) (117,335)
Net cash provided by
discontinued operations...... 988 88,823 (4,208) 85,603
-------- -------- -------- ---------
Net cash provided by (used in)
investing activities......... 988 48,594 (81,314) (31,732)
-------- -------- -------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
debt....................... -- -- 26,920 26,920
Payments of long-term debt.. (110,000) (916) (21,369) (132,285)
Distributions to minority
interests.................. -- -- (4,205) (4,205)
Repurchase of treasury
stock...................... -- (1,089) -- (1,089)
Net change in due to/from
affiliates................. 131,596 (75,096) (56,500) --
Net cash provided by assets
held for sale--Australian
operations................. -- -- 10,591 10,591
-------- -------- -------- ---------
Net cash provided by (used in)
financing activities......... 21,596 (77,101) (44,563) (100,068)
Effect of exchange rate
changes on cash and
equivalents.................. -- -- (1,288) (1,288)
-------- -------- -------- ---------
Net decrease in cash and cash
equivalents.................. (342) (18,491) (13,691) (32,524)
Cash and cash equivalents at
beginning of period.......... 347 45,931 19,340 65,618
-------- -------- -------- ---------
Cash and cash equivalents at
end of period................ $ 5 $ 27,440 $ 5,649 $ 33,094
======== ======== ======== =========
15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Quarter Ended Nine Months Ended
December 31, December 31,
------------------ ----------------------
1999 2000 1999 2000
-------- -------- ---------- ----------
(Dollars in thousands)
Revenues:
Sales............................ $677,582 $605,520 $1,979,583 $1,918,337
Other revenues................... 31,864 28,561 72,606 66,356
-------- -------- ---------- ----------
Total revenues................. 709,446 634,081 2,052,189 1,984,693
Operating costs and expenses....... 571,647 500,700 1,657,832 1,609,663
Depreciation, depletion and
amortization...................... 63,363 58,863 191,030 180,139
Selling and administrative
expenses.......................... 23,338 23,486 66,474 66,915
Net gain on property and equipment
disposals......................... (1,307) (1,691) (4,222) (5,064)
-------- -------- ---------- ----------
Operating profit................. 52,405 52,723 141,075 133,040
Interest expense................... 50,526 50,520 153,097 153,446
Interest income.................... (759) (1,239) (2,817) (6,993)
-------- -------- ---------- ----------
Income (loss) before income taxes
and minority interests.......... 2,638 3,442 (9,205) (13,413)
Income tax provision............... 2,449 4,460 1,466 3,683
Minority interests................. 6,274 1,016 11,898 4,641
-------- -------- ---------- ----------
Loss from continuing operations.. (6,085) (2,034) (22,569) (21,737)
Discontinued operations:
Loss from discontinued
operations...................... (3,620) -- (8,109) --
Gain from disposal of
discontinued operations......... -- -- -- 11,760
-------- -------- ---------- ----------
Net loss....................... $ (9,705) $ (2,034) $ (30,678) $ (9,977)
======== ======== ========== ==========
Other Data:
Tons sold (in millions)............ 49.1 46.8 144.2 143.7
======== ======== ========== ==========
EBITDA(/1/)........................ $115,768 $111,586 $ 332,105 $ 313,179
======== ======== ========== ==========
Cash provided by (used in):
Operating activities............. $ 98,609 $ 100,564
Investing activities............. (155,981) (31,732)
Financing activities............. (42,444) (100,068)
- --------
(/1/EBITDA)is defined as income from continuing operations before deducting net
interest expense, income taxes, minority interests and depreciation,
depletion and amortization. EBITDA is not a substitute for operating
income, net income and cash flow from operating activities as determined in
accordance with generally accepted accounting principles as a measure of
profitability or liquidity. EBITDA is presented as additional information
because management believes it is a useful indicator of the Company's
ability to meet debt service and capital expenditure requirements. Because
EBITDA is not calculated identically by all companies, the presentation
herein may not be comparable to other similarly titled measures of other
companies.
