EXHIBIT 99.1
[PEABODY LOGO] PEABODY ENERGY
NEWS RELEASE
CONTACT:
Vic Svec
(314) 342-7768
FOR IMMEDIATE RELEASE
October 16, 2002
PEABODY ENERGY (NYSE: BTU) ANNOUNCES RESULTS
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2002
- - EARNINGS PER SHARE TOTAL $0.54 FOR THE QUARTER AND $1.41 THROUGH NINE MONTHS
- - OPERATING PROFIT INCREASES 42% AND EBITDA* INCREASES 19% FOR THE QUARTER
- - INCOME FROM CONTINUING OPERATIONS INCREASES $25 MILLION FOR THE QUARTER
AND $65 MILLION THROUGH NINE MONTHS
- - REVENUES RISE 9% FOR THE QUARTER AND 5% THROUGH NINE MONTHS
- - YEAR-TO-DATE INTEREST EXPENSE IMPROVES 28%
- - U.S. COAL MARKETS IMPROVING, ALBEIT AT SLOWER PACE THAN EXPECTED DUE TO SOFT
ECONOMY
- - SPECIAL COST-CUTTING STEPS ARE UNDER WAY
ST. LOUIS, Oct. 16 - Peabody Energy (NYSE: BTU) today reported net income of
$29.0 million for the quarter ended Sept. 30, 2002, and $75.8 million through
nine months. Earnings per share totaled $0.54 for the quarter and $1.41 through
nine months, while EBITDA* totaled $110.4 million and $337.9 million for the
quarter and nine months. Operating profit increased 42 percent and EBITDA
improved 19 percent for the quarter.
Current quarter pre-tax results include $22 million related to a
favorable arbitration ruling on pricing under the Navajo station coal supply
agreement announced on July 21 and $15 million related to a mediated settlement
regarding the Mohave station coal supply agreement.
"Peabody is managing its way through the difficult market and economic
conditions by matching production to demand, taking actions to lower costs,
managing risk, and completing important transactions," said Peabody Energy
Chairman and Chief Executive Officer Irl F. Engelhardt. "Our employees dealt
with geologic and equipment problems which, along with cost impacts of reduced
production levels, impacted quarterly earnings. We see signs of market
improvements, albeit at a slower pace than expected due to the soft U.S.
economy."
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PEABODY ENERGY ANNOUNCES RESULTS -- ADD ONE
FINANCIAL RESULTS
Increased pricing under sales contracts coupled with the Mohave and
Navajo settlements led to 9 percent higher revenues for the quarter and 5
percent higher revenues through the nine months ended Sept. 30, 2002.
As discussed in the second quarter Form 10-Q, the company began
recording revenues this quarter net of costs for both physically and financially
settled trades to meet new accounting guidelines. The company had previously
recorded revenues net of costs for financially settled trades, while reporting
revenues and costs on a gross basis on separate line items for physically
settled trading transactions. The change has no effect on operating profit,
EBITDA or net income.
Production volumes were stable with the prior-year period, as the
output from four new operations was offset by the idling of the Big Mountain and
Colony Bay mines in Appalachia and cutbacks in planned production in the Powder
River Basin. Peabody has trimmed 19 million tons from planned 2002 production to
match demand.
Operating profit increased to $51.3 million for the quarter and $161.5
million through nine months, while EBITDA increased to $110.4 million and $337.9
million, respectively. Higher pricing and the successful resolution of two
contract disputes more than offset the impacts of production cutbacks, temporary
geologic issues in two Eastern underground mines and unplanned equipment repairs
in the Powder River Basin and Southwest. These three operating factors reduced
EBITDA by $39 million.
The Mohave station settlement provides for customer reimbursement of
previously accrued mine decommissioning and certain other post-mining
expenditures under the terms of the coal supply agreement. The reimbursements
will commence in January 2003 and continue on a monthly basis through December
of 2005. The Mohave coal supply agreement is scheduled to expire at Dec. 31,
2005, and the plant's owners and Peabody are in active discussions for a
continuation of coal supplies after that date.
Interest income for the quarter was $5.5 million as the company
collected $4.6 million in interest income related to excise tax refunds.
