SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-16463
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Full title of the plan and the address of the plan, if different from that of
the issuer named below:
PEABODY HOLDING COMPANY, INC. EMPLOYEE RETIREMENT ACCOUNT
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Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
PEABODY ENERGY CORPORATION
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701 MARKET STREET, ST. LOUIS, MISSOURI 63101-1826
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(Address of principal executive offices) (Zip Code)
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm...........................1
Financial Statements
Statements of Net Assets Available for Benefits -
December 31, 2004 and 2003...................................................2
Statements of Changes in Net Assets Available for Benefits -
Years Ended December 31, 2004 and 2003.......................................3
Notes to Financial Statements................................................4
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)...................11
Signatures.......................................................................13
Exhibit Index....................................................................14
Exhibit 23 - Consent of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Plan Administrator
Defined Contribution Administrative Committee
We have audited the accompanying statements of net assets available for benefits
of Peabody Holding Company, Inc. Employee Retirement Account as of December 31,
2004 and 2003, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2004 and 2003, and the changes in its net assets available for
benefits for the years then ended, in conformity with U.S. generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2004 is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ ERNST & YOUNG LLP
----------------------------------
Ernst & Young LLP
St. Louis, Missouri
June 2, 2005
1
Peabody Holding Company, Inc.
Employee Retirement Account
Statements of Net Assets Available for Benefits
(Dollars in thousands)
DECEMBER 31
2004 2003
------------ ------------
ASSETS
Investments, at fair value:
Investments in mutual funds $ 187,019 $ 152,788
Investment in common/collective trust 96,035 86,725
Investment in Peabody Energy Stock Fund 3,909 863
Participant notes receivable 10,414 8,337
------------ ------------
Total investments 297,377 248,713
Receivables:
Employer contributions 3,602 3,463
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Net assets available for benefits $ 300,979 $ 252,176
============ ============
See accompanying notes.
2
Peabody Holding Company, Inc.
Employee Retirement Account
Statements of Changes in Net Assets Available for Benefits
(Dollars in thousands)
YEAR ENDED DECEMBER 31
2004 2003
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ADDITIONS
Interest and dividends $ 7,450 $ 6,162
Net realized and unrealized appreciation of investments 18,158 31,617
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Net investment income 25,608 37,779
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Contributions:
Employee 15,545 13,554
Employer 10,368 9,475
Rollover 12,707 435
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Total contributions 38,620 23,464
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Transfers from other plans 920 2
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Total additions 65,148 61,245
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DEDUCTIONS
Withdrawals by participants (16,321) (14,951)
Administrative expenses (24) (13)
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Total deductions (16,345) (14,964)
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Net increase in net assets available for benefits 48,803 46,281
Net assets available for benefits at beginning of year 252,176 205,895
------------ ------------
Net assets available for benefits at end of year $ 300,979 $ 252,176
============ ============
See accompanying notes.
3
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements
Years Ended December 31, 2004 and 2003
1. DESCRIPTION OF THE PLAN
The following description of the Peabody Holding Company, Inc. (the "Company")
Employee Retirement Account (the "Plan") provides only general information.
Participants should refer to the plan documents for a more complete description
of the Plan's provisions. The Company is a wholly-owned subsidiary of Peabody
Energy Corporation ("Peabody").
GENERAL
The Plan is a defined contribution plan, and participation in the Plan is
voluntary. All salaried employees of the Company and certain of its
participating subsidiary and affiliated companies (the "Employer") are eligible
for participation on the date of their employment or at any time afterward. The
Plan is subject to the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA").
On April 15, 2004, Peabody purchased all of the equity interest in the
Twentymile Coal Company ("Twentymile") from RAG Coal International AG. As part
of the purchase agreement, all active employees of Twentymile, as defined in the
agreement, were eligible to participate in the Plan, and those employees who
were participating in the RAG American Coal Savings Plan and Trust were eligible
to roll over their fund balances into the Plan. In 2004, Twentymile participants
rolled over approximately $12.2 million in fund balances into the Plan.
The Plan allows participants to invest in a selection of mutual funds, a
common/collective trust, and the Peabody Energy Stock Fund. All investments in
the Plan are participant-directed.