Quarter ended December 31, 2000
Sales. Sales for the quarter ended December 31, 2000 were $605.5 million, a
decrease of $72.1 million, or 10.6% from the prior year quarter. Overall sales
volume was 46.8 million tons for the current year quarter, a decrease of 4.7%,
compared to 49.1 million tons for the prior year quarter. Sales from U.S.
operations decreased $64.2 million in the current year quarter as lower volumes
in the Midwest region and broker operations were only partially offset by
improved pricing in the Powder River region. Sales in Australia decreased $7.9
million from the prior year, mainly due to unfavorable currency translation.
Sales in the Powder River region, where selling price and cost are the
lowest in the Company, increased $6.3 million due to improved pricing over the
prior year. This increase was more than offset by a sales decrease
16
in the Midwest region of $48.7 million from the closure and suspension of three
mines at the end of the third quarter of the prior fiscal year, combined with
the closure of another mine early in the third quarter of the current year.
Sales from broker and trading activities decreased $18.0 million, mainly due to
unfavorable timing of broker shipments and lower average prices in the current
year quarter.
Other Revenues. Other revenues decreased $3.3 million as compared to the
third quarter of fiscal year 2000. A $13.0 million gain on contract
restructuring in the prior year quarter was only partially offset by higher
revenues from engineering services for underground mining projects in Australia
in the current year quarter.
Operating Profit. Operating profit was $52.7 million for the quarter ended
December 31, 2000, an increase of $0.3 million, or 0.6% compared to the prior
year. Australia's operating profit increased $8.6 million as a result of higher
mining services revenues, combined with lower long-term employee benefit costs
related to the wind down of production at Ravensworth, partially offset by
unfavorable currency translation. Operating profit from U.S. operations
decreased $8.3 million in the current year quarter.
U.S. operations experienced a 43% increase in fuel prices from the prior
year quarter, which decreased operating profit by $6.5 million. Operating
profit in the Midwest declined $10.3 million as compared to the prior year, due
to the closure and suspension of three mines in the prior year and the closure
of another mine early in the third quarter of the current year. Black Beauty's
operating profit was $14.3 million below the prior year, mainly due to a $13.0
million gain on contract restructuring in the prior year quarter. Operating
difficulties at several mines, including Black Beauty's 75% owned Sugar Camp
Coal operations, due to poor geological and weather conditions also contributed
to the current year decrease. In addition, the Company recognized $1.1 million
of compensation expense associated with the grant of 89,530 shares of Class B
common stock to certain members of management.
Partially offsetting these decreases, the Powder River region increased
$11.0 million, mainly due to improved pricing in the current year quarter. The
current quarter results also include a $10.0 million decrease in operating
costs related to the Company's United Mine Workers of America Combined Fund
liability. The Coal Industry Retiree Health Benefit Act of 1992 established the
Combined Fund to provide for the funding of specified health benefits for
covered United Mine Workers of America retirees. Two of the Company's
subsidiaries filed a lawsuit against the Social Security Administration
asserting that it improperly assigned certain beneficiaries to them. A federal
District Court ruled in the Company's favor. Effective October 1, 2000, the
Social Security Administration withdrew the assignment of a specified number of
beneficiaries to the Company's subsidiaries, resulting in a $10.0 million
reduction in the liability for these beneficiaries.
Income Taxes. For the quarter ended December 31, 2000, income tax expense
was $4.5 million on pretax income of $3.4 million, compared to income tax
expense of $2.4 million on pretax income of $2.6 million in the prior year. The
Company's consolidated tax position is impacted by the percentage depletion tax
deduction utilized by the Company and its U.S. subsidiaries that creates an
alternative minimum tax situation, and the positive contribution of its
Australian operations, which are taxed at a higher rate than the U.S.
operations. On a consolidated basis, the Australian income tax expense exceeded
the income tax benefit recorded on U.S. pretax losses in the current and prior
period.