Interest expense improved 28 percent for the first nine months due to improved
debt levels versus the prior year and lower short-term interest rates on
floating-rate debt.
During the quarter, Fitch raised its outlook for the company to
"Positive" and reaffirmed its investment-grade rating on Peabody's Black Beauty
unit. Peabody also received Moody's
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PEABODY ENERGY ANNOUNCES RESULTS -- ADD TWO
favorable SGL-1 liquidity rating. And Peabody was added to the S & P MidCap 400
ranking of the nation's leading middle-capitalization companies.
"Peabody strengthened its balance sheet during the quarter as both
working capital improved and net debt was reduced by $44 million from last
quarter," said Peabody Executive Vice President and Chief Financial Officer
Richard A. Navarre. "Due to the soft economic climate, the company's pace of
capital expenditures is slowing, and our focus is turning to debt repayment and
other opportunities."
Capital expenditures, excluding acquisition of reserves and operations,
totaled $56 million during the third quarter and $146 million through nine
months. The company is targeting full-year 2002 capital expenditures in the $180
million to $200 million range, while the acquisition of reserves and operations
totaled an additional $28 million for the quarter and $61 million through nine
months.
GROWTH INITIATIVES
Peabody completed several transactions during the quarter and continues
to make progress in developing coal-fueled generating plants using its surface
and reserve holdings.
- - Peabody acquired the 1.3 million metric tonne per year Wilkie Creek Coal
Mine and related coal reserves in Queensland from Mirant for a net cash
payment of approximately US$13 million. The acquisition marks Peabody's
return to Australia, which operated there throughout most of the 1990s.
- - Peabody purchased a 25 percent interest in Arclar Company, LLC, for
approximately $15 million. Peabody's 82 percent-owned Black Beauty unit
owns the remaining 75 percent. Arclar owns the Willow Lake and Cottage
Grove mines in Southern Illinois along with more than 50 million tons of
coal reserves. With the Arclar purchase, the company acquired controlling
interest of an entity that resulted in consolidation of $13 million in
debt.
- - Peabody continues to progress in the development of new coal-fueled
generating plants. A major milestone was achieved in the development of the
1,500 megawatt Thoroughbred Energy Campus, which received the final air
quality permit from the Commonwealth of Kentucky. Regarding the 1,500
megawatt Prairie State Energy Campus in Illinois, Peabody signed a
transmission agreement and received its water withdrawal permit for a
nearby river. The company continues to seek partners for these projects.
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PEABODY ENERGY ANNOUNCES RESULTS -- ADD THREE
MARKET OVERVIEW
"We expect coal demand for electricity generation to improve by 1
percent to 1.5 percent in 2002, after a very slow start," said Engelhardt.
"Customer stockpiles are being reduced through increased generation using coal
and lower industry production, particularly in the East. We expect stockpile
reduction activities to be completed in the fourth quarter or early next year,
and anticipate 2003 growth in coal demand of approximately 2 percent."
Customer inventories at Sept. 30 of approximately 130 to 135 million
tons have improved from the 140 to 145 million ton range in June and stand about
13 to 15 percent above normal levels.
Retail demand for electricity was aided by warm summer weather, as
cooling degree days averaged 16 percent above normal from June through
September. Generation would have been greater; however, the lingering recession
dampened industrial demand for electricity in certain regions, while some new
gas generating plants displaced lower-cost coal generation as they operated for
warranty purposes.
The coal industry supply picture varies by region and faces
uncertainties, particularly in Appalachia. Industry cutbacks have reduced
year-over-year production by approximately 26 million tons through September.
The Powder River Basin has increased production by about 1 percent, while
Appalachia is down 6 percent through September. Industry production pressures
are likely to continue in Appalachia, where a number of producers are having
financial difficulties, bonding is expensive and inaccessible for some, and many
surface mines and preparation plants face permitting threats.
Peabody has committed and priced all of its anticipated 2002 production
of 180 million tons. Approximately 157 million tons of 2003 production is
currently committed and priced. Through September, Peabody has added only 25
million tons to its 2003 sales contract backlog and only 8 million tons for
2004. The company plans to operate at approximately the same production levels
during 2003.