CONTRIBUTIONS
Each year, participants may contribute any whole percentage from 2% to 50% of
pre-tax or after-tax base compensation, as defined in the Plan. Participants may
also contribute distributions from other qualified defined benefit or defined
contribution plans.
In the calendar year that a participant is age 50 or older and each year
thereafter, certain participants meeting additional specific criteria are
permitted to make catch-up contributions to the Plan. These participants are
able to contribute amounts in excess of the maximum otherwise permitted by the
Plan, subject to certain limitations.
4
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
For participants other than those who are employed by Powder River Coal Company
or Twentymile, the Employer makes matching contributions equal to 100% of the
first 3% of base compensation and 75% of the next 4% of base compensation that a
participant contributes to the Plan. For participants who are employed by Powder
River Coal Company and Twentymile, the Employer makes matching contributions
equal to 50% of the first 6% of base compensation that a participant contributes
to the Plan.
Participants direct the investment of employee and employer matching
contributions into various investment options offered by the Plan. All
contributions are subject to certain limitations as defined by the Plan and the
Internal Revenue Service ("IRS").
Peabody's Board of Directors has approved desired minimum and maximum
performance targets that require the Employer to pay a performance contribution
between 0% and 4% of base compensation into the account of each active, eligible
employee as of the end of the fiscal year, based upon Peabody's level of
achievement of the approved target. Employees of Powder River Coal Company and
Twentymile are not eligible for the performance contribution. If Peabody does
not meet the minimum performance targets set by the Board of Directors for a
fiscal year, the Board of Directors may authorize the Employer to contribute a
discretionary amount to the Plan. If Peabody exceeds the maximum performance
targets set by the Board of Directors for a fiscal year, the Board of Directors,
at its discretion, may authorize the Employer to contribute up to an additional
2% of base compensation to the Plan.
At December 31, 2004, a $3.6 million receivable was recorded for a performance
contribution of 4% of eligible employees' salaries related to the 2004 plan
year. At December 31, 2003, a $3.5 million receivable was recorded for a
performance contribution of 4% of eligible employees' salaries related to the
2003 plan year.
FORFEITED ACCOUNTS
Employer contributions are reduced by forfeitures of non-vested amounts. The
forfeiture credits, net of holding gains or losses, amounted to $121,420 and
$245,245 for the years ended December 31, 2004 and 2003, respectively. As of
December 31, 2004 and 2003, the forfeiture credits that were available for
future use amounted to $246,101 and $109,762, respectively.
5
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PARTICIPANT LOANS
Participants may borrow up to 50% of their vested account balance from their
fund accounts, subject to a minimum of $1,000 and a maximum of $50,000. The
loans are secured by the balance in the participant's account and bear interest
at the prime interest rate as published in The Wall Street Journal on the first
business day of the month in which the loan was made, plus 1%. Principal and
interest are paid ratably through payroll deductions. A maximum of two loans may
be outstanding at any time.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions, the
Employer's contributions and plan earnings. The benefit to which a participant
is entitled is the benefit that can be provided from the participant's vested
account.
PAYMENT OF BENEFITS
Participants are eligible for distributions of their vested account balance upon
termination of employment. Participants are eligible for distribution of their
entire account balance at death, disability or termination after age 62.
Generally, participants may elect to receive their distribution as a lump sum or
annual installment. A beneficiary distribution is available as a lump sum only.
Participants who have attained the age of 59 1/2 have the right to receive a
partial or complete distribution of their vested account balance upon request,
without penalty. Withdrawals in cases of hardship, as defined in the Plan, are
also permitted. Other withdrawals of after-tax contributions are also available
as defined in the Plan.
VESTING
Participants are immediately vested in their contributions and actual earnings
thereon. Excluding Twentymile participants, vesting in Employer matching
contributions occurs ratably based on years of continuous service (25% per year
after two years of service with 100% vesting after five years), and
automatically vests completely when the participant attains the age of 62.
Employer performance contributions and discretionary contributions, if any, are
100% vested immediately. For Twentymile employees, all contributions and
earnings are immediately vested.
6
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PLAN TERMINATION
The Plan is voluntary on the part of the Employer. The Employer may terminate
the Plan in whole or in part subject to the provisions of ERISA. Upon
termination or complete discontinuance of all contributions to the Plan,
participants' accounts become fully vested. Currently, the Employer has no
intention to terminate the Plan.