Minority Interests. For the quarter ended December 31, 2000, minority
interest expense decreased $5.3 million to $1.0 million, due to lower current
quarter results at the Company's 81.7% owned Black Beauty operations. Black
Beauty's results were lower due to the contract restructuring gain in the prior
year quarter, combined with higher mining costs due to poor geological
conditions, higher fuel costs, and poor weather in the current period.
Loss from Discontinued Operations. During the quarter ended December 31,
1999, Citizens Power incurred a loss from operations of $3.6 million. Citizens
Power was classified as a discontinued operation effective March 31, 2000.
17
Nine Months ended December 31, 2000
Sales. Sales decreased $61.2 million, or 3.1%, to $1,918.3 million for the
nine months ended December 31, 2000. Overall sales volume was 143.7 million
tons, compared to 144.2 million tons in the prior year period. Sales from U.S.
operations decreased $84.9 million in the current year due to lower volumes in
the Midwest region offset partially by slightly higher volume in Appalachia,
the Southwest region and at Black Beauty, and improved pricing in the Powder
River Basin. Sales in Australia increased $23.7 million in the current year
period.
Sales in Appalachia improved by $14.6 million as a result of improved
performance at the region's longwall operations. Sales in the Southwest region
improved by $4.6 million with increased production. Black Beauty sales also
increased $14.0 million due to the higher volumes on contracts transitioned
from other Peabody mines. Sales in the Powder River Basin increased $27.9
million due to improved pricing in that region. Sales from broker and trading
activities increased $9.7 million, reflecting an increase in volume over the
prior year. These sales increases were more than offset by the sales decrease
in the Midwest region of $155.7 million from the closure and suspension of
three mines during the prior fiscal year and the closure of another mine early
in the third quarter of the current year.
Other Revenues. Other revenues for the nine months ended December 31, 2000
were $66.4 million, a decrease of $6.2 million compared to the prior year
period. Lower contract restructuring revenues and coal royalty income in the
current year were only partially offset by an increase in revenues from
engineering services for underground mining projects in Australia.
Depreciation, Depletion and Amortization. For the nine months ended December
31, 2000, depreciation, depletion and amortization expense was $180.1 million,
a decrease of $10.9 million compared to the prior year period. The decrease was
due to $6.0 million of additional depletion associated with a new coal royalty
agreement entered into in June 1999, combined with a change in sales mix, lower
depreciation and depletion expense in the Midwest region related to mine
closures in the region, and lower currency translation in the current year.
Operating Profit. For the nine-month period, operating profit was $133.0
million, a decrease of $8.1 million from the prior year period. Operating
margin was 6.9% in the current year, down from 7.1% in the prior nine-month
period. The negative impact of a 50% increase in fuel prices was $17.5 million
for the recent nine-month period. At our U.S. mining operations, operating
profit (excluding fuel cost variances) declined $2.5 million.
Operating profit in the Powder River region increased $22.2 million mainly
due to higher pricing in the current year. In the Southwest region, operating
profit increased $9.0 million as a result of improved productivity and slightly
higher sales volume in the current year. In addition, operating profit from
trading operations increased $4.4 million over the prior year. Offsetting these
increases was a decrease in the Midwest region of $40.4 million from the
closure and suspension of three mines in the prior year and the closure of
another mine early in the third quarter of the current year and additional
compensation expense of $1.1 million discussed above. Black Beauty's operating
profit decreased $16.1 million due to the operating difficulties resulting from
poor geological conditions we encountered during the period that increased
mining costs and unfavorable weather conditions in the third quarter, which
delayed production and transportation of coal. Appalachia's operating profit
decreased $10.7 million from poor mining conditions at certain underground
operations and lower average pricing due to contract expirations, partially
offset by improved performance at the region's longwall operations.
The current year results also include a decrease in operating costs for an
$8.0 million reduction in the Company's liabilities for environmental cleanup-
related costs based upon favorable clean-up experience and $9.1 million lower
costs related to Black Lung excise tax refund credits on export shipments.
Beginning in 1997, the Company filed for refund of these taxes on the basis
that the tax was unconstitutional. In May 2000,
18
the Internal Revenue Service issued guidelines for the refund of these taxes.