OUTLOOK
Looking forward, Peabody is taking a number of measures in the fourth
quarter to lower its cost structure.
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PEABODY ENERGY ANNOUNCES RESULTS -- ADD FOUR
- - Two mines will be suspended in Southern West Virginia, and certain Powder
River Basin mines will continue to operate below capacity;
- - Peabody will close a mine in Western Kentucky and the coal will be temporarily
sourced from third parties; and
- - Other across-the-board cost-cutting actions will be taken.
The company intends to record a fourth quarter charge of $8 million to
$10 million related to these actions. In light of the specific fourth quarter
actions, Peabody now targets fourth quarter EBITDA of $80 million to $95 million
on earnings per share of ($0.20) to $0.05. Peabody targets full-year 2002 EBITDA
of $420 million to $435 million (up 10 to 14 percent) and earnings per share of
$1.20 to $1.45.
Peabody Energy (NYSE: BTU) is the world's largest private-sector coal
company, with 2001 sales of 194 million tons of coal and $2.6 billion in
revenues. Its coal fuels more than 9 percent of all U.S. electricity generation
and more than 2 percent of worldwide electricity generation.
NOTE: For comparison purposes, prior-year information reflects pro forma data
that excludes the gain on, and results of, Peabody Resources Limited operations
that were sold in January 2001, and discontinued operations.
* EBITDA (also called adjusted EBITDA) is defined as income from continuing
operations before deducting net interest expense, income taxes, minority
interests and depreciation, depletion and amortization. EBITDA, which is not
calculated identically by all companies, is not a substitute for operating
income, net income and cash flow as determined in accordance with generally
accepted accounting principles. Management believes it is a useful indicator of
its ability to meet debt service and capital expenditure requirements.
Certain statements in this press release are forward looking as defined in the
Private Securities Litigation Reform Act of 1995. These statements involve
certain risks and uncertainties that may cause actual results to differ
materially from expectations as of the date of this release. These risks
include, but are not limited to: growth in coal and power markets; timing of
reductions in customer coal inventories; the pace and extent of the economic
recovery; severity of weather; railroad performance; the ability to renew coal
sales contracts upon expiration or renegotiation; risks of coal mining including
geologic conditions; the ability to successfully implement operating strategies;
the effectiveness of the company's cost-cutting measures; regulatory and court
decisions; future legislation; credit and market risk associated with the
company's customers; and other risks detailed from time to time in the company's
reports filed with the Securities and Exchange Commission. These factors are
difficult to accurately predict and may be beyond the control of the company.
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CONDENSED INCOME STATEMENT (UNAUDITED)
QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 [PEABODY LOGO]
(Dollars in Millions, Except Share Data)
Quarter Ended Nine Months Ended
------------------------- -----------------------------
Pro Forma (1)
September September September September
2002 2001 2002 2001
------------ ----------- ----------- -------------
Tons Sold (Millions) 49.8 49.3 147.9 144.0
============ =========== =========== =============
Revenues (2) $ 714.6 $ 655.6 $ 2,047.3 $ 1,942.5
Operating Costs 579.1 537.0 1,637.2 1,568.7
Depreciation, Depletion & Amortization 59.1 56.8 176.4 174.6
Selling & Administrative 25.1 25.6 72.2 80.2
------------ ----------- ----------- -------------
Operating Profit 51.3 36.2 161.5 119.0
Interest Income (5.5) (0.2) (6.6) (3.3)
Interest Expense 25.8 28.8 76.8 107.0
Income Tax Expense (Benefit) (1.5) 1.0 4.6 (3.9)
Minority Interests 3.5 2.5 10.9 8.1
------------ ----------- ----------- -------------
Income Before Extraordinary Item 29.0 4.1 75.8 11.1
Extraordinary Loss from Debt
Extinguishment, Net of Taxes - - - (36.1)
------------ ----------- ----------- -------------
Net Income (Loss) $ 29.0 $ 4.1 $ 75.8 $ (25.0)
============ =========== =========== =============
Diluted EPS (3) $ 0.54 $ 0.08 $ 1.41 nm
============ =========== ===========
EBITDA $ 110.4 $ 93.0 $ 337.9 $ 293.6
============ =========== =========== =============
(1) Excludes gain on, and results of, Peabody Resources Limited operations sold
in January 2001, and discontinued operations.