ADMINISTRATIVE EXPENSES
All significant administrative expenses of the Plan, including recordkeeping and
trustee fees, are paid by the Employer. Participants are required to pay their
own loan fees.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Plan are prepared under the accrual method of
accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates that affect
the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
VALUATION OF INVESTMENTS AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Shares of mutual funds are
valued at quoted market prices which represent the net asset value of shares
held by the Plan at year-end. Units in the common/collective trust are valued at
net asset value at year-end. The stock fund is valued at year-end unit closing
price (comprised of the year-end market price plus any uninvested cash
position). Participant loans are valued at cost, which approximates market
value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded when earned. Dividends are recorded on the ex-dividend date.
Capital gain distributions are included in dividend income.
7
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PAYMENT OF BENEFITS
Benefits are recorded when paid.
3. RELATED PARTY TRANSACTIONS
The Plan invests in shares of mutual funds managed by an affiliate of its
trustee, Vanguard Fiduciary Trust Company, a party-in-interest with respect to
the Plan. These transactions are covered by an exemption from the "prohibited
transaction" provisions of ERISA and the Internal Revenue Code of 1986 (the
"Code"), as amended. The Plan also invests in Peabody stock, through the Peabody
Energy Stock Fund, which is a permitted party-in-interest transaction.
4. INVESTMENTS
The Plan's investments, including those purchased, sold or held during the year,
appreciated in fair value as determined by quoted market prices as follows:
2004 2003
------------ ------------
(Dollars in thousands)
Mutual funds $ 16,737 $ 31,339
Peabody Energy Stock Fund 1,421 278
------------ ------------
$ 18,158 $ 31,617
============ ============
Investments representing 5% or more of the fair value of the Plan's net assets
at December 31 were as follows:
2004 2003
------------ ------------
(Dollars in thousands)
Mutual funds:
Vanguard 500 Index Fund $ 52,158 $ 47,766
Vanguard PRIMECAP Fund 27,479 21,251
Common/collective trust:
Vanguard Retirement Savings Trust 96,035 86,725
8
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
5. INCOME TAX STATUS
The Plan received a determination letter from the IRS dated February 9, 2004,
stating that the Plan is qualified under Section 401(a) of the Code and,
therefore, the related trust is exempt from taxation. Once qualified, the Plan
is required to operate in conformity with the Code to maintain its
qualification. The Plan was amended subsequent to the IRS determination letter.
The Plan's administrator believes the Plan is being operated in compliance with
the applicable requirements of the Code and, therefore, believes the Plan, as
amended, is qualified and the related trust is tax-exempt. The Plan's sponsor
has indicated that it will take the necessary steps, if any, to maintain the
Plan's qualified status.
6. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statements of net
assets available for benefits.
7. SUBSEQUENT EVENTS
Effective January 1, 2005, Peabody Investments Corp. became the sponsor of the
Plan and the name was changed to the Peabody Investments Corp. Employee
Retirement Account. Peabody Investments Corp. is a wholly-owned subsidiary of
Peabody Energy Corporation and the parent company of Peabody Holding Company,
Inc.
Effective March 28, 2005, upon termination of employment, if the value of a
participant's account is $1,001 or more but less than or equal to $5,000
(disregarding rollover contributions and related earnings) and, after receiving
all required notices, the participant does not affirmatively elect a
distribution, the balance of the participant's account will be automatically
rolled over by the Plan to an individual retirement account (IRA) and invested
in a money market fund. The participant will be responsible for paying all fees
and expenses assessed against the automatic rollover IRA. If the value of the
participant's account is $1,000 or less and, after receiving all required
notices, the participant does not affirmatively elect a distribution, the
participant will receive a lump-sum distribution.
9
Peabody Holding Company, Inc.
Employee Retirement Account
Notes to Financial Statements (continued)
7. SUBSEQUENT EVENTS (CONTINUED)
Prior to March 28, 2005, if the value of a participant's account was $5,000 or
less (disregarding rollover contributions and related earnings) and, after
receiving all required notices the participant did not affirmatively elect a
distribution, the participant received a lump-sum distribution as soon as
practicable after the participant terminated employment.
10
Supplemental Schedule
Peabody Holding Company, Inc.