The Company has filed a claim and expects to receive a refund in the first half
of 2001. Operating costs also decreased $10.0 million in the current year due
to the reduction in the Company's UMWA Combined Fund liability. The Coal
Industry Retiree Health Benefit Act of 1992 established the Combined Fund to
provide for the funding of specified health benefits for covered United Mine
Workers of America retirees. Two of our subsidiaries filed a lawsuit against
the Social Security Administration asserting that it improperly assigned
certain beneficiaries to them. A federal District Court ruled in our favor.
Effective October 1, 2000, the Social Security Administration withdrew the
assignment to our subsidiaries of a specified number of beneficiaries,
resulting in a $10.0 million reduction in our liability.
Australia's operating profit increased $11.9 million, mainly due to higher
sales volume, increased mining services revenues, and lower long-term employee
benefit costs related to the wind down of production at Ravensworth in the
current year, partially offset by unfavorable exchange rate movements.
Interest Income. Interest income increased $4.2 million to $7.0 million for
the nine months ended December 31, 2000, mainly as a result of the interest
recorded in the current year associated with the Black Lung excise tax refunds.
Income Taxes. For the nine months ended December 31, 2000, income tax
expense was $3.7 million on a pretax loss of $13.4 million, compared to income
tax expense of $1.5 million on a pretax loss of $9.2 million in the prior year.
The Company's consolidated tax position is impacted by the percentage depletion
tax deduction utilized by the Company and its U.S. subsidiaries that creates an
alternative minimum tax situation, and the positive contribution of its
Australian operations, which are taxed at a higher rate than the U.S.
operations. On a consolidated basis, the Australian income tax expense exceeded
the income tax benefit recorded on U.S. pretax losses in the current and prior
period.
Minority Interests. For the nine months ended December 31, 2000, minority
interest expense decreased $7.3 million to $4.6 million, due to lower current
period results at the Company's 81.7% owned Black Beauty operations. Black
Beauty's results were lower due to the contract restructuring gain in the prior
year, combined with higher mining costs due to poor geological conditions and
higher fuel costs in the current period.
Loss from Discontinued Operations. During the nine months ended December 31,
1999, Citizens Power incurred a loss from operations of $8.1 million. Citizens
Power was classified as a discontinued operation effective March 31, 2000.
Gain from Disposal of Discontinued Operations. During the nine-month period
ended December 31, 2000, the Company reduced its estimated net loss from the
sale of Citizens Power by $11.8 million, net of income taxes. This reduction
reflected a decrease in the estimated operating losses of Citizens Power during
the disposal period due to higher income from electricity trading activities
driven by increased volatility and prices for electricity in the western U.S.
power markets during the first quarter ($8.8 million) and higher estimated
proceeds from the monetization of power contracts as part of the wind-up of the
Company's ownership of Citizens Powers' operations ($3.0 million).
Liquidity and Capital Resources
Net cash provided by operating activities increased slightly, $2.0 million,
to $100.6 million for the nine months ended December 31, 2000. In March 2000,
we established a $100.0 million, five-year receivables securitization program.
The Company added $25.0 million to its securitization program in the first
quarter of the fiscal year, bringing the total amount of accounts receivable
included in the securitization program to $125.0 million.
Net cash used in investing activities was $31.7 million for the current year
nine-month period, a decrease of $124.3 million compared to the corresponding
period in 1999. During the second quarter of the current year
19
the Company received $90.1 million in net proceeds from the sale of Citizens
Power, while the prior year period included a $30.2 million investment for the
acquisition of the Moura Mine in Australia.
Total capital expenditures, excluding Australian operations, for the years
1998, 1999, and 2000 were $111.6 million, $124.2 million, and $150.1 million,
respectively. We currently estimate that our capital expenditures for fiscal
years 2001 and 2002 will be approximately $138 million and $210 million,
respectively, and will primarily be used to acquire additional coal reserves,
to develop existing reserves, to replace equipment and to fund cost reduction
initiatives. The Company had $100.6 million of committed capital expenditures
at December 31, 2000 that are primarily related to acquiring additional Powder
River Basin coal reserves and mining equipment. The Company anticipates
funding these capital expenditures through available cash and credit
facilities.