(2) To comply with new GAAP guidance effective this quarter, the company began
recording revenues and costs related to its physically settled coal trading
activities on a net basis. If these activities were recorded on a gross
basis, revenues and operating costs would have been $40.5 million and
$121.3 million higher for the quarter and nine months ended Sept. 30, 2002,
respectively, and $26.7 million and $61.5 million higher in the
corresponding prior periods. This accounting change had no effect on
operating profit or net income.
(3) Weighted average diluted shares outstanding were 53.6 and 53.7 million for
the quarters ended Sept. 30, 2002 and 2001, respectively, and 53.8 million
for the nine months ended Sept. 30, 2002.
This information is intended to be reviewed in conjunction with the company's
filings with the Securities and Exchange Commission.
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SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 [PEABODY LOGO]
Quarter Ended Nine Months Ended
--------------------------- ------------------------------
Pro Forma (1)
September September September September
2002 2001 2002 2001
------------ ------------- ------------ --------------
Revenue Summary (Dollars in Millions)
U.S. Mining Operations $ 658.3 $ 599.9 $ 1,877.4 $ 1,757.2
Trading & Brokerage Operations (2) 51.4 52.6 152.2 160.4
Other 4.9 3.1 17.7 24.9
------------ ------------- ------------ --------------
Total $ 714.6 $ 655.6 $ 2,047.3 $ 1,942.5
============ ============= ============ ==============
Tons Sold (in Millions)
East 11.8 13.1 36.4 39.8
West 32.8 32.5 96.2 93.9
Australia 0.1 - 0.1 -
Trading & Brokerage 5.1 3.7 15.2 10.3
------------ ------------- ------------ --------------
Total 49.8 49.3 147.9 144.0
============ ============= ============ ==============
Revenues per Ton - U.S. Mining Operations
East $ 26.31 $ 24.92 $ 26.34 $ 24.70
West 10.61(3) 8.44 9.56(3) 8.24
Total 14.76 13.17 14.16 13.14
Operating Costs per Ton - U.S. Mining Operations (4)
East $ 22.35 $ 21.00 $ 21.40 $ 20.74
West 7.26 6.18 6.79 5.93
Total 11.25 10.43 10.79 10.34
Gross Margin per Ton - U.S. Mining Operations
East $ 3.96 $ 3.92 $ 4.94 $ 3.96
West 3.35(3) 2.26 2.77(3) 2.31
Total 3.51 2.74 3.37 2.80
Operating Profit per Ton $ 1.03 $ 0.73 $ 1.09 $ 0.83
Dollars in Millions Dollars in Millions
-------------------------- -----------------------------
Gross Margin - U.S. Mining Operations $ 156.6 $ 124.8 $ 446.4 $ 374.9
Gross Margin - Australian Mining Operations 0.8 - 0.8 -
Gross Margin - Trading & Brokerage Operations (5) 5.0 10.1 33.3 26.4
Selling & Administrative (25.1) (25.6) (72.2) (80.2)
Other Operating Costs and Revenues (26.9) (16.3) (70.4) (27.5)
EBITDA 110.4 93.0 337.9 293.6
Depreciation, Depletion & Amortization (59.1) (56.8) (176.4) (174.6)
Operating Profit 51.3 36.2 161.5 119.0
Capital Expenditures and Acquisitions 83.7 81.0 206.8 173.5
(1) Excludes gain on, and results of, the operations of Peabody Resources
Limited sold in January 2001, and discontinued operations.
(2) To comply with new GAAP guidance effective this quarter, the company began
recording revenues and costs related to its physically settled coal trading
activities on a net basis. If these activities were recorded on a gross
basis, revenues and operating costs would have been $40.5 million and
$121.3 million higher for the quarter and nine months ended Sept. 30, 2002,
respectively, and $26.7 million and $61.5 million higher in the
corresponding prior periods. This accounting change had no effect on
operating profit or net income.
(3) The favorable effect of the arbitration settlements on revenues and gross
margin for the quarter was $1.30 and $1.13, respectively, and for the nine
months ended Sept. 30, 2002 was $0.44 and $0.38, respectively.