Employee Retirement Account
Employer ID #13-2871045
Plan #003
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2004
DESCRIPTION OF
IDENTITY OF ISSUE INVESTMENT TYPE CURRENT VALUE
---------------------------------------- --------------------------------- -------------
AIM Premier Equity Fund* 34,289 shares of mutual fund $ 338,779
Ariel Growth Fund* 63,234 shares of mutual fund 3,362,172
Baron Asset Fund* 11,105 shares of mutual fund 583,228
Delaware Int'l Value Equity Fund* 51,500 shares of mutual fund 868,797
Fidelity Equity-Income II Fund* 13,856 shares of mutual fund 332,693
Fidelity Blue Chip Growth Fund* 53,705 shares of mutual fund 2,240,055
Harbor Capital Appreciation* 56,575 shares of mutual fund 1,621,998
Lazard Small Cap Portfolio* 52,532 shares of mutual fund 989,711
Managers Special Equity Fund* 6,577 shares of mutual fund 594,671
Oppenheimer Quest Value* 13,776 shares of mutual fund 294,540
Sound Shore Fund* 19,494 shares of mutual fund 715,441
T. Rowe Price Mid-Cap Growth* 47,201 shares of mutual fund 2,354,394
T. Rowe Science & Technology Fund* 190,997 shares of mutual fund 3,648,044
T. Rowe Price Small-Cap Stock* 47,150 shares of mutual fund 1,500,313
Vanguard 500 Index Fund* 467,197 shares of mutual fund 52,157,913
Vanguard Explorer Fund* 193,405 shares of mutual fund 14,422,174
Vanguard Extend Mkt Index Fund* 73,378 shares of mutual fund 2,301,137
Vanguard GNMA Fund* 83,081 shares of mutual fund 867,363
Vanguard High-Yield Corp.* 161,446 shares of mutual fund 1,039,714
Vanguard Int'l Growth Fund* 464,253 shares of mutual fund 8,755,819
Vanguard LifeSt Conserv Growth* 633,766 shares of mutual fund 9,671,266
Vanguard LifeSt Growth Fund* 474,538 shares of mutual fund 9,509,748
Vanguard LifeSt Income Fund* 109,526 shares of mutual fund 1,481,889
Vanguard LifeSt Moderate Growth* 461,837 shares of mutual fund 8,271,498
Vanguard LT Bond Index* 142,277 shares of mutual fund 1,681,719
Vanguard LT Treasury Fund* 57,975 shares of mutual fund 667,297
Vanguard PRIMECAP Fund* 441,073 shares of mutual fund 27,478,849
11
Supplemental Schedule
Peabody Holding Company, Inc.
Employee Retirement Account
Employer ID #13-2871045
Plan #003
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) (continued)
December 31, 2004
DESCRIPTION OF
IDENTITY OF ISSUE INVESTMENT TYPE CURRENT VALUE
---------------------------------------- --------------------------------- -------------
Vanguard REIT Index Fund* 169,601 shares of mutual fund 3,185,114
Vanguard Sm-Cap Index Fund* 90,330 shares of mutual fund 2,422,653
Vanguard Total Bond Mkt Index* 616,324 shares of mutual fund 6,329,645
Vanguard Total Stock Mkt Index* 91,605 shares of mutual fund 2,635,470
Vanguard Windsor Fund* 593,928 shares of mutual fund 10,732,272
Vanguard Windsor II Fund* 128,961 shares of mutual fund 3,962,959
Vanguard Retirement Savings Trust* 96,034,805 shares of common/
collective trust 96,034,805
Peabody Energy Stock Fund* 115,524 units of stock fund 3,909,318
Various participants Participant loans, interest rates
from 5% to 10.5%,
maturities through
December 12, 2014 10,413,787
------------
$297,377,245
============
* Parties-in-interest.
12
SIGNATURES
Peabody Holding Company, Inc. Employee Retirement Account. Pursuant to the
requirements of the Securities Exchange Act of 1934, the plan administrator has
duly caused this annual report to be signed on its behalf by the undersigned,
hereunto duly authorized.
Peabody Holding Company, Inc.
Employee Retirement Account
Date: June 27, 2005 By: /s/ SHARON D. FIEHLER
----------------------------------------
Sharon D. Fiehler
Peabody Energy Corporation
Executive Vice President,
Human Resources & Administration
13
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
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23 Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm
14