Net cash used in financing activities was $100.1 million for the nine
months ended December 31, 2000, as compared to $42.4 million in the prior year
period. The Company repaid $132.3 million of long-term debt during the current
year period, an increase of $84.2 million, as the proceeds from the sale of
Citizens Power were used to reduce the Company's leverage position.
As of December 31, 2000, the Company had total indebtedness of $1,866.5
million (excluding $119.4 million of borrowings by our Australian operations
that are classified as a single line in our consolidated balance sheet
entitled "Assets held for sale--Australian operations"), consisting of the
following (in thousands):
Term loans under Senior Credit Facilities.......................... $ 580,000
9.625% Senior Subordinated Notes due 2008 ("Senior Subordinated
Notes")........................................................... 498,826
8.875% Senior Notes due 2008 ("Senior Notes")...................... 399,038
Indebtedness of Black Beauty Subsidiary............................ 199,262
5.0% Subordinated Note............................................. 187,422
Other.............................................................. 1,988
----------
$1,866,536
==========
The following table sets forth the mandatory repayments of our indebtedness
as of December 31, 2000:
Senior 5%
Credit Subordinated
Fiscal Year Facility Note Other Total
- ------------------- -------- ------------ -------- --------
2001 $ -- $ 20.0 $ 24.8 $ 44.8
2002 -- 20.0 7.9 27.9
2003 -- 20.0 25.4 45.4
2004 85.0 20.0 20.4 125.4
2005 25.0 20.0 15.4 60.4
2006 and thereafter 470.0 140.0 952.6 1,562.6
------ ------ -------- --------
$580.0 $240.0 $1,046.5 $1,866.5
====== ====== ======== ========
The Senior Credit Facility includes a Revolving Credit Facility that
provides for aggregate borrowings of up to $200.0 million and letters of
credit of up to $280.0 million. The Revolving Credit Facility commitment
matures in fiscal year 2005. As of December 31, 2000, the Company had no
borrowings outstanding under the Revolving Credit Facility.
Revolving loans under the Revolving Credit Facility bear interest based on
the Base Rate (as defined in the Senior Credit Facilities), or LIBOR (as
defined in the Senior Credit Facility) at the Company's option. As of December
31, 2000, the Company had in place a $300 million interest rate swap that
fixes LIBOR at approximately 7.0% and expires on October 5, 2001.
Approximately 52% of the term loans outstanding under the Senior Credit
Facility were fixed as of December 31, 2000.
20
The Revolving Credit Facility and related Term Loan Facility also contain
certain restrictions and limitations including, but not limited to, financial
covenants that will require the Company to maintain and achieve certain levels
of financial performance and prohibit the payment of cash dividends and similar
restricted payments.
The indentures governing the Senior Notes and Senior Subordinated Notes
permit the Company and its Restricted Subsidiaries to incur additional
indebtedness, including secured indebtedness, subject to certain limitations.
In addition, the indentures limit the Company and its Restricted Subsidiaries'
ability to:
. lease, convey or otherwise dispose of all or substantially all of our
assets;
. pay dividends or make other distributions;
. issue specified types of capital stock;
. enter into guarantees of indebtedness;
. incur liens;
. restrict our subsidiaries' abilities to make dividend payments;
. merge or consolidate with any other person or enter into transactions
with affiliates; and
. repurchase junior securities or make specified types of investments.
As of December 31, 2000, Black Beauty maintained a $100.0 million revolving
credit facility that matures on February 28, 2002. Black Beauty may elect one
or a combination of interest rates based on LIBOR or the corporate base rate
plus a margin which fluctuates based on specified leverage ratios. Borrowings
outstanding under the Black Beauty revolving credit agreement totaled $65.8
million at December 31, 2000. The revolving credit facility contains customary
restrictive covenants including limitations on additional debt, investments and
dividends.