(4) Excludes depreciation, depletion and amortization; selling and
administrative expenses; and certain other costs related to past mining
activities.
(5) Tons traded (in millions) for the quarter and nine months ended Sept. 30,
2002 were 10.5 and 55.8, respectively, compared to 13.8 and 35.9 for the
corresponding prior periods.
This information is intended to be reviewed in conjunction with the company's
filings with the Securities and Exchange Commission.
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CONDENSED BALANCE SHEET
SEPTEMBER 30 AND JUNE 30, 2002 AND DECEMBER 31, 2001 [PEABODY LOGO]
(In Millions)
(Unaudited) (Unaudited)
September 30, June 30, December 31,
2002 2002 2001
-------------- -------------- -------------
Cash & Cash Equivalents $ 15.9 $ 8.8 $ 38.6
Receivables 165.5 190.1 178.1
Inventories 231.2 242.4 215.7
Assets from Coal/Allowance Trading Activities 75.0 83.9 60.5
Other Current Assets 42.0 41.0 34.6
-------------- -------------- -------------
Total Current Assets 529.6 566.2 527.5
Net Property, Plant & Equipment 4,380.4 4,372.6 4,337.4
Investments & Other Assets 293.6 278.0 286.0
-------------- -------------- -------------
Total Assets $ 5,203.6 $ 5,216.8 $ 5,150.9
============== ============== =============
Current Maturities of Debt $ 50.6 $ 46.5 $ 46.5
Liabilities from Coal/Allowance Trading Activities 43.8 51.4 45.7
Accounts Payable & Accruals 571.9 543.0 592.1
-------------- -------------- -------------
Total Current Liabilities 666.3 640.9 684.3
Long-Term Debt 997.3 1,037.8 984.6
Deferred Taxes 580.4 577.4 564.8
Other Long-Term Liabilities 1,822.6 1,836.1 1,834.6
-------------- -------------- -------------
Total Liabilities 4,066.6 4,092.2 4,068.3
Minority Interests 36.7 49.2 47.1
Stockholders' Equity 1,100.3 1,075.4 1,035.5
-------------- -------------- -------------
Total Liabilities & Stockholders' Equity $ 5,203.6 $ 5,216.8 $ 5,150.9
============== ============== =============
This information is intended to be reviewed in conjunction with the company's
filings with the Securities and Exchange Commission.
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CONDENSED INCOME STATEMENT (UNAUDITED)
RECONCILIATION OF PRO FORMA AND GAAP RESULTS
NINE MONTHS ENDED SEPTEMBER 30, 2001 [PEABODY LOGO]
(Dollars in Millions)
Nine Months Ended
--------------------------------------------------
Pro Forma Adjustments
September to Reconcile September
2001 to GAAP (1) 2001
-------------- -------------- ---------------
Revenues $ 1,942.5 $ 20.5 $ 1,963.0
Operating Costs 1,568.7 13.6 1,582.3
Depreciation, Depletion & Amortization 174.6 2.3 176.9
Selling & Administrative 80.2 0.3 80.5
Gain on Sale of Peabody Resources Limited - (171.7) (171.7)
-------------- -------------- ---------------
Operating Profit 119.0 176.0 295.0
Interest Income (3.3) - (3.3)
Interest Expense 107.0 0.6 107.6
Income Tax Expense (Benefit) (3.9) 48.1 44.2
Minority Interests 8.1 - 8.1
-------------- -------------- ---------------
Income from Continuing Operations 11.1 127.3 138.4
Income from Discontinued Operations - 1.1 1.1
-------------- -------------- ---------------
Income Before Extraordinary Item 11.1 128.4 139.5
Extraordinary Loss from Debt
Extinguishment, Net of Taxes (36.1) - (36.1)
-------------- -------------- ---------------
Net Income (Loss) $ (25.0) $ 128.4 $ 103.4
============== ============== ===============
(1) Represents gain on, and results of, Peabody Resources Limited operations
sold in January 2001, and discontinued operations (and related tax
effects).
This information is intended to be reviewed in conjunction with the company's
filings with the Securities and Exchange Commission.
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