Black Beauty's senior unsecured notes include $31.4 million of senior notes
and three series of notes with an aggregate principal amount of $60.0 million
as of December 31, 2000. The senior notes bear interest at 9.2%, payable
quarterly, and are pre-payable in whole or in part at any time, subject to
certain make-whole provisions. The three series of notes include Series A, B
and C notes, totaling $45.0 million, $5.0 million and $10.0 million,
respectively. The Series A notes bear interest at an annual rate of 7.5% and
are due in fiscal 2008. The Series B notes bear interest at an annual rate of
7.4% and are due in fiscal 2004. The Series C notes bear interest at an annual
rate of 7.4% and are due in fiscal 2003. The senior unsecured notes contain
customary restrictive covenants including limitations on additional debt,
investments and dividends.
Non wholly-owned subsidiaries of Black Beauty maintain borrowing facilities
with banks and other lenders with customary restrictive covenants. The
aggregate amount of outstanding indebtedness under those facilities totaled
$42.1 million as of December 31, 2000.
As of December 31, 2000, the revolving and working capital borrowing
facilities referred to above totaled $300.0 million, and borrowings thereunder
totaled $65.8 million. The Company was in compliance with the restrictive
covenants of all of its debt agreements as of December 31, 2000.
On January 29, 2001, the Company received $455 million of gross cash
proceeds from the sale of its Australian operations, subject to post-closing
adjustments. In February, the Company repaid all $110 million of tranche A
loans and $138 million of tranche B loans outstanding under the Senior Credit
Facility. After giving effect to those repayments, the Company had no remaining
tranche A loans outstanding and $332 million of tranche B loans outstanding.
21
Other
Mine Closure. In October 2000, the Camp No. 1 mine was closed due to the
depletion of its economically mineable reserves. This mine shipped 3.0 million
tons in fiscal year 2000. The Company does not anticipate a material adverse
effect on its results of operations, financial condition or liquidity from the
mine closure since the requirements of the mine's customers will be met by
other mines of the Company or its affiliates.
Recent Accounting Pronouncements. In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 (as amended by SFAS Nos. 137 and 138)
requires the recognition of all derivatives as assets or liabilities within the
balance sheet, and requires both the derivatives and the underlying exposure to
be recorded at fair value. Any gain or loss resulting from changes in fair
value will be recorded as part of the results of operations, or as a component
of comprehensive income or loss, depending upon the intended use of the
derivative. The effective date of SFAS No. 133 is for all fiscal quarters of
fiscal years beginning after June 15, 2000 (effective April 1, 2001 for the
Company). The Company does not anticipate the adoption of SFAS No. 133 will
have a material effect on its financial condition or results of operations.
Forward Looking Statements
This quarterly report and certain press releases and statements the Company
makes from time to time include statements of the Company's and management's
expectations, intentions, plans and beliefs that constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and are intended to come
within the safe harbor protection provided by those sections. Forward looking
statements involve risks and uncertainties, and a variety of factors could
cause actual results to differ materially from the Company's current
expectations, including but not limited to: coal and power market conditions
and fluctuations in the demand for coal as an energy source, weather
conditions, the continued availability of long-term coal supply contracts,
railroad performance, foreign currency translation, changes in economic
conditions, changes in mining costs for labor, fuel and operational reasons,
changes in the government regulation of the mining industry, risks inherent to
mining, changes in the Company's leverage position, the ability to successfully
implement operating strategies and other factors discussed in the Company's
filings with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release the results of any revisions to such forward
looking statements that may be made to reflect events or circumstances after
the date hereof, or thereof, as the case may be, or to reflect the occurrence
of anticipated events.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
Macquarie Generation
In September 1997, Peabody Resources, at that time a subsidiary of the
Company, filed a lawsuit against Macquarie Generation in the Supreme Court of
New South Wales, Commercial Division, seeking damages for certain coal
deliveries which were not paid by Macquarie Generation and for a declaratory
judgment regarding the assignment to Macquarie Generation of two long-term coal
supply agreements for the Ravensworth and Narama mines. The contracts expire in
2001 and 2012, respectively. Macquarie Generation later agreed that the two
contracts were properly assigned to it. Macquarie Generation subsequently filed
a cross-claim against Peabody Resources alleging that Peabody Resources
breached the labor escalation provisions in the coal supply agreements,
committed misrepresentations regarding the labor costs and violated the
Australian trade practices
22
and fair trading laws in relation to the Narama contract. Macquarie Generation
sought to terminate or rescind the Narama coal supply agreement and had sought
damages from Peabody Resources for alleged breaches of both contracts. Even
though we continued to deliver coal, Macquarie Generation unilaterally reduced
the price that it paid for coal deliveries under the Narama contract. A trial
regarding these issues began on September 7, 1998 and concluded on September
25, 1998. On September 22, 1998, Macquarie Generation withdrew its breach of
contract claims.
The Supreme Court of New South Wales issued a decision on November 19, 1998
rejecting Macquarie Generation's claims to terminate the coal supply agreement
for the Narama mine. Macquarie Generation abandoned any basis to a claim for
damages. The Court ordered Macquarie Generation to pay Peabody Resources the
portion of the price that it had unilaterally withheld, with interest.
Macquarie Generation has made that payment to Peabody Resources and is paying
Peabody Resources for deliveries of coal at the contract prices. Macquarie
Generation filed an appeal of the decision, with the New South Wales Court of
Appeals. The Court of Appeals ruled in favor of Peabody Resources on all issues
and the time to file a further appeal has expired. Therefore, the matter has
been resolved without a material adverse effect on our financial condition or
results of operations.
Saline Valley Conservancy District
Saline Valley Conservancy District filed a lawsuit against our subsidiary,
Peabody Coal Company, on April 5, 1999 in the Circuit Court of Saline County,
Illinois. Saline Valley alleged that Peabody Coal Company's coal refuse pits at
the closed Eagle No. 2 mine in Saline County, Illinois constituted a public and
private nuisance and a trespass, and that Peabody Coal Company engaged in
various negligent acts at the coal refuse pits. Saline Valley sought up to $124
million of compensatory damages, $125 million of punitive damages, and
injunctive relief. Peabody Coal Company removed the case to the United States
District Court for the Southern District of Illinois. Peabody Coal Company
settled the dispute by paying $1.1 million to the plaintiff in January of 2001.
Salt River Project Agricultural Improvement and Power District--Price Review
In May 1997, Salt River, acting for all owners of the Navajo Generating
Station, exercised their contractual option to review certain cumulative cost
changes during a five-year period from 1992 to 1996. Peabody Western sells
approximately 7 to 8 million tons of coal per year to the owners of the Navajo
Generation Station under a long-term contract. In July 1999, Salt River
notified Peabody Western that it believed the owners were entitled to a price
decrease of $1.92 per ton as a result of the review. Salt River also claimed
entitlement to a retroactive price adjustment to January 1997 and that an
overbilling of $50.5 million had occurred during the same five-year period. In
October 1999, Peabody Western notified Salt River that it believed it was
entitled to a $2.00 per ton price increase as a result of the review. The
parties were unable to settle the dispute and Peabody Western filed a demand
for arbitration in September 2000. The arbitration panel has been selected and
the hearing is scheduled to start on October 29, 2001.
While the outcome of arbitration is subject to uncertainties, based on our
preliminary evaluation of the issues and the potential impact on us, we believe
that the matter will be resolved without a material adverse effect on our
financial condition or results of operations.
Salt River Project Agricultural Improvement and Power District--Mine Closing
and Retiree Health Care
The Salt River Agricultural Improvement and Power District, or Salt River,
and the other owners of the Navajo Generating Station filed a lawsuit on
September 27, 1996 in the Superior Court of Maricopa County in Arizona seeking
a declaratory judgment that certain costs relating to final reclamation,
environmental monitoring work and mine decommissioning and costs primarily
relating to retiree health care benefits are not recoverable by our subsidiary,
Peabody Western Coal Company, under the terms of a coal supply agreement dated
February 18, 1977. The contract expires in 2011.
23
Peabody Western filed a motion to compel arbitration of these claims, which
was granted in part by the trial court. Specifically, the trial court ruled
that the mine decommissioning costs were subject to arbitration but that the
retiree health care costs were not subject to arbitration. Peabody Western
appealed and the Arizona Court of Appeals affirmed the trial court's order.
Peabody Western filed a petition for review with the Arizona Supreme Court.
That petition was denied on September 24, 1998. As a result, Peabody Western,
Salt River and the other owners of the Navajo Generating Station will arbitrate
the mine decommissioning costs issue and will litigate the retiree health care
costs issue.
While the outcome of litigation and arbitration is subject to uncertainties,
based on our preliminary evaluation of the issues and the potential impact on
us, and based on outcomes in similar proceedings, we believe that the matter
will be resolved without a material adverse effect on our financial condition
or results of operations.
Southern California Edison Company
In response to a demand for arbitration by one of our subsidiaries, Peabody
Western, Southern California Edison and the other owners of the Mohave
Generating Station filed a lawsuit on June 20, 1996 in the Superior Court of
Maricopa County, Arizona. The lawsuit sought a declaratory judgment that mine
decommissioning costs and retiree health care costs are not recoverable by
Peabody Western under the terms of a coal supply agreement dated May 26, 1976.
The contract expires in 2005.
Peabody Western filed a motion to compel arbitration which was granted by
the trial court. Southern California Edison appealed this order to the Arizona
Court of Appeals, which denied its appeal. Southern California Edison then
appealed the order to the Arizona Supreme Court which remanded the case to the
Arizona Court of Appeals and ordered the appellate court to determine whether
the trial court was correct in determining that Peabody Western's claims are
arbitrable. The Arizona Court of Appeals ruled that neither mine
decommissioning costs nor retiree health care costs are to be arbitrated and
that both issues should be resolved in litigation. The matter has been remanded
back to the Superior Court of Maricopa County, Arizona, where a trial has been
set for April 2001. Peabody Western answered the complaint and asserted
counterclaims. The court then permitted Southern California Edison to amend its
complaint to add a claim of overcharges of at least $19.2 million by Peabody
Western. The court also ruled that the claim for the overcharges and for
damages resulting from the April 2001 trial would be tried separately,
following the resolution of the April 2001 trial.
While the outcome of litigation is subject to uncertainties, based on our
preliminary evaluation of the issues and the potential impact on us, and based
on outcomes in similar proceedings, we believe that the matter will be resolved
without a material adverse effect on our financial condition or results of
operations. We had a receivable on our balance sheet at December 31, 2000 for
the mine closing costs associated with the Salt River and Southern California
Edison matters of $81.5 million.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See the Exhibit Index at page 24 of this report.
24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEABODY ENERGY CORPORATION
Date: April 27, 2001
/s/ Richard A. Navarre
By: _________________________________
Richard A. Navarre
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
25
EXHIBIT INDEX
The exhibits below are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit
No. Description of Exhibit
------- ----------------------
2.1 Share Purchase Agreement dated as of December 26, 2000, be-
tween P&L Coal Holdings Corporation, Gold Fields Mining Corpo-
ration and Coal & Allied Industries Limited (Incorporated by
reference to Exhibit 2.1 of the Company's Form 8-K dated De-
cember 26, 2000).
3.1 Second Amended and Restated Certificate of Incorporation of
P&L Coal Holdings Corporation (Incorporated by reference to
Exhibit 3.1 of the Company's Form 10-Q for the third quarter
ended December 31, 1998).
3.2 By-Laws of P&L Coal Holdings Corporation (Incorporated by ref-
erence to Exhibit 3.2 of the Company's Form S-4 Registration
Statement No. 333-59073).
26